Value of Investment: managing L&D by its benefits

People development is now regarded as a holistic method. Its aim is to strengthen the human side of the company. It is the function that develops an organisation’s human performance capacity. Anyone who wants to position people development strategically first needs a clear picture of where it stands today. A people development audit provides this starting point.

The first step is to define the group of people involved. The guiding question is: who is currently responsible for people development projects in the business units and regions, and who implements them? The aim is to find the doers and their assistants. Key players can be the head of people development, their staff and a few trainers, as a rule no more than six people.

Next, a decision must be made as to whether the audit is carried out separately in each region or business unit or whether a central project team is put together. Both routes are possible; the decision depends on the structure of the company.

The audit begins with inviting the key players, who work through the audit questions on site and compile the documentation. After a presentation of the audit and its background, the success factor analysis follows. It is important that the auditor obtains all documentation on the questions from the company. For the success factor implementation, a trainer and consultant competence analysis can be added if required.

The evaluation is carried out by a team of experts. It evaluates the documentation from a qualitative perspective, creates a gap profile and benchmarks the results against best-practice organisations. This produces an audit report with detailed recommendations.

The handover takes place in two steps. An executive summary is presented to the company’s management: approach, profile of people development, gap analysis, recommendations for action, next steps and monitoring every six to twelve months. A detailed full presentation follows with the head of people development and the key people. All results are discussed, the recommendations for action are reviewed and an action plan including monitoring is drawn up.

The Value of Investment system, VOI for short, goes back to Prof. Dr. Herbert J. Kellner and the institute ITD International. Its core formula is: creating value through appreciation. Behind this formula lies a company-wide optimisation system that connects people development with the company’s objectives.

VOI is first of all a holistic way of looking at performance. Performance is seen not only as a financial contribution to the company but as value. This perspective changes what is measured and how success is recognised.

VOI is at the same time an approach. It answers the question of what needs to be done to achieve optimisation. The individual phases, tools and checklists give this approach a fixed structure.

VOI is also a performance development system. The company’s value drivers are supported by primary motivation. People perform better when they recognise the benefit of their contribution for themselves and for the company. Within the system, this connection is regarded as a new path to top performance.

Finally, VOI is a measurement system for qualitative results. Two questions regularly come up here: how precisely is it measured, and what is measured? The answer lies in the benefit analysis, which defines qualitative benefit factors, determines their value and transfers them into a tailored VOI calculation. In this way the system complements the classic return on investment view with the qualitative side of value creation.

The Value of Investment system is based on a new approach from the psychology of motivation. It is holistic: everyone involved must be on board. From the shareholders’ point of view, capital takes priority. The system reverses this process. Capital has the same value as people. What the individual achieves stands on the same level as capital.

The system’s optimisation tools are best-practice processes. They were derived from successful training and development projects and serve as guard rails that a company can orient itself by.

The focus is on human value, not human capital development. Anyone who speaks of people as capital degrades them to the level of capital. The system speaks instead of the value that people create.

A further element is the steering of benefit-oriented change processes. The benefit is put first for all partners: for the company, the management, the employees and the customers.

The system concentrates on strengths, on the positive and on potential. This does not mean that problems are suppressed. The approach is simply different. No one goes looking for the culprit. Instead, the work is to identify where things are stuck and which behaviour needs to change, and then to tackle it there.

An image illustrates this attitude: a gardener can keep pulling weeds to keep the garden free of them. But he can also plant more flowers and crops, so that weeds no longer find any room. The Value of Investment system chooses the second path.

The Value of Investment system causes an organisation to realign itself, namely towards benefit and value creation. If an organisation develops in a certain direction, it is because it asks itself questions about that direction. If an organisation lives only in the here and now, it cannot look ahead. Old things should be called into question in order to take on new ones.

VOI asks the right questions and steers towards optimisation. The system does not do the company’s thinking and work for it. It sets guard rails within which those involved should move. They have to discover and try out the paths themselves. Companies steer their own development through the focus of their analyses.

