Person pointing at holographic images representing different aspects of business such as people and productivity

In this post, HR thought leader Steve Goldberg presents four strategic themes underlying the business case for organizational learning and development. These speak to the need for enterprise agility, the importance of employee productivity and engagement, driving successful business and digital transformations, and the role of employer brand in talent imperatives. In a follow-up post Goldberg provides additional information on actions learning functions can take in support of each of the four areas.

Setting the Stage

Based on 25+ years in leadership roles in global HR, HR technology and HCM product strategy, including reporting to CHROs in Fortune 250s (U.S. and Europe), I believe four distinct themes emerge as critical ones to highlight in crafting a winning learning and development (L&D) business case. They are: 

  1. Elevating organizational agility or future-proofing the organization
  2. Maximizing productivity, employee engagement, and lifetime value
  3. Improving success rates of business and/or digital transformations
  4. Solidifying employer brand to improve attraction and retention of top talent

While several other L&D business case elements (such as those in the area of compliance) have been extremely helpful to their corporate advocates, I have intentionally narrowed the lens by applying what I call the ascension test to reflect capabilities that will enable an organization to ascend the ranks within its industry segment.

Before we explore the four noted themes, I’ll begin with an anecdote from one of my first meetings on L&D business cases. This one took place in the late 1980s with the chief financial officer of then-major Wall Street firm, Salomon Brothers. Without naming names, I’ll just say the CFO was not an enthusiastic supporter of what might be termed HR-specific spending. 

Fortunately, my chief HR officer and mentor, the late Ed Weihenmayer (to whom I reported at two different investment banks), was there with an approach that is worth modeling: begin with an effective counter to any anticipated main argument or type of resistance. In this case, the strategy worked like a charm. The CFO’s anticipated L&D business case blocker was this: “But what if we continue to spend all this money you’re requesting on an L&D budget and our employees leave anyway, and take their new skills to a competitor?” Our effective counter: “Fair point, but what if we don’t invest in the development our people need to address critical skills gaps and they stay here?” 

It was a short and successful meeting, and one worth bearing in mind for any L&D leader who knows how it feels to be put on the spot to justify a training budget.

Now to the four themes underlying the business case for L&D funding, and I place these in what I believe to be their potential order of business impact:

"What if we continue to spend all this money you’re requesting on an L&D budget and our employees leave anyway, and take their new skills to a competitor?"

1. Elevating Organizational Agility or Future-Proofing the Organization

We live and work in an era characterized by much less predictability and much more change. I sometimes think of this as a time of max fluidity for organizations. This very unique period has been driven by a once-in-a-lifetime pandemic, one that perhaps altered forever the way employees think about work, the way customers think about products and services, and the gradual replacement of Baby Boomers in the workforce by Millennials and Gen Z. This has given rise to major shifts in needs and expectations for employees and customers alike. 

For organizations, those dynamics have resulted in a new universal business imperative—the ability to effectively pivot (strategically, operationally, or culturally). Research findings underscore the value of such agility, while also pointing out opportunities for L&D. 

For example: 

  • Most C-level executives (92%) say that organizational agility is critical to business success (although only 27% consider themselves highly agile, suggesting needed training)
  • Agility offers bottom-line benefits: 55% of highly agile organizations are top-quartile financial performers (versus only 25% of firms with average agility)
  • While most leaders want their companies to be agile, nearly six in 10 firms (59%) lack the necessary cultural capabilities (such as willingness to share knowledge)—a clear call for L&D intervention

Additionally, Korn Ferry research noted another urgent call to action for L&D, reporting that learning agility “is a key predictor of success and a critical attribute of effective leadership…yet only 15% of managers and executives possess this trait.” 

For learning functions, truly future-proofing an organization also calls into play the ever-changing skills landscape with which companies contend today. From information technology-related skills necessitated by breakthrough tech innovations in artificial intelligence and generative AI, to soft or behavioral skills, such as the ability to thrive and lead amid constant change, employees need effective training to remain relevant in the present and prepare for a fast-approaching future. 

And one more finding to round out the picture: World Economic Forum research confirms that critical need for upskilling and the business case for L&D, reporting that “Six in 10 workers will require training before 2027, but only half of workers are seen to have access to adequate training opportunities today.”

