The pandemic, digital disruption, and the Fourth Industrial Revolution compelled organizations to take measures to deal with this rapid shift. Upskilling and reskilling were the highest priorities in navigating this tremendous transformation. Employee training and development became big corporations’ most important line items, and they began spending excessive money on training their employees.
One of the most pressing challenges for Chief Learning Officers (CLOs) and learning and development (L&D) leaders was determining and utilizing the L&D budget to meet the organization’s learning and training needs for maximum gains. Since then, learning enthusiasts have had difficulty figuring out how, when, and where to spend billions of dollars.
Are you aware of all expenditures made from the L&D budget? Are you allocating your L&D investment wisely to the right audiences and experiences?
Listen to Rob Lauber, Former Chief Learning Officer, McDonald’s, Founder at XLO Global, LLC, as he talks with Nolan Hout, Vice President, Marketing at Infopro Learning, Inc, about his real-life experiences and recommendations on how to maximize the ROI with the training dollars while continuing to create value as we all adjust to this “new normal.”
Listen to the Podcast to learn more:
Rob Lauber, Founder at XLO Global – An industry veteran who has worked up the corporate ladder from L&D Manager and Director of Learning Services to CLO of one of the world’s most iconic brands, McDonald’s Corporation, Cingular Wireless, and Yum. He now leads XLO Global, a consultancy and advising firm focused on driving strategic value for businesses and workforce development initiatives.
Nolan Hout, Vice President of Marketing of Infopro Learning – A seasoned marketing expert with extensive experience in all aspects of marketing, including strategy, digital marketing, and more. He spends most of his time in the L&D industry conducting marketing research to identify the most critical challenges. He leverages this data to create cutting-edge learning solutions that boost business performance and ROI.
An excerpt of the discussion follows:
Nolan: Welcome to Infopro Learning’s podcast series. Today, we have a much-anticipated session to explore how chief learning officers can manage their budget for billion-dollar organizations.
I can’t think of a better guest to join us for this topic today than Rob Lauber, CLO of the year award winner. He has been the Vice President or CLO for some of the world’s largest companies, McDonald’s Corporation, Cingular Wireless, and Yum, all of which have major learning and training expenditures.
Today’s largest organizations deal with some of the most common L&D challenges. They always ask about some common and simple concerns that always lead them to a bog. One of the biggest things always comes up is the idea of the BUDGET. The substantial amount of money dedicated to L&D within a large organization requires prudent spending.
When you have a big L&D budget, how do you go about managing that? How do you even begin designating where that money will be spent?
Rob: There are a few filters that I’ve used across my career at Cingular, Yum, and McDonald’s to figure out what’s the best way to allocate funds. Or how much money do I need to do what needs to be done?
The first one is, putting the work to be done in a couple of categories; one would be what it takes to run the railroad. You have many things such as trainers, infrastructure, and staff. Few things are constant year after year. So, these are the run the railroad exercises. What does it cost actually to do that and examine every year? Is there the opportunity to get more efficient at that? or do you have enough capacity and capability? It would probably be another question in terms of thinking about it. And it’s the first lens you would look at.
For example, if the utilization rate of trainers is increased from 70% to 80-90%, feedback such as work-life balance and burnout is obvious. Moreover, passing 70% would lead to a higher attrition rate. It is possible to determine whether trainers are enough for a particular course or not by using data from the previous year.
A number is assumed against the established data, helping organizations determine where the most significant part of the budget is being used and what will happen in the coming year. When an organization thinks about learning technology investments, most of them are subscription-based or license cost contract costs. These factors are going to be pretty constant year after year. The only thing variable is the transformation, restructuring, etc.
The second lens is about advancing the business strategy. Every year starts at zero, and you build into what is it that you’re going to need to be able to support where the business is going? Typically, in a multi-year plan or the yearly plan. Suppose there will be a big deployment of an HR management system next year, for example, Oracle. IT will be a resource-intensive process, and a must-ask question in such situations is, how much money is needed to do that? Should we use internal resources? Or external resources?
