Over the past month, a group with whom I'm involved have been asking local leaders about the programs that we present to the community. These leadership development events are especially focused on personal leadership within the context of work and professional life. We've always seen our audience as the local business person who either has never attended a leadership conference, or the business owner who brings her staff to our event for a shared leadership experience.
One of the questions that has been asked of us concerns the Return on Investment (ROI) for attending one of our events. Here are some of my colleague's thoughts.
... this is the times we have moved into.. ROI...people on all levels are stretched - for time, money and quality.. they think before they spend now.. and what they are thinking about it is now I have to make a choice.. if I do this I can't do that... and that speaks to the decision going to the highest point of value... I have to sell ROI to get the gig ... they want to know "what is going to be different" after this event.. Tall order.. but still have to address it ...
I think we need to consider that the whole ROI question could be a red herring. Not that ROI is not important or should not be measured, but it reminds me of the companies who are scaling back on corporate wellness programs because they haven't figured out how to measure ROI.
Honestly, you CAN'T accurately measure the ROI of the programs we present. In fact, you can't measure it ANY time exactly. The reason is that there are SO MANY additional factors within the organization and out that could radically affect such measurements. Yet, the corporate CEO, business owner/leader wants to SEE the value and benefits.
Bottom line...people are spooked at all levels of life. Uncertainty in the future is at an all time high. We don't have the answers, but we can stimulate great questions and help people deal with their uncertainty in a positive fashion. If we don't inspire people to develop their creativity, think of themselves as solutions providers instead of employees...we are not creating value ... However, I believe we are doing this. We just have to be creative in positioning this message. The ultimate ROI is to help people feel as if they can leverage their uncertainty into unparalleled opportunity.
I agree with my colleagues about these issues.We live in a much more complex, demanding world. Every decision brings a level of scrutiny that is unprecedented. As a result, I've come to the conclusion that we need to think differently about ROI.
There are two aspects of ROI that are worth considering. One is the standard question of the meaning of investment and its return. The other is deeper question related to employees and their value.
What do we mean by ROI?
ROI is a concept for measuring value. It is primarily a cost-benefit measurement. If I spend this money on this event, will it return a value equivalent or greater to its cost.
This is a trap that many businesses find themselves in. It is a trap because the cost / benefit ratio is not a adequate measure of value.
Watch this video by Dr. Eliyahu Goldratt that provides perspective on the trap that many business are caught in.
Goldratt Lectures: Thinking Globally by Theory0fConstraints
When cost is a primary measure of value it is impossible to understand the potential that resides in the business. Potential requires investment for it to be discovered, developed and fulfilled.
This especially applies to the highest cost within a business, employees.
Here is one of those points of transition that is important for us to recognize. The shift is from one conception of what a business is to a new conception.
A shift in values and approach.
The 20th century marked the height of the application of the industrial model in business. Employees were viewed as parts of a production system. The ROI / cost-benefit method of thinking meant that those jobs were allocated to where costs were low and production levels could be maintained. As a result, corporate businesses became huge successes by this way of thinking. That was then, this is now.
Today, as globalisation flattens the business landscape, these decisions are not so simple as they once were. Factor in an accelerating and disruptive rate of social, economic and political change, and the environment for business from the largest company to the local mom and pop convenience store is filled with uncertainty.
The old way of understanding a business was to see it as a mechanical system of business and production processes, with people as the most expensive parts of the machine. A new way to understand the nature of a business is as a community of people committed to a shared mission for impact.
The old way of doing things, the person was defined by the job. In the new way, the person is defined by their potential contribution. With the former, the perspective was reductionist and limited. With a different approach, the system is open to change through the contributions of each person. The system opens up avenues for discovering the value that is latent in products and processes.The old system assumed that we know all that we need to know. The new approach assumes that we must discover what we don't know, and then build from that perspective.
A better understanding of ROI asks what kind of investment do we need to make to fully realize the value of the staff that we have?
The change in perspective here is not just about employees. It is about the business itself. Is the business about what it produces or is it about the impact that its products and services have upon its market?
With a cost orientation, the production system is the focal point of the business. With a view to optimizing (a Goldratt term) the system, the shift can be made to the benefit or impact of the products or services of the company. It is ironic that the question about the Return on Investment in people leads to the same question applied to the company as a whole.