Opportunities for L&D to support organizational agility:

  • Design and deliver agility training for C-level executives and other leaders
  • Perform organizational culture and process/procedure assessments to identify existing and needed capabilities that support personal and enterprise agility
  • Design and deliver training needed to address any deficiencies noted in the assessments conducted

2. Maximizing Productivity, Employee Engagement, and Lifetime Value

Employee productivity improvements are among the most measurable of all impactful business outcomes from any type of investment in the workforce. To illustrate, assume a figure of $100,000 revenue per employee. Increase that output by a mere 5% (to $105,000 revenue per employee) and multiply by a workforce of 500 employees (=$2.5M in value creation), a workforce of 3,000 employees (=$15M in value creation), or a workforce of 10,000 employees (=$50M in value creation).

Given the potential for such large revenue gains associated with employee outputs, it is important to consider factors underlying such improvements. Productivity is usually closely linked with two drivers: the right skills at the right time and engaged (versus disengaged) workers. The former is enabled by close alignment of business planning with learning strategy planning. The latter is directly influenced by the quality of one’s manager. While related data is concerning, it also highlights areas of particular interest to L&D. 

UK-based research found that 71% of organizational leaders call employee engagement “crucial to business success.” But other studies suggest that few organizations get engagement right.

Gallup reported that employee engagement reached a seven-year low in 2022 when a survey of 67,000 full-and part-time employees found about one in five describing themselves as actively disengaged at work. At the same time only a third (32%) of respondents said they were engaged in their work (invested in their jobs and their organizations’ success and willing to contribute maximum effort to both).

Engagement is important, according to Gallup, because of its links to better productivity, profitability, customer service, talent retention, and other strong business outcomes. Disengagement, which can detract from those positive results, may arise for multiple reasons. 

Gallup noted declines in several key areas:

  • Clarity about work expectations
  • Sense of connection to organizational mission or purpose
  • Perception of opportunities for learning and growth

My own career experience suggests that those top areas affecting worker engagement are also heavily influenced by an employee’s direct supervisor or manager. Gallup agrees, having found that managers account for 70% of the variance in teams’ engagement levels. For L&D, such conclusions emphasize the importance of focusing on manager training and support as a strategic means of driving optimal business results. 

As for the notion of lifetime value, while it’s obvious to most that sustaining engagement and productivity (and impact) are crucial, so is recognizing all the sources of value that an employee offers, whether job-relevant or not. This might include referring qualified candidates, contributing/funneling ideas for operational improvements or sales leads, etc. L&D can play roles in providing learning content and resources that help empower employees to fully engage and participate in those ways.

Opportunities for L&D to support productivity, engagement, and lifetime value:

  • Ensure close alignment in strategic planning for business and learning objectives to arm employees with right skills at desired times
  • Provide managers with training to support effective communication about work expectations
  • To embed connection to organizational mission/purpose, include content on those items in onboarding, orientation, and ongoing employee training
  • Internally market development opportunities available to employees and update options regularly

3. Improving Success Rates of Business and/or Digital Transformations

McKinsey’s research has reported that 70% of organizational business transformations fail. Often, this is due to poor execution and follow-through on planned changes—a clear opportunity for L&D to step in with change-management training for managers and employees.

While many companies report having digital transformations (initiatives to apply digital technologies to change and further businesses) underway or in planning stages, data compiled by Forbes and other sources suggests significant investments are being made, but questionable success achieved. 

A few relevant data points:

  • A global spend on digital transformation of more than $3 trillion is projected by 2026
  • Half of transformation efforts aim to capitalize on organizational growth prospects, while 41% are responses to heightened competition
  • Research suggests that only about a third of digital transformations have been successful thus far, and the most commonly cited obstacle companies encounter is a lack of needed skills and expertise

Business transformation efforts naturally differ with organizational needs and capabilities, but $27.5 million is now the reported average cost for an enterprise digital transformation. Such high financial stakes emphasize how crucial it is for L&D leaders to make compelling business cases for training budgets that include the skill-building needed to ensure that transformation dollars aren’t wasted. 

Anecdotally, I’ll add that the vast majority of HR leaders with whom I speak today (dozens annually at HR events) say they are in the throes of a complex, lengthy, and costly transformation endeavor of some type. This harks back to the need to elevate organizational agility and to ensure linkages with investments in learning content and technology. 

