James Russell: Team building - so what?

You organise one of those team-building days where employees take a bus out to the wilderness, spend some time navigating small streams and wire fences on an orienteering exercise, extricating themselves from the snarled bird's nest of a ropes course and generally have a good laugh. Next day, everyone goes back to work. But what's changed, and how do you know whether it was a worthwhile exercise or an expensive waste of time?

Results from a recent survey published in the New Zealand Management magazine demonstrated that less than 20 per cent of New Zealand organisations measure any tangible business impact from human resources (HR) programmes.

Derek Good, director of Rapid Results, a company specialising in the measurement of return on investment of HR intiatives, believes that this illustrates why so many companies cut HR spending when an economy downturn is expected. "This is exactly the opposite of what should take place. When there is less business for an organisation to go after, that's when the staff need to be more skilled and at the top of their game to compete and secure that business."

According to Good, the secret to obtaining management signoff for a proposed HR programme lies in the justification of the expense; namely, to set goals for the training, predict return on investment and then measure the results. If training can be shown to be worth it, then there is a far better chance of management agreeing to future initiatives.

"We can separate the measurable return into hard and soft measures. Hard measures can be accurately determined in such areas as increased productivity, increases in sales and reductions in staff turnover. In addition, predictions can be provided in these areas which enable companies to engage in HR spending or campaigns. Soft measures can include areas such as morale, improved teamwork, increased customer satisfaction and better communications between departments."

Good says it is these soft measures that are often difficult to put a monetary value or return on. "However, there are ways to measure it. For example, a staff member who is highly motivated in their work will be less likely to take a day off work sick when they are feeling 50/50. Conversely, a person lacking in morale at work will not need much of an excuse at all not to show up. You can begin to count the benefit of reducing the amount of sick days ordinarily taken by your staff by improving morale," says Good.

Good is frequently amazed at how little HR departments know about the returns gained from the training programmes carried out, as well as the lack of tangible goals for planned initiatives.

"We go to some people and ask them what do they want to achieve and they turn around and say 'I don't know - we just want some training'. We always like to ask the question 'so what?' We keep asking 'so what?' meaning what does the client hope to achieve, and we keep going until we get something that is tangible, such as a measureable increase in productivity."

Good believes that a system to constantly measure the returns is, in itself, a good investment. "In order to determine the success of any investment, you have to measure the output - even if part of the cost of the investment is in the measures. In addition to understanding that concept, the ability to measure along the way - right from the start - is essential. Measures at the end of a programme may be too late as the money is already spent."

So can the concept of achieving return on investment be applied to individual employees?

"Absolutely. I've run a company where we had a production foreman who was just not a people person and although he was extremely effective in knowing a lot about the factory processes, we had a very high staff turnover. We had to make a decision to sack him. That cost us some money to get rid of him but our staff turnover went right down and for us that was a direct return on that investment because we saved a hell of a lot of money in training new people."

Good believes that an exit interview is a valuable 'investment' for companies to make. "Companies can start measuring things like this; if they've had 50 people leave in the last year and those people are asked 'what would have kept you here?' or 'why are you moving on?' and the same thing keeps cropping up, there's an indicator there. The problem is many exit interviews aren't conducted, and if they are, then not in the right manner so that people don't give that information away. There then might be a return on investment on training on how to conduct good exit interviews."

Ask the questions

What are the goals for your HR program?
What tangible expectations are there?
What intangible goals do you have?
How best can they be measured?
How will they be measured?
What will define the success of the programme?
What return on investment is predicted?