What is the Return that a client or customer should expect from the company's products and services?
My point here is that our conception of ROI is based upon an understanding of what a business is that is more all encompassing than what we initially recognize. If our conception puts us in the trap of not being able to see the potential that resides dormant, waiting to be released, then we need to think more deeply than simply about what ROI means. We need to look at what is the purpose or mission of our business and what role do our employees have in its fulfillment.
Taking ROI one step further
One of my colleagues commented in our discussion,
...What we CAN demonstrate clearly is that the organizations that invest more heavily in their people through training and events are the CEOs who are most successful -- from Southwest Airlines to Starbucks to Lockheed Martin, Google, …
Yes. This is clear, in that we all understand that there is value in investing in people. What isn't clear is the answer to the question, "What should be the outcome in investing in people?"
Our conception of ROI is rooted in 20th century thinking. It is a transaction based model that defines the value of people as costs within a production system. (I am somewhat overstating the point, because not every business owner sees employees in this way. They recognize that their staff are people with families, mortgages to pay, and who are the ones who make the business function.)
This transactional perspective fails to understand that the transformation of any organization comes through the people who work and volunteer within it. The agility and adaptability that businesses need today does not come by executive fiat. It comes by having employees who are passionately engaged as leaders in the company's mission. As a result, executive leadership must shift from a control stance to the practice of developing and facilitating employee leadership.
To embrace this change of mind requires us to also make the shift from a mechanistic understanding of business to something a kin to the business conceived as a a community of leaders joined together to create impact. In this sense, the company is a society of change agents whose purpose is to have as great a positive impact upon clients and customers as possible. It is an approach centered upon realizing the full potential of people as the business' strongest, most valuable assets, not as costly machine components.
What does it mean for employees to lead?
First, they are seen as people with potential that is unrealized and undeveloped. This is the talent question that businesses are beginning to invest significant resources in.
Second, employee leadership rises from their own, individual, personal initiative to make the difference that the company's mission promises. These employees are engaged in taking action to make their company better.
Third, their leadership is both collaborative and individual. This understanding of leadership isn't an encouragement for every employee to do their own thing based on their own interests. This is leadership that recognizes that how people work together is a key dimension of organizational success, and of increasing importance.
One way of distinguishing the difference between employee leadership and executive leadership is the difference between tactical and strategic leadership. If the business owner spends her or his time putting out fires, addressing customer issues, resolving employee issues, then the system is designed for the executive leader to control all aspects of the business. Today, this is not realistic.
Instead, by developing the leadership capacity of people, employees learn that they have the perogative to resolve issues before they become problems. They learn that they can take care of customers, vendors and other employees in a way that builds long term sustainable relationships of mutual benefit.
A company that supports the personal initiative of their employees is one that has opened up the possibilities and opportunities that were hidden before. People are the agents of transformation through their individual initiative and shared responsibility for the company. Employees are assets waiting to be utilized for the benefit of the company.
Redefined ROI as Return on Initiative.
The measure of initiative is the change that makes a difference that comes from the leadership of people. This kind of leadership transcends the restrictions of cost/benefit decision-making by elevating a culture of shared responsibility. It means that employees are not measured simply as costs on a balance sheet, but rather as agents of positive, sustainable change.
What does it take to create a culture where employees are equipped and motivated to take leadership initiative?
Here are four steps.
The first, the owner or chief executive has to release control, and allow for employee initiative to take place. The future success of a company will be determined by how well the organization can become a community of leaders. It starts with the person at the top being willing to share leadership.
This is not an easy step because every inclination bred into the bones of a senior executive is the fear of losing control and failing. Often, only after realizing that over-control is the surest route to failure that openness to a more open, collaborative leadership structure can develop.
The second step is to begin to invest in specific ways to help employees realize their leadership potential. This is not training in executive leadership. This is training in personal leadership that is reflected in their performance, attitudes, behaviors and relationships within the company. With this training, the company transitions from a mechanism of business process into a community of leaders who take initiative to develop those processes for impact.
Let them lead, and It may turn out that eight leaders can do more than a dozen people who are just time-servers as employees. Let them lead, and your company becomes a magnet for people who want to work in an environment where leadership initiative is welcomed. But to let them lead, they must be equipped to do so.