Opportunities for L&D to support business and digital transformations:

  • To facilitate success with both business and digital transformations, provide change management training for leaders, managers, and employees
  • Provide leaders and managers with training to support proper planning and execution of major change initiatives
  • Assess digital technology skills and gaps likely to strengthen or hamper digital transformations and design/deliver appropriate training accordingly

4. Solidifying Employer Brand to Improve Attraction and Retention of Top Talent

This last theme of the four goes hand-in-hand with the two sides of the employee engagement/productivity coin. In my view, the difference is that the absence of having or projecting a great employer brand logically leads to two other significant negative outcomes (in addition to low engagement and productivity) to be avoided: high employee turnover and inability to attract top job candidates.

Federal government statistics tell us that each month in the U.S., 3 to 4.5 million employees quit their jobs. Employers are not only losing valuable talent, but also must deal with hiring, training, and replacing lost workers. Most HR practitioners would agree that the cost of unwanted employee turnover can range from one-to-three times an exiting employee’s salary. This is based on cost of hiring a replacement, productivity dips during the new employee’s ramp-up, and the cascading negative effects of other employee departures on team morale.

For L&D, the good news is that LinkedIn research has found that more than nine in 10 employees (94%) say they would stay onboard longer at companies willing to invest in their learning and development. This can include traditional training programs, mentoring and coaching, and other approaches to help employees develop both hard and soft skills. Clearly, L&D’s role in driving greater retention rates is an important one. 

When it comes to an organization’s inability to recruit top talent, I’ll share a famous quote from Bill Gates that was personally related to me years ago by his staffing general manager, a now-retired gentleman named Abilio Gonzalez.

"The cost of unwanted employee turnover can range from one-to-three times an exiting employee’s salary."

According to Gonzalez, Gates maintained that a great software developer who voluntarily opts out of the recruiting process mid-stream (or, worst case from a cost perspective, at the end by not accepting a job offer)—likely due to questions about the employer’s brand, core values, culture, or management reputation—could easily represent the loss of $1 billion in unrealized revenue that individual developer would have generated during the course of their career at Microsoft.   

Finally, other research has focused on the price in employer brand erosion that organizations pay for bad behavior displayed by hiring managers, line managers, and other leaders. 

Concerning data points note that:

  • Eight in nine studied industries fail to mitigate employee misconduct
  • One in 10 job candidates in the study demonstrated misconduct issues
  • Sexual misconduct, harassment, and intolerance were the most-noted forms of inappropriate conduct

Not surprisingly, researchers concluded that widespread negative behaviors were costing employers trillions of dollars every year. HR and learning professionals familiar with Atana’s award-winning training programs on respectful workplace environments and behaviors will immediately recognize another opportunity for their functions to take action that strengthens the critical strategic areas of employer brand and talent attraction and retention. 

Opportunities for L&D to support employer brand and improve talent attraction and retention:

  • Strengthen employer brand, along with talent attraction and retention, by establishing a reputation as an organization committed to providing employee learning and development opportunities
  • Ensure that organizational talent acquisition processes and outreach publicize the company’s dedication to employee learning and development
  • To improve talent retention, deliver learning content for employees and managers that teaches skills and behaviors necessary to create and maintain respectful workplaces where harassment and discrimination are not tolerated.

Conclusion

Today’s workforce is increasingly represented by Millennials (born early 1980s - mid-1990s). When I think about that group, what comes to mind is the value they place on meaning and purpose at work; personal growth and development opportunities; coaches instead of bosses; and open, transparent communications on a regular basis.  

The burden of that shift in workplace dynamics, coupled with the four themes I’ve presented, signals a clear call to organizational and learning leaders: upskilling and reskilling employees and managers is a vital mandate. Consequently, the continuous and adequate funding of L&D needs (current and future) must be the foundational North Star in any company’s long-term human capital and business growth strategies.


About the Author

Steve Goldberg has operated on all sides of human resources (HR), human capital management (HCM), and HR technology for more than three decades and on three continents. He is perhaps best known for such HR tech-related themes as elevating organizational agility, employee experience, employee journey, line manager enablement, and organizational readiness. During his career, Steve led HCM product strategy at PeopleSoft and HR tech research practices at Bersin and Ventana Research. Cited multiple times as a Top 100 HR Tech Influencer, he holds an MBA in human resources and a BBA in industrial psychology and is a frequent speaker at industry and solution vendor events. Steve has worked with more than 60 HCM solution vendors and is a strategic advisor to Atana.