1. Measuring the ROI of Talent
Development
Kim Richards, VP Organization Development
LPL Financial
Josh Davis, Consultant, Linkage Inc.

2. The Model for Strategic Organization ImpactTM
Why we are here:
• To outline the LPL • To highlight how to tie
Financial journey to talent development to
align OD/Talent business metrics
Management with
Business Priorities • To showcase the
findings from a study of
• To explore the evolution 20+ companies on
and role of LPL talent development
Financial’s Talent effectiveness
Council in shifting and
shaping a Talent
Development Culture
• To show how LPL
uniquely quantified
culture to demonstrate
the effect on both
engagement &
performance

3. A TALENT MANAGEMENT
JOURNEY
PL FINANCIAL – A TALENT
DEVELOPMENT JOURNEY

4. • Largest independent broker/dealer
in the country
• Headquartered in Boston,
Charlotte, and San Diego
• 12,962 affiliated financial advisors Our Commitment Creed
nationwide
• 4th in industry ranking customers are the most important people to our company
• Our by number
of financial advisors customers are not an interruption of our work; they are
• Our
• 679 financial institutions servedof it…
the purpose
• ,465 institutional Our customers share our commitment to excellence and
• clearing and
technology subscribers
encourage us to innovate
• 2,720 employees • We are 100% committed to our customers’ growth,
• $354.1 billion in advisory and about their success, and exceedingly proud to be
passionate
brokerage assets their partner
• $110.8 billion in advisory assets rely on us to help them prosper…
• Our customers
under management
• 2011 annual revenues of $3.48
billion
• 4.2 million funded accounts

5. Talent Management Journey
Reinvest &
Realize
Integrate & Dividends
2012-2013
Compound the
• Build skill
Invest & Lay the Investment • Define Leadership
Foundation 2011-2012
and create Talent
2010-2011 • Foster
Mindset
• Assess Current Development
• Evaluate progress
State culture
& reevaluate
• Create Vision & • Build & strengthen
strategy
Strategy practices
• Raise the Bar
• Build TM • Establish baseline
• Innovate
Framework • Scope, scale & link
• Align to Business practices
Strategy
• Launch Foundation
practices

6. Invest & Lay the Foundation
The Business Context for Talent Management at LPL
Our Business Challenges & Key People
Opportunities Points
• Growth • Sustain LPL • Employees drive
• Complexity Core Values our business;
• Accelerate performance &
• Market engagement is
Headwinds pace & critical to growth
• Industry change; & retention in
Regulation continual tough economic
improvement times
• Shareholders &
Analysts • Create scale & • Every LOB
cross- stated
functional need/desire for
synergies key Talent
• Attract, Management
engage, retain practices
talent • Business wants
more capacity &
• Build skill, strategic
business guidance &
acumen and partnership for
leadership People
bench Strategies

7. Invest & Lay the Foundation: Talent Council
Create an environment & Align business planning
culture to support & objectives with talent
achievement of the 5 management activities to
Year Strategic Plan ensure exceptional
through employees, business performance &
leaders & teams customer service
Increase the internal talent
Increase engagement,
pool of future leaders and
retain critical talent and contributors, creating a
improve performance by pipeline of ready talent
supporting our ready to execute business
employees’ growth & strategy, assume greater
development levels of responsibility and
achieve business objectives

8. Invest & Lay the Foundation: People Framework
Get the
Right Talent
Onboard
Align & Manage &
Plan Our Pay for
Corporate Performance
DNA
Move the Grow &
Talent Develop
Talent Success
Measures

9. ROLD – LPL Culture
Senior Leaders indicated:
Need to
Strengths
Develop • Leadership ability is vital to
current and future success
• Lack confidence that current
workforce has right mix of skills
• Not enough leaders in the
pipeline to meet future demands
• Do not believe we have
reputation for exceptional
leadership

10. Impact on Business Results
Learning & Equity
Development (revenue,
relationship,
Culture reputation, etc.)
Employee
Development Engagement
Job
Experiences & Perfor-
Commitment mance
to LPL
Senior Leader
Commitment to Business
Teaching Unit
Generally, the more Perfor-
The more engaged mance
employees perceive LPL to
employees are, the
engage in Leadership
stronger job performance
activities, the more engaged &
and more “equity” they
committed they are to LPL.
have.