Methodologically, the system builds on the Appreciative Inquiry process, which runs in four steps: Discovery, Dream, Design and Destiny. People and organisations can change when their perspectives change. The focus is on strengths, solutions and resources. Most of it has to come from the company itself: where are our strengths and resources?

Connected with this is the path from the shareholder principle to the stakeholder principle. Everyone involved is regarded as an equal partner. Capital is important, but it is one factor among several.

The approach can be summed up in one sentence: turn piggy banks into truffle pigs. The point is to work out benefit instead of just saving costs.

The first principle is to filter out strengths. That means seeking out what works and concentrating on it.

The second principle is to tackle problems with a solution-oriented approach and in a respectful process. Whoever facilitates the process must not themselves be the cause of the problem and must not present ready-made solutions. Solutions must be sought and found together, and in a respectful process.

The third principle is transparency. Everyone involved knows what game is being played and who is playing. Communication filters are switched off. Benefit communication exists in every organisation. It takes place at the same hierarchical level and follows the question of how someone communicates so that it is advantageous for them. The system makes these filters visible and removes them.

Corporate culture and leadership behaviour are decisive. If the solutions remain superficial, the system cannot work. The goal is genuine appreciation, resource orientation and strategic participation.

Primary motivation has a clear advantage here: nobody feels like a fifth wheel. Everyone knows that their contribution is valued.

The Value of Investment system is not a clinic for a sick organisation but a fitness centre for companies willing to develop. It requires an organisation that wants to develop and invests time and attention in doing so.

VOI is not a quick fix. Get everything done today, with as little effort as possible and working as fast as possible: the system does not make this promise. Human behaviour and entrenched structures must be changed slowly and sustainably. The process is an optimisation designed for the medium to long term.

VOI is not a measurement system for increasing human capital and does not degrade people to a cost factor. Employees are not just a resource but the most important source of success and value creation. This is a paradigm shift, and a drastic one.

The problem the system solves lies in current steering practice. HR controlling systems steer the input, i.e. headcount and costs, rather than the output. They are more of a hindrance than a help. Collecting key figures is fine, but the other path is worth trying.

Then there is the view of capital and people. Capital and people are not on an equal footing. Corporate culture arises through appreciation that leads to value creation.

In summary: human capital is a relative value, because the performance of the individual can only be seen in relation to the company’s structures, objectives and strategies. Corporate structures can challenge or hold back, and so can objectives. Since strategies differ in every company, there will never be an identical statement. The right approach is to measure value creation, i.e. the output: what does a person achieve under the given conditions, and what is this value contribution worth to the company?

Entry into the Value of Investment system follows the same pattern as the people development audit. First, the key players are defined, again no more than six people from the head and team of people development and a few trainers. Then a decision is made as to whether to work regionally or centrally. The key players work through the audit questions on site and compile the documentation.

The difference lies in the subject: instead of the success factors, the evaluation methods are analysed. Here, too, the auditor obtains all documentation. A team of experts evaluates qualitatively, creates a gap profile, benchmarks against best-practice organisations and prepares the report with detailed recommendations. The presentation to the company’s management and key people and the action plan with monitoring conclude the audit.

The evaluation methods analysis examines training approaches on the basis of three factors. The first factor is the approaches themselves. When selecting methods, the questions are what the approach contributes to the corporate objectives, whether it is compatible with the corporate strategy and whether it is a competence-oriented approach. Its didactic substance is measured by whether the approach is didactically and methodologically sound, whether it can be integrated into existing concepts and methods and whether it reliably delivers the planned results.

The framework conditions are about which inhibiting conditions must be removed and which supporting conditions must be created, and what consequences must be drawn for the future.

The second factor is the evidence. In training controlling, the questions are whether an objective measurement and control procedure exists, whether the controls are appropriate in educational terms and whether they are based on psychometric quality criteria. For return on investment, the points of interest are the cost-benefit ratio, existing cost-benefit benchmarks and the cost of a company-specific adaptation. For value on investment, the questions are whether the qualitative benefit factors are defined, whether their value has been determined and whether a tailored procedure for the VOI calculation exists.

