The Benefits of Investing in Human CapitalNovember 29, 2009
Business executives are always asking training professionals to justify investing in internal and external training. These decision makers want to understand the return on investment (ROI) as they might with a new software program or a marketing campaign. Many also ask why leadership training? There is enough data available on training, including data on Rapport’s training, to justify an executive’s investment in their most valuable asset…their people.
To answer these questions, it is important to understand the current global economy. One of the greatest challenges that organizations face in their quest to thrive, is the ability to change. Thousands of companies have failed while others are thriving. The difference is those that are thriving have the ability to adapt and meet the new market realities. The quicker an organization can change, the sooner they are able to thrive. What allows companies to adapt and change is a culture of leadership.
Emeritus Professor of Leadership at Harvard Business School, worldwide speaker, and the author of seven bestselling business books, John P. Kotter states: “Powerful macroeconomic forces are at work here, and these forces may grow even stronger over the next few decades. As a result, more and more organizations will be pushed to reduce costs, improve the quality of products and services, locate new opportunities for growth and increase productivity…..Leadership…creates organizations…and adapts them to significantly changing circumstances.” (Leading Change, John P. Kotter, pp. 3, 25.)
In 2008, IBM came to a similar conclusion in its Global Human Capital Study: “More than ever, today’s global organizations are focusing their time and attention on maximizing the value of their workforces. As corporations, nonprofits and government entities are becoming more globally integrated, and as traditional geographic and competitive boundaries disappear, the need to identify, develop and connect talent has never been more critical.”
The study surveyed senior HR executives from 400 companies in 40 different countries. The executives identified the importance of an adaptable workforce that can rapidly respond to changes in the outside market and leadership to guide individuals through change and deliver results. These companies also cited a lack of leadership capability as one of their top workforce challenges.
Successful organizations are acutely aware of the need for leadership development and the numerous benefits of leadership training:
• “The goal of leadership is to help people find their voice, where needs in the organization and marketplace overlap with talent, passion and conscience. When people truly find their voice, they don’t need to be supervised; they manage themselves because their motivation is internal rather than external.”
• Improved morale: People need to have the feeling they are learning, growing and developing new skills. This keeps them engaged.
• Training helps people get connected to their company. To develop and share common goals. They believe more in their company and want it to succeed. When people start moving in the same direction with a common goal, they create a culture that will propel their company to success.
• Growth is change, and it will not happen without a shift in culture that changes the way employees work, act, innovate, talk, learn and collaborate. One of the greatest challenges an organization faces is changing its business culture. Training helps organizations create this culture shift by moving people out of their comfort zones and into the leadership behaviors that drive success.
• A 2008 leadership training study by Metrika-Phoenix found that leadership training strongly influenced behaviors that improve performance at work. The survey had a higher than 72% response rate, a confidence level of 97.5% and a margin of error less than 5%. Over 92% of training participants reported improvement in the following behaviors:
-Increased understanding of how their behavior impacts other people
-Willingness to take additional risks and push themselves.
-Greater willingness to support others and work as a team.
-They hold themselves and others to higher standards of accountability
-The ability to express more passion and enthusiasm.
-Greater self-confidence and a sense of increased self potential.
-More awareness of the potential in others.
-They are developing better focus on tasks and are getting better at showing initiative.
• The only thing that increases productivity within an organization is people. People are the only asset that appreciates in value. People may be developed and their performance improved. All other assets like buildings, equipment and systems deteriorate and depreciate.
• Talent shortages require organizations to focus on developing and retaining talent.
• When employees feel appreciated, they are more likely to stay with a company. Many employees feel training improves their opportunities for advancement and thath they receive the necessary tools to be more effective at work and in their personal lives. “Having employees whose work and personal lives are balanced has tangible benefits—both for the employees and the organization overall—including an increased ability to attract and retain skilled people and higher production, satisfaction, and morale.”
More than ever, it is imperative that organizations continue to invest in their people. The current economic challenges associated with globalization demand that organizations change their approach and develop new leadership skills. It is critical that employees are more focused, confident and effective than ever before. To be effective, successful leaders will partner with outside organizations to develop their skills and serve as role models and mentors.
The ultimate responsibility to develop leadership lies with the entire organization. Effective outside partnerships are not enough. HR departments acting alone are not enough. Potential leaders must be identified and provided with direction, opportunity and guidance in order to develop. When the entire organization understands the benefits of developing leaders and works together, the necessary cultural ingredients to adapt and thrive will exist.
IBM Global Human Capital Study (2008).
Kotter, J.P., Leading Change