Typically, external resources are leveraged in such scenarios to scale and contract efficiently. For example, after figuring out the amount of investment required, it is recommended to combine it with product launches, systems, technology, and other related pieces to advance the business strategy.
Nolan: How do you go about capturing the budget from the business landscape perspective? How are things changing, and what can we do to be prepared?
Relationships across the business are the most crucial aspect for a learning leader. Connectedness is imperative to understand the strategic priorities. If you report to a CEO, stay connected to the CEO and the C-level executives about the strategic planning for next year’s priorities. Generally, there are four or five big things that the organization’s working against. Aligning the budget perspective against these four or five things with the stakeholders championing will help get visibility of the plans for the coming year.
Then comes the miscellaneous things, the things an organization wants to achieve, and if it can’t get them done, it will not be the end for the organization. Miscellaneous is a nice to have and not mission critical but worthy of exploration.
Rob shared an interesting example of learning tech during the podcast to explain why miscellaneous is worthy of exploration. Listen to the podcast to explore more.
Nolan: How can we make the most of the approaches when deciding whether to reduce or increase the L&D budget cost to serve?
Rob: The most important thing to remember is that everything you do is connected to business activity. Following that, leading to the point of discussion and chunking out things that are really ‘nice to have’ will eliminate everything optional in the budge list. Nice to have is good, but the strategy is more important. In such cases, when asked to lower the budget by 2% or half a million dollars, examine the railroad items to see if there are any alternatives to make them better, faster, or cheaper. If you can accomplish that, then it is a recurring theme year after year.
There are numerous approaches to this, but the bottom line is that you are optimized and efficient. Finally, get down with your stakeholders and ask them, “OK, what will I do with 2% less?”
It’s a fair question to ask. Learning and development, in general, are not as constant as we believe; things ebb and flow. Many of the L&D initiatives we conduct are cyclical, such as high potential programs completed after around two years. They would either fade away or become part of the standard training program. It would frequently wither and perish or be rebuilt. So, considering such factors will make a difference.
Nolan: How does the business evaluate the L&D cost-to-profit conversion? Is it a one-time activity, or do you perform it year-round as a value add?
Rob: It is an ongoing dialogue that L&D leaders must conduct throughout the year. Ringtones and graphics, for example, were a big deal at Cingular Wireless about 18-20 years ago. People were paying to get the graphics and to download a particular ringtone. However, the secret was to train sales representatives to pitch it provocatively. At the beginning of the budget year, we ran several small campaigns to target buyers’ data literacy at some retail stores.
As a result, attachment rates or conversion rates went up by about USD 2.00 per customer transaction from the trained individuals versus those that weren’t originally. What makes this interesting is when you extrapolate that out across the system, that’s worth about 40 to USD 50 million in incremental revenue. This gave a significant push for the second year, and with the SVP of Sales, we discussed the scenario and the results. After that, we strategized to grab the USD 40 million revenue by putting in some extra million and a half dollars to augment the sales staff to pull these dollars faster.
Receiving the green signal, we went full speed and could secure a few dollars out of it. In addition, a significant uptake in the ringtones, graphics downloads, attachment rates, and all other stuff was seen nationwide. It was interesting in a dynamic where from an L&D perspective, we paid close attention to the sales outcomes, which is what was most important to our stakeholders.
If it had failed, we might have sat there and said, “We need to halt what we’re doing and stop investing; alternatively, we can invest and go faster.” To be able to leverage your L&D budget to influence the dialogue in that direction, I believe you must first build a lot of trust inside the organization.
Nolan: How do you take input from someone you don’t know well or not on your team? How do you reconcile lowering your budget and accepting inputs as they come?
Rob: It isn’t easy, and the first thing that L&D leaders should acknowledge is that ideas can come from anywhere. The chief learning officer’s mistake is that they assume they have unique ideas. When they are the most distant from the learner in terms of L&D, they must recognize this and be humble about it from the outset.
In a decentralized community like McDonald’s, how can ideas be found? How do you use them to spread them over the rest of the world?