The third factor is stability. Goal synchronisation requires that the overall process has been made clear and understood, that the synchronisation of project and corporate objectives has been communicated and that the objectives are linked to the results. For strategy mapping, what counts is whether the strategy has been presented clearly to everyone involved, whether those involved are actively included in the development process and whether top management identifies with the training project. Clarifying the benefit asks whether the participants’ benefit expectations have been identified, whether the motivational structure of the target group is known and whether the individual benefit has been made clear to the participants.

The VOI process runs in six phases. In the first phase, the project objectives are specified and secured. The tool is the GoalNavigator, a checklist with 30 questions. The aim is to ensure that the project has a solid foundation. Working through it takes about three hours including discussion and is done in a group or individual interview, supplemented by a practical simulation.

The GoalNavigator is divided into six categories: needs analysis, description of objectives, conditions for objectives, competencies, certainty of objectives and timeframe. The questions make it possible to review the objectives critically at the start of a project. They show whether objectives are correctly formulated and presented in a way the target group can understand, and also whether the objectives are realistic, measurable and motivating.

In the second phase, the prerequisites for introducing the system are ensured. The tool is the QuickCheck, a checklist with 20 checkpoints. The aim is to clarify whether the conditions for a successful VOI calculation are met. Working through it takes about two and a half hours including discussion, again in a group or individual interview.

With the help of these questions, gaps in training projects can be identified and eliminated in a very short time, before they have a negative effect. The question catalogue is based on best practices that work like guard rails and immediately point to missing elements in strategies and programmes. The questions should, however, also bring out superfluous elements so that they can be removed from a project in good time.

The Value of Investment system serves primarily to assure the quality of training and development projects. For this reason, the questions in the QuickCheck are predominantly quality-oriented. Anyone who can answer all 20 questions with yes can start implementing the project with a clear conscience. If some questions remain open, the missing prerequisites should be addressed first and the gaps closed.

Some of the prerequisites queried have far-reaching consequences, while others are of less importance for some projects. Nevertheless, it is worth thinking through and answering all 20 checkpoints. It is best to answer all questions first; then go back to the points that could not be ticked off and make clear what the consequences are if the prerequisite in question is not met.

In the third phase, the motivational structure of everyone involved in the project is identified and made usable. The core instrument is the ValueFinder, a benefit analysis in the form of a questionnaire, supplemented if required by a simulation, a case study and graphic evaluations of the motivational structure. The aim is to define the benefit for the company, management, employees and customers and to recognise the existing motivational structures.

The benefit analysis is carried out in individual interviews of 30 to 45 minutes, about 15 minutes per category. First, the interviewee receives an overview of primary motivation in their target group. The guiding question is: what are the motives for the project? The person ticks which categories apply. Then the interview questions for the ticked categories are selected, the interview is conducted and the answers are noted in key words. There is no discussion.

The results of the interviews are entered in the ResultTracker. A radar chart shows the motivational structure, and a table illustrates the details.

Once the answers from the ValueFinder are available, the ValueConverter comes into play. Its aim is to synchronise the benefit expectations with the company’s value drivers. The duration depends on the project. Here, people development acts as a catalyst between employees and the company. Its task is to connect the employees’ benefit expectations with the corporate objectives, i.e. the company’s value drivers.

The ValueConverter works in five steps. First, a concrete business case is created for each training measure. Second, a detailed objective/value driver matrix is produced. Third, an overview of the converted benefit expectations is drawn up. Fourth, benefit-oriented action concepts are developed for the training and development measures. Fifth, a measurement system is set up to determine the success of the benefit conversion.

The fourth phase is ProjectMapping. It serves to identify the project dynamics and to link the interests involved with the project objectives. The aim is to make the motivational dynamics within a project clear and to manage them. The approach is based on checklists.