The third step is to allow for the structure of the organization to adapt to a new leadership approach. Too often I've seen great ideas fail to return on their promised benefit because the environment is not suited to them. For employees to lead requires change in how the business functions. If there is genuine openness to change, then the right changes will be made.
The fourth step is to recognize that values are the heart of this kind of leadership. These are values that provide the foundation for the company's purpose or mission, its vision for success and how it defines the impact that it is to have on its community of constituents. Values are the unchanging foundation that unites a community of leaders together.
The pejorative attitude that values are a secondary importance as "soft-skills" simply reveals the mechanical perspective that has been the dominant philosophy of business for the past century. An emphasis on the importance and application of values creates a shift in culture that opens the company up to fresh ideas and new opportunities. It allows for relationships to form that are based in respect, trust and mutuality.
Each of these steps needs to be implemented for each supports the other as change brings strength and growth.
Shifting from a Return on Investment mindset to a Return on Initiative one.
This change of mind is like the difference between a journey measured by a credit card statement and one measured by the pictures, videos and stories of the trip. One is like a list of activities and the other a biography of a person's life. Invest in the person, and their life and work become more integrated, providing a stronger basis for leadership.
The most important question that must answered before any of the above can be fully understood is what is the potential that each staff person has?
Do you know what that might be?
Do you have any way of understanding what potential looks like?
Then you can ask the question what does it take to develop their potential? It is part training, part creating the right social atmosphere, and part a redesign of how the organization functions.
The beauty of this new approach to being a business is that it is no longer all up to the senior leadership. As this approach produces its promised impact, more and more of the staff will be making contributions that move the company into a new way of operating.Then your Return on Investment in them will be measured in the company's Return on their Initiative in leading.
Photo courtesy of Push Revolution Photography
Hi Ed,
You share important insights in your post, especially two questions you raise re ROI, i.e., the meaning of investment and its return, and the deeper question related to employees and their value. It strike me that similar questions are and will continue to be shared within the education community struggling to be more effective with it’s mission/purpose and its employees, many of whom are overwhelmed with the challenges of educating youth.
The Goldratt video provides perspective on the myopic view of many businesses that operate on a “value” system that supports their belief that the cost/benefit ratio IS an adequate measure of value.
You remind us that a shift in values, related to globalization, has encouraged companies to re-consider cost as a primary measure of value, and pay more attention to community contribution committed to a shared mission for impact upon the market.
You challenge businesses to discover and articulate their purpose/mission, and the roles their employees have in its fulfillment, and you make a strong case for staff development programs that facilitate individual and collaborative leadership based on personal initiative.
You raised the question, “What should be the outcome in investing in people?”, and lead us to the conclusion that indeed, one critical outcome is discretionary effort, based on a company’s focus on ROI (Return on Initiative)
Values are the basis of all that you have shared. So I offer a few observations for your consideration.
1) Most companies and organizations have mission statements but MORE companies must effectively articulate mission and purpose to employees, especially to job seekers during the hiring process, including total transparency about mission/purpose during interviews. This dialogue will assist companies with important exchanges that can occur during the hiring/selection process to select the best candidates.
2) Most employees, and especially job seekers, are not sufficiently aware of their deep-seeded work values that relate to their individual personality, and are more focused on obtaining work that provides a good salary vs work with meaning/purpose that also provides a good salary. Employees whose work provides meaning and purpose, initiate discretionary effort.
3) An important staff development component related to a culture of individual and collaborative leadership should include opportunities for employees to examine their personal work values in the context of their company’s mission/purpose, and specifically address the multiple ways individual employers can/should contribute collaboratively to the company’s shared mission/purpose for impact upon the market. (a link on deep-seeded values http://bit.ly/dNEaOu )
4) All of this can and should be applied to educational reform, because the future of any company’s/nation’s workforce is contingent on the effectiveness of its K12 schooling and post-secondary education/training. Unfortunately, this type of reform will probably take another two decades. In the meantime, the business community can surly contribute much through more collaboration with the education community. EdC
If you or your readers are interested, a new Tweet Chat has been initiated to start a dialogue re this transition all students must make from their schools to life. #schools2life 2nd/4th Thursdays 8-9pmEDT and on LinkedIn at schools2life.
We welcome dialogue with the business community, certainly a major stakeholder.
Posted by: Edward Colozzi | July 19, 2011 at 10:09 PM