If we could get everyone, for example, moving in the same direction on the same learning technology platform, that would help advance the business strategy and makes it more accessible. Such as an excellent eLearning program in Australia to get reused in Canada, the United States, or the United Kingdom. It can happen, and that didn’t exist before and was very manually intensive.
You might present it in terms of how it benefits them and you. The key is to respect the viewpoint that people offer to the table. The European folks I worked with had a much different perspective on multinational things than I do. Because they are sitting there with 23 countries just hours away from them, and multiple languages were very nearby.
That type of perspective is critical because what appear to be simple ideas, straightforward strategies, and simple investments may become considerably more challenging when applied globally.
Rob further expanded on the question and shared some interesting examples from his past experiences. Listen to the podcast for expert perspectives.
Nolan: What are the financial metrics that apply to all the organizations? What are the ten factors that every CLO cites as being decisive factors?
Rob: I do not know if there are actual measures. I think it varies based on the organization and what the organization places priority on. At McDonald’s, there was a program wherein we were spending probably USD 15 million in the US per year. And one of my responsibilities upon arrival was to examine everything. If you merely looked at the ROI, it appears that it provided no benefit to the business in terms of financial performance. You couldn’t identify a restaurant metric that helped you improve. Looking at it from a global perspective, your metrics in France really worsened if you participated in this program.
So, the honest question is, why are we doing this when we can’t see any impact on the business. But the conversation became a legacy and tangible value to this activity in the business. The action that the L&D organization performs and so culturally as a marker – we must continue the investment as a cost of doing business because it has much more symbolic meaning and has much more of an intangible or cultural value than a business return on investment. So those are like really fascinating conversations to get into. In addition to this, there are cultural measures that are almost sometimes as important as financial measures.
For instance, in the traditional Kirkpatrick model, you’re never going to get a level 4 on it that shows any return. Still, the value of employee engagement, cultural significance, and brand reputation, transcend the financial value. It would be best if you continued to do those. Again, it doesn’t mean you shouldn’t look for efficiency. You know, realizing how you do it, but you want to preserve some element of that right, so I think every company I’ve ever worked in had programs like that. Those are sort of you run the railroad kind of pieces that exist, and you’re going to keep doing them year in and year out because they’re just culturally important.
Rob and Nolan agreed that these measures or activities are an excellent method for enhancing one’s brand. You can learn more about this by listening to the podcast.
Nolan: What are some of the quantitative measures that you can look at as the Chief Financial Officer (CFO)?
Rob: We would always look at things like 90-day attrition, for example. Most of the companies I worked in the last 20 years had lots of hourly frontline facing. So, we looked at the attrition rate in the first 90 days. How well were we onboarding people and making them feel like this is a place they want to be? We would look at the time to productivity and how fast we could get somebody contributing to the business, which is a function of instructional design.
So, if we got a five-week customer service training program, does it take five weeks, or can we get them on the phone in the first week? Can our systems only route specific calls to people, and we can get them taking particular calls in the first week, those kinds of things. And then ultimately, unlike product launches, we might look at sales take rate, sales mix, and how close are they aligned with the expectations from sales and marketing?
At Cingular, before a launch, we measured employee confidence in the actual launch by asking specific questions. How prepared do you feel to be able to handle these situations on Monday when we open the store? And the confidence level was like in the 90s kind of level, so we took that data, and it wasn’t like ROI because it was going to be clear by Tuesday.
On Friday, essentially, we had enough data, probably 25,000 people’s responses on their confidence, and we were able to know going into Monday that most people felt confident in handling the customer issues. We executed it well on the back end with these data points. We received full credit for it. It was rather intriguing.
More questions answered from a CLO point of view in the podcast are:
Rob’s in-depth discussion with Nolan unveiled more of his informative inputs on cleverly spending and making the most out of the L&D of a billion-dollar organization. He has answered other interesting questions like:
- At what stage do you discuss the evaluated learning metric and the business impact with your team?
- What is the cost per learner, and how important is it from a CLO perspective?
- What advice would you provide to CLOs with enormous L&D budgets who may feel overwhelmed?
Listen to the complete podcast audio to get Rob’s other expert opinions on managing the budgets of billion-dollar organizations and their future.