ProjectMapping finds out how the interests are linked and clarifies mutual dependencies. The tool makes it possible to capture all details that are important for a training project, to establish relationships and to make dependencies clear. It provides the necessary basis for successful performance improvement, keeps the process clear and helps to measure the results quantitatively and qualitatively.

The fifth phase is aligning the project structure with best practice using the PrecisionTraining tool. The aim is a benchmark against internationally recognised quality standards in the training industry. The project is compared with best practices, and it is examined whether it has brought successes, partial successes or failures. The approach follows a four-step process: evaluate, select, calibrate, transfer.

The sixth phase comprises summarising, interpreting and presenting the results. The tool is the ResultTracker. The aim is to present the results to the management board and the other stakeholders. The approach consists of an analysis sheet and the presentation.

Taken together, the six phases interlock: phase 1 secures the objectives, phase 2 checks the prerequisites, phase 3 identifies and converts the benefit expectations, phase 4 links the interests with the project objectives, phase 5 compares with best practice, and phase 6 brings the results before the decision-makers.

Introducing strategic people development sensibly begins with a pilot project. Six guiding questions apply to the project team: for which corporate objective should people development make a decisive contribution to achieving it? Which people development objectives are to be achieved? Which job groups are affected? Who is responsible for people development? Who is responsible for planning and implementing the measures as part of strategy implementation? Who should take on project management?

The pilot project goes through six steps: goal setting, assessment, development, implementation, transfer and evaluation. A total of 16 tools are available for planning and implementation, which are used individually and depending on the task. The 16 tools are a treasure chest and do not have to be used in a linear way.

In goal setting, the GoalNavigator synchronises the corporate objectives with the competence and performance objectives. The PerformanceAnalyzer identifies qualitative and quantitative performance standards and performance objectives. The CompetencyTracer identifies the necessary competencies and establishes the current degree to which they are met.

In assessment, the PartnerScanner captures the range of experience of managers and employees and identifies individual learning behaviour. The ValueFinder identifies the benefit expectations of the stakeholder groups involved through a detailed benefit analysis. The CompetencyDetector identifies the current standards and individual competence levels.

In development, the ValueConverter synchronises the benefit expectations of the groups and people involved with the company’s value drivers. The SystemOptimizer aligns the training and development objectives with the corporate objectives and benchmarks. The PracticeMonitor, as a transfer plan, ensures that what has been learned is applied successfully in practice.

In implementation, the PrecisionTrainer aligns trainers and consultants with modern training methods. The PerformanceBuilder defines development measures that are used in addition to or instead of training. The WorkplaceInnovator creates a learning climate that favours transfer and removes transfer blockages.

In transfer, the Personal Development Plan sets out the personal potential of the participants and describes the training and development measures in concrete terms. The TransferFacilitator creates opportunities for application at management level with the aim of stabilising competencies. The Performance Support System provides the practically relevant information, processes and problem solutions at organisational level to secure learning transfer.

Evaluation is based on three methods: the four-level method, the ROI method and Value of Investment.

People development can only work properly if it knows the corporate objectives. These must be demanded from the management. The corporate objectives answer the questions: what do I want? How much do I want? What timeframe exists? These questions must be asked for everyone involved: for the managers, the employees, the customers and the suppliers.

Performance objectives are derived from the corporate objectives, and from these the competence objectives: which competencies are needed to deliver the performance defined in the corporate objectives? Only from this do the learning objectives emerge. A corporate objective can be captured with five questions: what is to be achieved? How much? By when? Who should contribute what? Why?

The synchronisation follows a hierarchy of objectives. At the top is the vision, a short description of where the company wants to be in the medium and long term. The guiding questions are: where do you want to go? Where do you see your company in five to ten years? The example is a fictitious manufacturer of solar installations that wants to be the most important solar manufacturer in the world.

