The allocation of the learning and development (L&D) budget has never been more important, as employers bid to maximise the return on any investment. This is according to Hannah Stratford, head of business psychology for HR consultancy ETS, in her article entitled L&D strategy: exclusive or inclusive – what gets the best return?. With widening skills shortages, a struggling economy and tight budgets, says Stratford, the battle to attract and retain the best talent is becoming increasingly more intense.
“Investing in developing employees is a win-win situation. 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, however, is in whom to invest development budgets. It is a source of much debate,” Stratford maintains.
“Organisations often focus the lion’s share of the L&D budget on the top five per cent performers or future leaders in fast-track programmes, but is this the right approach for every organisation? Will having one or two star performers generate a better return than developing a group of skilled – but not standout – employees?” she asks.
Having said that, Stratford begins her article by quoting Facebook CEO Mark Zuckerberg who, when asked in a New York Times article, why he was willing to pay $47 million to acquire FriendFeed, a price that translated as about $4 million per employee, he replied: “Someone who is exceptional in their role is not just a little better than someone who is pretty good – they are 100 times better.”
However, the author Bill Taylor, as Stratford explains, writing in the Harvard Business Review, challenges Zuckerberg’s belief, praising the virtues of the collective team and arguing that this is more important for the long-term performance of the business. In support of this argument, Taylor quotes an article published by The Economist on the “management secrets” of FC Barcelona, universally considered as the best football team in the world – perhaps in history. The magazine questioned how a club that is based in one of Europe’s unemployment black spots had managed to turn itself into a ruling power in the world’s most popular sport. The answer was simply that FC Barcelona plays as a team in a sport that has far too many prima donnas – a team that has indeed provided a distinctive solution to some of the most contentious problems in management theory.
In addition to the above, in his article Great People are Overrated, Taylor also takes a look at the research carried out by Harvard Business School professor Boris Groysberg, captured in Chasing Stars, which was also cited in The Economist’s article. After examining the careers of more than 1,000 star analysts at Wall Street investment banks, and conducting more than 200 frank interviews, Professor Groysberg came to a striking conclusion. His research found that star analysts who change firms suffer an immediate and lasting decline in performance. This is mainly attributed to the fact that their earlier excellence appears to have relied heavily on their former employer’s general and proprietary resources, organisational cultures, networks and colleagues.
“I’m certainly not suggesting that leaders who are growing companies or building teams should settle for mediocrity,” Taylor concluded. “But I am suggesting that there is more to long-term performance than the excellence of your individual players. Great teams, great companies, great organisations of all kinds are as much about character as credentials, about what makes people tick as much as what they know. Most of business life isn’t really a choice between one great person and 100 pretty good people, but if that is the choice, I’m not sure I’d make the same one as Mark Zuckerberg – especially if those 100 pretty good people work great as a team”.
While at first glance, focusing the greater part of the L & D budget on the top five per cent of employees appears to make business sense because these are the best and the brightest and hence will be providing an immediate return on investment, whether this approach offers the greatest return on investment in the medium-to-long term is more open to question, Stratford points out. What is more, focusing only on developing this small group of employees could be seen as a short-sighted business strategy – especially when considering that top performers are more likely to be poached by a competitor or may choose to move on for a better salary or to take on a new challenge. As such, when using this exclusive approach to learning and development, Stratford explains, one should first and foremost carefully consider what the implications could be in a case where several top performers decide to leave the organisation in quick succession, thus leaving talent gaps that may expose the business to major difficulties.
It can be argued that organisations are better served by investing equally in an “all-inclusive” approach to employee development. This is because such an approach can lead to gaining a competitive advantage. Stratford explains that the rationale behind this view is that the incremental value of bringing low performers up to average standard or average performers up to high standard is likely to result in a better return on investment. Moreover, this approach also gives organisations a certain degree of security, because there is less chance of them being negatively affected by talent shortages or skills gaps. Finally, with this approach learning and development plans can also be used to inform talent planning processes to negate this kind of issue in the future – something that is worth taking on board by L & D professionals, says Stratford. This is mainly because even if, at the end of the day, organisations decide that top performers deserve to receive a greater share of L & D investment, at the very least ensuring that each and every employee has a personal development plan should be a minimum requirement for businesses. This is what will give employees much needed and deserved clarity about their careers and development path.
Stratford concludes by saying that the main point she wanted to put across with her essay is that organisations should be careful when it comes to putting all their eggs in one basket, because what is the right L & D approach for one organisation 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 by numerous experts, including Lynda Gratton of the 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,” Stratford concludes.
Angele Camilleri is
a researcher with the Foundation for Human Resources Development