11. Building Capability & Capacity
From To
Functional Silos Enterprise Thinking
Subject Matter Experts & Deep & Broad Business Acumen
Specialization (General Managers)
Managing & Controlling Work Leading & Empowering People
Diversity of perspective &
One way, the “right” way
approach
Make no mistakes Learn. Grow. Innovate.

12. Impact on Culture
• Talent What? • Talent
• Managers Management is
manage work key strategy
• “Nobody cares 2011 • Manager-led
about my development
development” • 160 in Voluntary
• HR is operations • Talent Who? Competitive
focused E.D.G.E.
• Managers vs.
leaders • New CHCO
• “I don’t have reports to CEO;
time for part of EMC
2010 development”
• HR adopts 2012
People
Framework &
restructures

13. LPL 2012 Corporate Goals
Focus on
“One of the most critical Employees
factors in helping us
achieve our mission and
growth objectives is
leadership ..Mark Casady,
CEO (April 2012)
„Talent Management is a #1 priority.”
Mark Casady, CEO (VP+ Management Forum in
April 2012)

15. Measuring the Bottom-
line Results of
Leadership Development

16. • Agenda:
• How to measure impact in your own organization
• Key findings from a study of talent development
effectiveness

17. Linkage Leadership Impact Study
ROLD (Return on Leadership Development) measures the impact
of leadership development initiatives. To date over 20 companies
have engaged in this process.
Participants Included:
• American Airlines • LPL Financial
• Baxter • Mattel
• Biocon • McKesson
• General Motors • Meridian Health
• Genpact • St. Jude
• Grainger • Toyota
• John Deere • Turkcell
• Karl Storz • Turk Telekom
• Lockheed Martin • WestJet Airlines

18. Types of Leadership Development Initiatives
Evaluated
• Action learning • Job rotation
• “Classroom” programs • Mentoring
• Elite university • National programs for
programs women
• High potential programs • Networking systems
• Hybrid programs and events
• Individual and peer • 360 Feedback
coaching
• International
assignments

19. Assessment and Levels of Evaluation
Training Need
• A specific knowledge, skill, or process that a
participant must learn to perform successfully.
Performance Need
• Behaviors that must be performed by participants
in order to achieve business needs.
Business Need
• Strategic goals of an organization, business unit,
or department that are expressed in operational
terms.

20. Five Levels of Training Evaluation
Level 1 Reaction
Level 2 Learning
Level 3 Behavior / Application / Performance
Level 4 Results- Business Impact
Level 5 Return on Investment (ROI)
Kirkpatrick, 1959
JJ Phillips, 1996

21. Examining Effectiveness of Leadership Development
Systems: ROLD Model
Strategy
Innovation – Effectiveness –
Measurement of the Measurement of
innovative nature of the quality of
the methods used in leadership
leadership development and
development and the the impact it is
impact leadership having on business
development is having results.
on company
innovation.
Productivity – Efficiency –
Measurement of the Measurement of
company's leadership the real cost of
pipeline and bench leadership
strengths. development.