Below this are the objectives. They are declarations of intent and roughly formulated ideas of goals for realising the vision, but not yet operationalised. Guiding questions: where do you want to take your company? Where do you want to be in five years? What does the end state look like? Examples are market leadership as a supplier of turnkey installations, spreading solar technology throughout the world, quality leadership and acting in accordance with defined ethical and moral principles.

The goals are framed quantitatively and qualitatively. Guiding questions: what do I want to achieve? How much? By when? Where? With what? Who? Why? In the example: the dominant market share, 35 per cent in solar technology, in five years, worldwide, with products A, B and C, through a dealer network and in-house installation teams, to secure the company’s long-term future.

The performance objective describes the required end state quantitatively and qualitatively, drawing on standards and quotas such as production volumes. Guiding questions: what must we fulfil qualitatively and quantitatively to achieve the defined goal? What unit numbers must be delivered? Examples: product group A 15 per cent, product group B 32 per cent, product group C 53 per cent, 200 new installers in the trade, finding reliable suppliers, clearly defining the service offering.

The competence objectives describe the competence requirements for delivering the performance. Guiding questions: which functions are involved in achieving the goal? What must the individual functions do to support achieving the goal? What expertise, what skills and what attitude are needed for this? Which competencies secure the performance? In the example: qualifying the dealer network.

The Goal Navigator describes the goal development process on the basis of nine factors. The first factor is visions. Before corporate objectives can be formulated, top management must be clear about the direction of the company. Visions contain statements about future development and other important perspectives. For a producer of solar installations, it might read: “We produce electricity from solar energy with a complete range of services and high economic efficiency.”

Visions do not need to be specific and do not necessarily need to be realistic. They serve as a rough orientation and contain all essential perspectives in one or two sentences. The perspectives are the success factors, for example safety, economic efficiency and market dominance.

The second factor is external factors. Corporate objectives are determined to a large extent by developments in the market, global trends, technological progress, economic uncertainty and other external influences. Often a company cannot control these factors. However, the company’s management must take them into account when setting goals and assess their effects as precisely as possible.

The third factor is internal factors. To be able to formulate realistic objectives, top management must consider all important internal influencing factors: competence pool, corporate culture, turnover of employees and managers, working climate and willingness to learn. The maturity of processes, economic efficiency and future potential must not be overlooked either.

The fourth factor is the benefit expectations of everyone involved. Only if the management board succeeds in capturing all expectations and developing the right value drivers will motivating corporate objectives emerge.

The fifth factor is corporate policy. Its task is to synchronise the visions, all external and internal factors and the benefit expectations of all stakeholders. The result is clear principles that sum up the company’s values. They express its self-image and determine the rules of conduct towards employees, customers, suppliers and the public.

The sixth factor is the corporate objectives. Once the principles have been formulated, the management board defines the overarching goals at the top level of the system of objectives, called objectives in American usage. These are broader, mostly medium- to long-term goals from which the strategic management objectives and the operational process objectives are derived. They are often also called directional goals, because they lead from vision to reality.

The seventh factor is the strategic management objectives, overarching specifications for the operational process objectives, developed with reference to the management processes. Implementing a strategy is oriented primarily towards rapidly realising a high benefit for everyone involved. The questions to be clarified are how healthy growth is achieved, how to respond to market changes, how customers are satisfied, how new opportunities are used, how the financial objectives are achieved and how the business units are managed.

The eighth factor is the operational process objectives, the detailed design of the goal development process. They describe the details and provide the managers and employees responsible for implementation with concrete, measurable, realistic and motivating information on objectives. Divisional and team objectives are also formulated at this level. Operational process objectives must also be set for the management processes, measured regularly and adjusted if necessary. For this, the company appoints a process management officer and a process supervisor.

The ninth factor is personal objectives. All levels of objectives must be made clear to managers and employees, as they are to derive their personal objectives from the first three levels. This is followed by the agreement on objectives. Employees only commit to objectives and act on their own responsibility if the overarching connections make sense to them and they fully recognise their personal benefit. In addition to individual results objectives, behaviour-oriented objectives must also be agreed.