This past week I had a CEO question the ROI on an investment in educating his people. I took two deep breaths and thought to myself “how could he know.”
When the Eureka! Ranch was a “guru” consulting firm. The ROI question was easier to answer. We tested the ideas quantitatively and input them into a validated sales forecasting model like BASES, AcuPOLL or Merwyn.
With training and innovation systems development it’s more challenging. By design - we don’t “DO” the work. Rather, we enable executives to work smarter.
We don’t set the strategy (Blue Cards) we don’t pick their innovations (Yellow Cards). They are in charge of selecting their strategy and innovations.
The ROI on education of people is not like the ROI on a piece of equipment. Think about it what’s the “useful life” of a human? I know some old ones that still seem to have a lot of life left. I know some young ones that seem to be burned out.
Ben Franklin famously said, “Education is the investment with the greatest returns.” and “An investment in knowledge pays the best interest. “
Another CEO when asked about the ROI of Innovation Engineering training and systems answered, “I’m embarrassed to say it, because I’m an accountant by training, but I never calculated the ROI of Innovation Engineering - it was just so obviously positive.”
Out of curiosity I had our data geeks do a “macro” analysis on Innovation Engineering ROI. We have quite a bit of data. Today there are $75 billion in active innovations in Innovation Engineering client portals. If we discount this based on “probability” we get to $16 billion. If we apply a 6% net profit rate and make estimates on the cost of training, development and employee time - we find that Innovation Engineering conservatively delivers a 300% ROI. I say conservatively because we’ve discounted revenue by 80% and done about the same with expenses. AND - the employees knowledge and the company’s systems will pay back additional ROI over time.
Maybe more important that ROI - is what drives it. Recall a couple weeks ago I reported on the impact of leadership engagement on innovation business results.
It appears that the ROI from education is also leadership engagement.
When the leader is willing to learn about new leadership methods, innovation systems and tools - then a chain reaction of positives result. When a leader doesn’t take the time to learn - so to does a chain reaction of negatives result.
Sheldon Scott, President & CEO of the Whitney Blake Company is a CEO who is deeply involved in education. He’s also a certified Innovation Engineering Black Belt. When I asked him about ROI here’s how he responded:
“The IE process has allowed me to focus on leading the company to the point that in three years I will have been able to grow my company top and bottom by 4x.
Before IE I was just another Micro Manager focusing on how I could ring out more with less. Now with IE I focus on value for my customers, working partnerships, solving the problems of my customer’s customers. Leading as opposed to following or copying.
Our customers look to us as the experts. We are much more embedded, critical part of customers success and openly recognized for it”