What's the ROI on people development?

I've shared a couple of recent LinkedIn posts about what happens within a CPA firm when it takes on a financial stakeholder of some kind—and what it means for you, as a leader.

I got an interesting comment back from R. Charles Waring on one of the posts...

It's an excellent question.

​​Here's a link to the original post with the comment.​​

In discussing the comment with my marketing partner, Chad, we had a fascinating conversation that led us to widen our aperture and look at the bigger picture centered around two important questions related to people development:

1. How do you demonstrate to a PE firm (or any financial stakeholder) that investment in people is the right thing?

2. How do you make sure your investments in people development are paying off?

Both of these questions are critical to the success of growth and scaling efforts at any firm because it's the people who execute strategy and enable the organization to remain relevant and sustainable.

Here's my perspective on each of these questions.

1) How do you demonstrate to a PE firm (or any financial stakeholder) that investment in people is the right thing?

If we view this from the top down, we've got to look at the idea of value creation.

What are the levers that go into maximizing the value of a professional services firm?

Well, things like:

• Sticky clients

• Effective cross-serve (additional services)

• Increased rates

• Recurring projects or revenue

• Increased margins (offshorring, automation)

• Productized services

• M&A

What powers each of these levers?

Talented people who can not only deliver exceptional work but also think strategically and enable the firm to achieve its overall strategy.

When we're talking about investing in people, I’m not referring to baseline technical skills—those are table stakes. I’m talking about the non-technical capabilities that transform good firms into great ones:

• leadership development

• crucial conversations

• the ability to think strategically and connect dots

• relationship building

• getting off the dance floor and spend time on the balcony

• overcoming objectors to gain buy-in

Each of these efforts needs to link directly back to the value creation plan.

When you can demonstrate how leadership development translates to enabling teams of people to produce more or how relationship building leads to more cross-serve opportunities, you bridge the gap between people development and tangible outcomes that drive value for the business.

These aren’t new ideas just because a financial stakeholder is involved—these are the fundamentals of building a resilient, scalable, and thriving organization.

And the reality is: If you can’t link people investments to measurable value, financial stakeholders may struggle to get on board.

2) How do you make sure investments in your people development are paying off?

My honest answer is that most firms don't know.

For example, every firm I've ever been a part of as a leader and as an advisor has conducted crucial conversations training.

I'll bet you know exactly what I'm talking about because you've likely sat in a few of them...

Meanwhile, do you know what leaders in every firm I advise struggle with?

Having crucial conversations.

So it begs the question...

Are the investments we make in these sorts of programs actually paying off? How do we know people have digested it and implemented what they've learned?

Frankly, I haven't seen a firm do this effectively.

Even during my time at Baker Tilly, we participated in more traditional people development programs without consistently returning to draw conclusions as to their effectiveness or impact.

Are people having more crucial conversations as a result? Are those conversations leading to identifiable actions? Are those actions leading to measurable outcomes?

As I've reflected on these questions, if I were a CEO again, I'd be much more intentional and disciplined about seeking to understand the impact of our people development efforts because I believe it has a direct impact on the success of the organization.

Think about it...

The ability to have crucial conversations might mean we counsel someone out of the organization sooner because they weren't a great fit.

That could lead to short-term savings, and even if it doesn't, it could mean we find the right person for the role who enables future growth.

Or, maybe a crucial conversation unlocks improved performance for an individual, which creates a greater return for the organization.

Without any sort of follow-up to a development program, leaders are left hoping the effort paid off. And hope is not a strategy.

Seeking Your Input

After some reflection on the question, I absolutely believe that coming up with an ROI approach to people development programs is a good idea.

And guess what? If you can do that successfully, you'll be much better prepared to position the value of these investments to a financial stakeholder.

While many of the things I write about come from years of proven experience, this concept of proving the ROI of people development is something I'm still thinking through.

Frankly, much of my belief in people development has been just that—a belief.

I'd be curious to hear from you—what's your perspective on this topic?

Do you think it's necessary to prove an ROI on people development initiatives? If so, do you have examples of firms or leaders who have done it successfully?

I'd enjoy hearing from you in hopes that we might collectively build out a model for doing this effectively.

With intention,
Alan D Whitman