When should you invest in a leader? 5 CHROs share how they decide which investments are most likely to pay off.

When should you invest in a leader? 5 CHROs share how they decide which investments are most likely to pay off.

By | September 22, 2020

When we invest, we want to gain something more, something greater, or something better than we had before.

When contemplating whether to invest in development for senior-level talent, think of investments in leaders as no different than others one would make in business — where a meaningful return on investment or return on capital is sought.  Talent investments in this context might include executive education, targeted development for succession candidates and high potentials, individual and team coaching, and leadership development cohorts.

Although some talent investment decisions are driven directly by the CEO, most organizations depend on their CHROs to analyze talent investment opportunities and predict and promote where the organization might derive its best risk-adjusted return. That is, they forecast the investment’s level of success, accounting for any risks.

As a CHRO, I have seen various risks play out — such as high-potentials who burned out or left the organization, executives who struggled to put in the time and effort, poor coach-coachee chemistry, or project failure. I have also witnessed the multiplier effect of sound talent investment decisions — even by transforming one leader at a time. The greatest returns come when the individuals in which organizations invest are introspective, open to feedback, want to progress, do not have serious performance issues, raise their hands to participate, build their own learning plan, and exhibit competencies amenable to change.

As overseers of talent and architects of culture, CHROs can help their organizations create significant and lasting value by conceptualizing talent development within the phases of an investment cycle. I recently asked five CHROs to share their experiences of doing so. Here is what they said. For the purpose of this article, we will focus on the pre- and post-investment phases only.

Meet the CHROs

Patrick Cimerola | Choice Hotels

Carol Jensen | Flatiron Health

Kim Keating | Conservation International

Lydia Martinez | Long and Foster

Reginald Stover | Boston Children’s Hospital (Former)

Pre-Investment: Making The Case

The initial phase of talent investment asks, “why should we invest in this particular person or team at this particular time?” CHROs must guide their leadership teams toward agreed-upon measures of success before the work commences and gather or establish baseline measurements. Consider the following four factors to bolster your business case:

1. Ensure Succession And Organizational Viability

Patrick Cimerola, CHRO of Choice Hotels, supports his business case for investing in development by saying, “our company has been here 80+ years; we want to be here another 80+, and we want people to be ready.”

Choice Hotels trusts Cimerola to manage the “talent sheet” — just as finance manages the balance sheet. With Cimerola as the conductor, the company orchestrates talent management reviews of its top 100 leaders assessing performance and potential. As far as potential goes, he says, “that’s our future, so those are the larger investments.”

Choice Hotels has a history of people rising through the organization. Through data analytics, the company knows it has more success when it develops people internally and gives them an opportunity. It strives to fill 60% of its roles from within and 40% from the outside, affording some a chance to grow while continually bringing in new thinking.

Cimerola stresses that CHROs emphasize the ROI associated with succession and development – not so much as a measure but as a key to the organization’s sustainability and performance. Fortunately, once he and his leadership agree on the definition of talent, it is typically “easy from there” as long as they manage the budget.

2. Cultivate Individual Readiness

Given the fast growth of Flatiron Health and the importance of attracting and retaining talent, CHRO Carol Jensen has no difficulty getting support for talent development programs. Jensen launched the company’s first senior leader cohort talent development program last year. VPs nominated potential participants based upon their individual performance, the scope of their roles, identified development areas relative to program content, and the like.

Meanwhile, Lydia Martinez, CHRO of Long and Foster, analyzes how much of an employee’s profile is already responsive to the needs it faces, or expects to, within a particular operational unit or line of business. The next step is determining the employee’s capacity to incorporate a new skill set required. She collaborates with business Presidents to identify team members who are either poised to grow or who have expressed interest in developing further. All developmental initiatives must pre-assess the impact that new skills development will bring to the bottom line.

3. Win With Your Talent

Reginald Stover, former CHRO for Boston Children’s Hospital, posits that the business case for talent investment is quite simple, regardless of organization type: “to differentiate in the markets we are in, have a great place to work, be the ‘destination employer of choice’, and drive employee satisfaction.” He offers that the way to best differentiate is “with the people” and that businesses win with the development of talent. It is the talent that will realize the strategic priorities for the organization, and talent investments will flow through to the “end-user” experience of customers or clients or patients.

4. Think Beyond Cost And Time

Sometimes pushback emanates from other business priorities, and it is important to take the long view. For instance, in highly entrepreneurial environments such as Long and Foster, a core element of the culture is driven by sales. Introducing the need for developmental opportunities raises concerns, including the use of time for anything other than that pursuit. Other surmountable challenges are the fear of losing talent in a prior role, development cost, and learning curve impact in terms of both cost and efficiency. Recognize that the long-term value of higher-functioning talent to the broader organization will typically far outweigh the short-term expense.

Post-Investment: Measuring The Impact

This phase of talent investment asks: “how should we measure our investments?” Metrics should fit the nuances and strategies of your business. Refer back to any earlier baseline measurements so investment effects can be captured, to the fullest extent possible, once you measure again. An example would be effectuating a post-360º survey and comparing it to a previous pre-360º survey, along with these four considerations:

1. Tap Into Data

Cimerola emphasizes that technology and data are critical to gauge ROI. He and his CEO manage investment effectiveness as a sports team would. They know who the “minor leaguers” are, track development plans, and make sure they are hitting all the marks. Choice Hotels looks at results covering a broad range of measures like financial performance.

For Kim Keating, CHRO of Conservation International, ultimate returns should appear in promotion rates and retention rates of top talent versus others. Turnover gives Conservation International an idea of how long it can expect to retain an individual after investing in his or her development. Also, the nonprofit continually monitors performance ratings of those provided career development.

Martinez measures talent investments differently depending on the skill(s) targeted. For leadership development, the organization focuses on the impact that development has on others:  how those being developed are perceived as leaders and how their contributions are valued by those they support. The results ideally manifest in positive engagement, turnover reduction, and communication effectiveness between leaders and their teams. In sales roles, production, retention, repeat business, and financial success are usually the core measures.

2. Analyze Effectiveness And Efficiency

Overall, Long and Foster measures its investments by analyzing if the talent has been transformed “to a new level” as an organizational asset through the acquisition of new skills, attitudes, and/or aptitudes. Effectiveness is reflected by how the individual implements learned skills in response to the evolving needs of an organization. There should also be efficiency increases through operationalized learning such that a role will never be performed the same way as before.

3. Examine Culture And Productivity

The final measure of Cimerola’s “talent sheet” is the resultant culture. Culture is created by the tone at the top. Cimerola studies culture through static engagement surveys and dynamic pulse checks. Development plans and performance check-ins assess how people are living desired competencies and company values, including whether employees feel welcome, wanted, and respected. He examines engagement and productivity, considering metrics like occupancy in hotels and franchisee financial health.

4. Listen To Your People

Keating often asks individuals who have received some kind of professional development to share what they can with the organization by distributing materials, hosting a brown bag, or facilitating other learning forums.

Jensen weighs success through participants’ evaluation of program content and their ability to apply learnings in their roles. In addition, managers evaluate the program. Sometimes “thinking out of the box” about what constitutes a success measure is necessary. And, by staying attuned to the organization’s people, unexpected paths unfold. For example, some of the cohort topics and learnings resonated so much with members, they asked to roll out the tools and concepts to their teams so more employees had access. Listening carefully has also created the capacity for ongoing feedback. Jensen has learned that the cohort appreciates a network with other senior leaders across the company, a shared group of experiences, vocabulary/tools for peer coaching continuing well past the program, additional exposure to executives, and external coaches allowing for individualized development topic exploration.

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