Return on Investment and People Development Tom Smith

About Lane4 “The aim of this establishment is to create an environment where champions are inevitable”

“Like other leaders, many HR executives hold flawed and incomplete beliefs. They fall prey to second-rate evidence, logic and advice which produce suspect practices, and in the end, damages performance and people” Pfeffer and Sutton (2006) Hard Facts, Dangerous Half-Truths and Total Nonsense

The Value of Top Talent Low Superior Performers Performers 1SD Good Low Complexity Jobs 19% Moderately Complex Jobs 32% Highly Complex Jobs 48% Sales 48-120% Some of you may have come across this before - it’s quite a famous “study of studies” or meta-analysis that looked to find out performance differences in jobs of varying complexity. In this normal distribution where it says “superior performers” read “Top Talent” I promise there is only one more bit of stats after this in the presentation and that’s at the end…... Basically what this tells us - forget the stats if you like - is that the more complex the job (and in banking they are as complex as they come) the return is quite significant If you assume that 1 Standard Deviation equates to 16% of a population, then here we have 16% of the population accounting for up to 120% more productivity! In JPM we refer to superior performers - Top Talent - as the Top 20% - more of that later though. Hunter, J.E., Schmidt, F.L. and Judiesch, M.K. (1990) Individual differences in output variability as a function of job complexity. Journal of Applied Psychology, 75; 28-42

The Risk of Workforce Disengagement The Danger of Non-Engagement Poor performers who frequently put in minimal effort – the “disaffected” – exhibit strong emotional and rational non-commitment to day-to-day work, the manager, team and organisation. A Risk and an Opportunity The “agnostics” exhibit only moderate commitment to their work, teams and organisations. The “agnostics” are capable of moving into either the “disaffected” or the “true believers” categories; many in fact already lean towards one of the other The Reward of Engagement High performers with low retention risk – the “true believers” – exhibit very strong emotional and rational commitment to their day-to-day work, teams, managers and organisations “The Disaffected” “The Agnostics” “The True Believers” The majority of employees are “up for grabs” – they are neither fully committed nor fully uncommitted. 20% 29% 27% 13% 11% Leaning towards disengagement Leaning towards engagement Neutral Source: Corporate Leadership Council Research (2004)

What strikes you about the two studies?

Barriers to using ‘hard data’ to measuring HR / L&D activities Less to do with any disinterest in measuring bottom line impact, more to do with the difficulty of doing so… Barrier Mean Score Difficult to calculate ‘true’ financial ROI 4.98 Insufficient resources available 4.77 More useful / relevant criteria 4.41 Time consuming 4.19 Don’t believe possible to calculate ‘true’ ROI level 3.78 There is no requirement 3.23 *Significant difference between buyers and non-buyers with buyers believing resourcing is a bigger barrier than non-buyers. Is this quantity of available resource or quality? Do they have the right skills? **Public sector significantly differ in their opinion to retail – public sector believe there are more relevant criteria (public sector mean =5.13, retail mean = 3.24)

ROI Vicious Circle

How do you currently measure the impact of what you do in HR?

Kirkpatrick’s Model of Training Evaluation

‘’Hold HR accountable: do not accept measures of activity - things like positions filled, training hours delivered and appraisals completed on time. Require measures of accomplishment that reflect business success: sales or revenue, profits, productivity, customer retention and so on’’ Kaufman (2006) ‘’How to Fix HR’’ Harvard Business Review

Change the questions we ask…. Today’s Questions What does the employee survey suggest we do? What works at GE? What does the business need? How much does it cost? What other data do we have? New Questions What do the employee behaviours suggest we do? What works here? How does what our business needs fit into the overall system? What do patterns over time tell us? What data do we need? Based on Nalbantian et al, 2004

ROI - Leadership Development Examples We specialise in those industries with the key traits of professional sports – constant pressure and the need to deliver immediate and tangible results We specialise in those industries with the key traits of professional sports – constant pressure and the need to deliver immediate and tangible results Working with Royal Mail top 90 senior managers 18 month programme aimed at reducing bureaucracy and managing transitions 25% improvement in management confidence to effect change “Making Sainsbury’s Great Again” Leadership programme for top 1000 business leaders Internal capability building of 50 accredited coaches Staff perceptions of the new leadership behaviours up 11% to 76% Development of Top 150 in CCE over 5 year period Aimed at improving organisational confidence 60% reduction in voluntary attrition and improved engagement

ROI - Leadership Development Examples Development of UK Dealerships Management teams Aimed at improving sales and after sales service ratings Difference in participating vs non-participating dealerships 4x2 day workshop in High Performing Leaders Programme Significant improvement in 180 leadership scores (pre vs post) EES scores highest in participating businesses

 Discuss examples of ROI work within your organisations…..  What will you do differently next time?

Conclusions

Conclusions Measurement of ROI needs to change from retrospective and separate to proactive and integrated HR initiatives should be integrated into the business as a whole with shared accountability for the results Measurement of ROI should be used as a feature of feedback loop to ensure that HR initiatives continually and positively impact the organisation

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