L&D strategy: exclusive or inclusive – what gets the best return?
Hannah Stratford, June 07, 2012
The allocation of learning and development (L&D) budget has never been more important, as employers bid to maximise the return on any investment.
With widening skills shortages, a struggling economy and tight budgets, the battle to attract and retain the best talent is growing becoming more intense.
Investing in developing employees is a win:win. Employees want to feel valued and encouraged to progress; employers want to reap the improved performance that comes from having more highly-skilled workers.
The issue for business leaders, though, is who to invest development budgets in. It is a source of much debate.
Mark Zuckerberg, CEO of Facebook, says: "Someone who is exceptional in their role is not just a little better than someone who is pretty good... they are 100 times better."
Author Bill Taylor, writing in the Harvard Business Review, counters this view, extolling the virtues of the collective team and suggesting this is more important for long-term performance.
What is your view? Will having one or two star performers generate a better return than developing a group of skilled – but not standout – employees?
Should we focus on the top performers?
Organisations often focus the lion's share of L&D budget on the top 5% performers or future leaders in fast-track programmes. Is this the right approach for every organisation, though?
At first glance, it can appear to make commercial sense. These are the best and brightest employees – in many cases, they will be directly generating significant income for the organisation. Clearly, they are hugely important and you want to ensure they are happy and engaged, and feel valued and invested in.
Investing all or the vast majority of your L&D budget in their development then should generate an immediate return. Whether it offers the greatest return on investment in the medium-to-long term is more open to question.
It could be argued that only developing this small group of employees is a short-sighted business strategy – particularly when you consider that your top performers are more likely to be poached by a competitor or may choose to move on for more money or a new challenge.
It is worth considering what the implications are if several top performers left the company in quick succession – would you then have talent gaps that exposed your business to difficulty?
Or is it better to invest equally in all employees?
There is an argument that organisations may be better served by investing equally in an 'all-inclusive' approach to employee development. The suggestion is that this approach can lead to a more sustainable competitive advantage.
The reasoning behind this view is that the incremental value of getting low performers up to average performers or average performers up to high performers is likely to result in a better return on investment.
This approach can also give a degree of security for companies, as there is less chance of their being adversely affected by skills gaps and talent shortages. Learning and development plans can be used to inform talent planning processes to negate these kinds of issue in future.
Is it better to have a large team of skilled and engaged employees that are all contributing to the business's success – or a smaller group of superstars that companies can sometimes become overly reliant on?
At the very least, this is a thought that is worth taking on board for L&D professionals. Even if companies ultimately decide that top performers should receive a greater share of L&D investment, ensuring each and every employee has a personal development plan should be a minimum requirement for businesses. This will give employees much needed clarity around their development path.
It is about best fit, not best practice
The point I am making is that organisations should be wary of putting all of their eggs in one basket. What is the right L&D approach for one company may not work for another.
The truth is that, for most companies, the sweet spot will probably be somewhere in between the two outlined approaches – a view backed-up by numerous experts, including Lynda Gratton of London Business School.
It is about 'best fit' rather than best practice. You need to devise a strategy that fits the unique organisational context, as this is what will determine the return on investment.
Hannah Stratford is head of business psychology for HR consultancy, ETS