Global-market forces and innovation related to technology are beginning to force HR leaders to redefine their training and development agendas and the skill sets needed to succeed.
Millennials -- the youngest generation of four currently in the workforce -- were recently featured in a CBS 60 Minutes segment. The TV broadcast focused on how different these workers are from the departing baby boomer leaders. Many of the challenges created by this generational chasm fall on training-and- development departments to solve, as organizations scramble to address the pending leadership gap that demographic data suggest is inevitable.
To prepare for this future, training and learning efforts must accelerate the development of leaders who can innovate in the face of rapid change. What's more, e-learning needs to become a motivational strategy, not just a cost-reduction tactic.
The only way to prepare for the uncertain future is to manage expenditures targeted at human capital as investments -- not merely current-period expenses -- something that will require the measurement of the value being created by training and e-learning programs.
Global-market forces and innovation related to technology are reshaping the worlds of training and development. What's needed in the future is dramatically different from what worked in the past. Efficiency will continue to be required, but cost reduction alone will not be sufficient. The challenge will be to demonstrate the value training and e-learning creates while simultaneously managing human-capital risk related to that change.
One force that will define the future priorities for training and e-learning professionals is the demand by senior leaders for the entire organization to embrace innovation in the face of the unpredictable future. The uncertainty is represented by a March 2007 Standard and Poor's forecast indicating the price of oil in 2008 would be $65 a barrel. It actually reached $130 a barrel in May 2008, only 14 months later.
In the face of such uncertainty, the role of training and development will shift from responding to training demands from within the firm to becoming the operation that prepares leaders to innovate in the face of external forces. Calibration of how well the training organization is developing leaders and innovators is going to require new measurements.
The most predictable of the forces that will define the agendas of training and e-learning leaders are those rooted in demographics. These forces have two certain features. First, the supply of leaders will inevitably shrink. In the next decade, almost 40 percent of the workforce will retire, including many of businesses' most experienced senior leaders. The only uncertainty is the exact timing of their departure.
The challenge for training and development is to recommend the size and focus of the human capital investments organizations must make to replenish the skills, knowledge and experience certain to walk out the door. In this case, it will require an inventory of what skills and knowledge are leaving and a financial plan for implementing the training-and- development programs needed to replace the critical capabilities of the departing human assets.
A second implication of the demographic shifts was captured in the 60 Minutes segment. The accelerating rate of change makes the values and experiences of those on the two ends of the generational continuum dramatically different. It is as if the boomers and the millennials came from different planets, not merely different decades. Nowhere is the implication greater than in e-learning.
In the past, e-learning was managed as a cost-reducing alternative to expensive classroom delivery. Potential savings for the firm still exist. In the coming months and years, however, the shift to e-learning will increasingly be driven by the preferences of the learners, not by the financial priorities of the accountants.
If you'd like proof, visit the lecture halls of any major American university. Chances are you'll find young learners only reluctantly sitting in a classroom so familiar to the departing boomer leaders.
There's no question millennial prefer the technology world. They want to learn in the same medium they use to socialize and interact with their peers. They want content delivered to their mobile devices.
This shifts the priority of e-learning from the firm's focus on cost savings to the learner's need to be motivated. The absence of motivation radically dilutes the value of even the best content. Fulfilling the potential of training and development requires the engagement of the learner.
People as Assets
So, if these are the major factors that will define the priorities for C-suite executives, what steps do HR leaders need to take to respond to a future in which innovation and leadership are key to creating value?
First, they need to ensure their organizations act on the near-mantra expression, "Our people are our most important asset." This requires that people be managed like an asset.
The pivotal feature of an asset is that it has future value. Assets are not merely treated as an expense on the current income statement. Unfortunately, CFOs don't contribute much to the effort of managing human capital as an asset. GAAP (generally accepted accounting principles) leaves accountants with no choice but to record training and e-learning expenditures as a current period expense, not as an investment.
Consequently, HR leaders are going to have to step up and play a pivotal role for their respective organizations, deploying the methods of investment decision-making when it comes to human capital.
To manage our human capital as assets, the future will require that HR leaders develop and deploy capital investment decision-making methods not currently a part of the professional capabilities of learning executives. By demonstrating the future value that can be created, HR will be able to justify the increased budgets required to reposition their organizations for the future.
What will it require for HR leaders to lead their own organizations in the future? Among other things, they need to be prepared to answer the following three critical questions:
1. What business outcomes should be measured to demonstrate the value created by a particular training or e-learning program?
2. How do we convince those leaders with the authority to approve or deny human capital investment budgets that the business impact measured is the result of our training/learning programs and not the result of other forces?
3. How do we organize the conclusions of our analyses so top management can understand their future implications?
Among the skills HR leaders need in order to deal with their list of priorities are those of communications, business acumen and statistical multi-variant analysis. The business acumen is necessary for the critical communication that needs to happen between themselves and their CFOs as a part of the human capital investment and budgeting processes.
Measuring the value that's created is necessary for arriving at executive decisions that impact the future and is essential in justifying budget and resource allocations -- strategic decisions that lead the organization in the face of accelerating change. The challenge for the profession is to champion the methods for measuring the value that's created and educate the training organization in how to make those methods an integral part of every training and e-learning initiative.
Multi-variant statistics is a required part of the value-creation analysis. Without explicitly dealing with the noise from all of the other changes going on around training and e-learning programs, HR leaders will never be able to convince their CFOs that the results are compelling and justify the increased human capital investment required. (Organizations such as Chrysler, ACS, Sun Microsystems and US Bank are already using statistical methods to measure training and e-learning value creation in research being done at Bellevue University's Human Capital Lab.)
In the end, the highest priority for training is to be able to document the compelling value-creation arguments. The challenge for all of us is to develop and deploy the skills needed to make the investment case to other C-suite executives.While we are justified in debating the particulars of the future changes, what is not debatable is that human capital will play an increasingly important role in the creation of value in the future.The HR profession sits at the eye of this storm. How well the profession responds to the challenges will play a key role in determining how well the organization performs as the uncertain future unfolds.
Ref: Michael E. Echols
[About the Author: Micheal E. Echols was educated as physicist and mathematical modeler with a Ph.D from the University of California at Berkeley. A former senior profit-and-loss executive at the General Electric Co., Echols is the author of three books on human capital investment and wrote dozens of articles and presentations on managing human capital. He is executive vice president and director of the Human Capital Lab at Bellevue University in Omaha, Neb.]