22. Impact Measures
• Individual: • Group
• Employee Engagement • Business Unit
(3 sub-scales) Performance (past 12
• Organizational months)
Commitment (intended • Organization
turnover) • Organizational Culture
• Job Performance (13 • Learning Culture
dimensions) • Organizational Strategy
• Revenue Goal • Program Specific
Achievement (past 12
months) • Competencies
• Equity (ratings and $ • Communication Skills
estimate of financial • Coaching/Mentoring
impact of leader on the Skills
organization over past 12 • Global Leadership Skills
months)

23. Tying Objectives to Business Impact
Measures
Example: Large financial services company based in NYC
Leadership Business Impact
Development (Level Four)
Objectives Measures
• Retain, develop and engage Employee Engagement
the most promising future
leaders Organizational Commitment
Retention Rate
• Enhance
commercial/financial and Revenue Goal Achievement
leadership impact
Cost Savings
Business Unit Performance
• Establish networks with
peers and with senior
leaders Relationship Impact

24. Leadership Evaluation Process
• Survey Executives
• Organizational Strategy
• How aligned is the program with organizational strategy?
• Executive perspective on effectiveness
• How effective do they feel the program(s) are?
• Are the programs effectively providing a skilled workforce
for the future?
• Pipeline/Talent Management
• How strong is the leadership bench?
• Innovation
• How innovative are the methods, and how effective is the
program effecting organizational capacity for innovation?

25. Leadership Evaluation Process
• Survey leaders who participated in the program
as well as a comparison group of similar leaders
who have not
• Why?
• What are equitable groups?
• Tenure
• Level
• Roles/responsibilities
• Make direct comparison to determine impact

26. Example: A business process and technology management company
Benefit - Cost
x 100 ROI %
Cost
Program: 18 month job rotation program for high potential managers
Impact measure: Individual equity (sum of rainmaking, relationship, reputation,
innovation, savings for each individual manager )
Benefit: Difference in individual equity between high potential managers who
participated in the program and those who did not = $21,000 multiplied by 150
managers
$3,150,000 - $1,363,000 x 100 = 131%
$1,363,000

27. Sources of Data To Measure Level 5 Results
• Available Organizational Data to Serve as Additional Effectiveness
Measures
• Performance Appraisal Ratings
• Goal Achievement Ratings
• Promotion Rates
• High Potential, Succession, or Promotablity Ratings
• Retention Rates
• Leadership Census Information for Pipeline Analysis
• # of Current Leaders at Each Level
• Average Retention Rate of Leaders at Each Level
• Typical # of Years at Each Level Before Promotion
• # of Current Leaders by Years of Experience at Each Level

28. Return on Investment (ROI)
Benefit - Cost
x 100 = ROI %
Cost

29. Determining Cost
• Fully loaded cost

30. Determining Benefits

31. Tool 1: Begin with Business Strategy
• What is the most important component of your company’s
current business strategy?
• Increase productivity
• Increase sales growth
• Improve customer satisfaction
• Improve products, services, processes, systems,
and/or operations
• What else do you know about your company or business
unit strategy?
• How does the strategy drive your training objectives?

32. Impact Mapping to Determine Measures
Leadership
Behaviors Business Impact
Development
(Level Three) (Level Four)
Objectives

33. Case Study 1
Company: Diversified Financial Services Company known for
stability and customer service
Clientele: 10.4 Million Customers
72.3 Billion of Assets Under Management
Business Issue:
The company’s Information Technology (IT) Organization consists of 1600
employees located in a small Midwestern city. The organization has set a
strategic objective to develop and implement programs to attract and retain top
employees. In addition, customers are requiring that IT leaders become more
business focused in order to proactively meet their growing needs.

34. Case Study 1: Impact Map
Leadership
Behaviors Business Impact
Development
(Level Three) (Level Four)
Objectives
• Attract and Retain • Employee Survey • Number of Job
Employees Candidates
• Improve IT Leaders’ • 360 Feedback • Turnover Rate
Ability to Partner
With The Business
• Customer
Satisfaction Survey
• Improve
Management Skills

35. Business Impact (“Level Four”) Data
Purpose:
To determine the impact on the organization of participants’
application of training on the job.
Data:
Level Four data can be anything that benefits the organization. Data
is collected in terms of the change in individual/organizational output
or performance.
Hard Data is easiest to convert into monetary values.
• Outputs (e.g., items sold)
• Time (e.g., break-in time for new employees)
• Cost (e.g., budget variances, cost savings)
• Quality (e.g., # of tasks completed properly)

36. Level Four Data (continued)
Soft Data is harder to convert into monetary value.
• Work Habits (e.g., absenteeism)
• Customer Service (e.g., customer satisfaction)
• Work Climate (e.g., job satisfaction, employee turnover)
• Development/Advancement (e.g., performance appraisal ratings, # of
promotions, increases in job effectiveness)
• Job Attitude (e.g., organizational commitment)
• Initiative (e.g., implementation of new ideas)

37. Tool 2: Discovering Data
• To what extent is data available in your
organization?
• Why types of relevant data could you access for
measurement purposes?
• Examples:
• Previous performance
• Turnover
• Organizational surveys
• Financial performance

38. Tool 3: Creating New Data
Definition of Measurement
A set of observations that reduce uncertainty where the result
is expressed as a quantity.
Types of Measurement
• Quantitative - numerical
• Qualitative - verbal

39. Hubbard’s Clarification Chain
1. If it matters at all, it is detectable/observable.
2. If it is detectable, it can be detected as an amount (or
range of possible amounts).
3. If it can be detected as a range of possible amounts, it
can be measured.

40. Creating New Measures
• Which types of existing data map back to your
training objectives?
• How about new measures you could introduce?

41. Tool 4: Estimating the Value of a Leader
How would you rate yourself on the following?
• Rainmaking Equity – the extent to which an individual and/or
the team he or she manages brings in revenue, brings in
business, or raises money
• Innovation Equity – the extent to which the individual and /or
the team he or she manages develops intellectual capital or
technology that brings revenue into the company
• Reputation Equity – the extent to which revenue is brought
into the company as a result of the reputation of this individual
and/or team he or she manages
• Relationship Equity – the extent to which revenue is brought
into the company as a result of the impact of this individual on
others
• Savings Equity – the extent to which money is saved in the
company as a result of this individual and/or the team he or

42. Tool 5: Converting Data to Dollars
In reviewing your Level 4 business impact measures,
which of them can be converted to $ values?
Training and
Conversion to
Development Level 4 Data
$
Objectives

43. Converting Benefits Data into Monetary Value
• Converting output to contribution - using standard value
(profit/savings)
• Converting the cost of quality - using standard value of quality
• Converting employee’s time - using standard values of compensation
• Using historical costs/savings
• Using internal and external experts
• Using data from external databases/studies
• Linking with other measures
• Using participants’ estimates
• Using supervisors’ and managers’ estimates
• Using training/performance improvement staff estimate

44. Calculating ROI
Benefit - Cost
ROI % = x 100
Cost

45. Calculating ROI
Example: A business process and technology management company based in India
Benefit - Cost
x 100 = ROI %
Cost
Program: 18 month job rotation program for high potential managers
Impact measure: Individual equity (sum of rainmaking, relationship, reputation,
innovation, savings for each individual manager )
Benefit: Difference in individual equity between high potential managers who
participated in the program and those who did not = $21,000 multiplied by 150
managers

46. Tool 6: Making Metrics Work
• Who are the participants in the training and
development?
• Is there a comparison group of similar leaders who
did not (or will not) participate in the training and
development?
• If “Yes,” you can create a comparison group design
• Are there some participants who have not yet
begun the training and development?
• If “Yes,” you can create a pre-test/post-test design
• If you answered “no” to the two questions above
• You will have to get creative and consider a correlation
design

47. Example Correlation Study
• Measured leaders:
• Level of exposure
• Degree of experience
• Beliefs, views, and perceived impact of FSL
(competencies)
• Assessed extent to which exposure, experience and
perceived impact affected job performance and business
results
• Correlation does not equal causation!

48. Correlational Impact
Business Impact at Individual Level Leader Leader Leaders Managers
Exposure To Experience Perceived Rating Of
Competencies Level With Impact of Leaders
Competency Competency Competency
Level
Job Performance
(as measured by their managers)
Employee Engagement
(extent to which an employee is fully involved in, and
enthusiastic about their work)
Organizational Commitment
(Individuals psychological attachment to
organization)
Rainmaking Equity
(ability of individual/and or team to bring in revenue, bring
in business or raise money)
Innovation Equity
(ability of the individual an/or the team he or she manages
to develop intellectual capital or technology that brings
revenue into the company)
Reputation Equity
(extent to which revenue is brought into the company as a
result of the reputation of this individual and. or the team he
or she manages)
Relationship Equity
(extent to which revenue is brought into the company as a
result of the impact of this individual on others)
Savings Equity
(extent to which money is saved in the company as a result
of this individual and/or the team he or she manages)

49. Leadership Impact Findings

50. Finding # 1
Across all companies, bench strength is
the biggest concern of senior
executives
Linkage Return on Leadership Development (2011)

51. Senior Executive Assessment: Bottom Five Items
Linkage Return on Leadership Development (2011)

52. Finding # 2
Senior executives feel that the largest
gap in leadership development is in the
extent to which it contributes to
corporate innovation.
Linkage Return on Leadership Development (2011)

53. Current vs. Ideal State of Leadership Development
As Reported by Senior Executives
Other elements we asked about were:
Extent to which leadership development
-Removes a major risk from our strategy
-Provides a major opportunity for growth of our company
-Improves leader capabilities, performance, and
engagement
-Takes advantage of innovative delivery mechanisms
-Improves the ethics and moral character of leaders Linkage Return on Leadership Development (2011)

54. Current vs. Ideal State of Leadership Development As
Reported by Senior Executives
Linkage Return on Leadership Development (2011)

55. Finding # 3
A “culture of learning” positively
impacts engagement and performance.
Linkage Return on Leadership Development (2011)

56. Case Study: Measuring The Impact of Leadership
Development On Learning Culture
The VP of Leadership Development at LPL was interested
in helping the organization develop a learning culture.
As part of ROLD, we created a customized Learning
Culture Scale to assess the current state.
Example Items:
• We have a culture of continuous learning and development.
• We are given time to reflect on our experiences.
• Coaching is a part of the daily interaction between employees
and managers.
• People give open and honest feedback to each other.
• We learn from our mistakes.

57. The Impact of Learning Culture
Leadership Leadership Overall LPL
Development Program Development (n=107)
(n=24) Comparison
Assessment Item
(n=83)
Mean SD Mean SD Mean SD
Learning Culture 3.28 (.58) 3.02 (.79) 3.08 (.75)

58. The Impact of Learning Culture

59. Finding # 4: Leaders Preferred Method of
Leadership Development Delivery
Method Percent of Leaders
Endorsing
Coaching/mentoring 74%
Classes with your Senior Executives as instructors 49%
Career planning 43%
360-degree feedback 41%
Action learning teams 32%
Informal/social learning 31%
e-learning 25%
Social networking 22%
Online business simulations 18%
Discussion boards 17%
Wikis 4%
Electronic games 4%
Blogs 4%
Linkage Return on Leadership Development (2011)

60. Rule of Five
There is a 93% chance that the median of a
population is between the smallest and largest
values in any random sample of five from that
population.
Any data is better than no data!
Hubbard, 2007

61. Closing Thoughts……..
What gets measured improves!

62. Resources
• How to Measure Anything: Finding the Value of “Intangibles” in
Business (2010)– Douglas W. Hubbard
• Investing In People: Financial Impact of Human Resource
Initiatives (2011) Wayne Casio & John Bourdreau
• The Leadership Scorecard (2004) – Jack Phillips & Lynn
Schmidt
• The ROI Field Book: Strategies for Implementing ROI in HR
and Training (2007) – Patricia Phillips, Jack Phillips, Ron
Stone, & Holly Burkett
• The ROI of Human Capital (2000)– Jac Fitz-enz