A CFO's Case For Investing Big in Employee Development

  • Kevin Ingram senior vice president of finance, FM Global, Business Insurance; October 24, 2017

Originally published in CFO Newsletters.

Every company says it: Our people are our company, so we invest deeply in them.

But the truth CFOs face when they start to make the case for investing in employee development is that the headwinds are stiff. Professional development is expensive. It arguably takes people away from their core responsibilities. And the return is hard to document. Presented with such barriers, many companies hold back on professional development, and many employees feel stalled in their careers.

I believe it's important to walk the talk of investing in people. Aggressive, substantial, broad-based professional development is worth the cost and can transform a company from the inside out from good to great.

The best way I can make the case is detailing how I approach professional development at my company, a global commercial property insurer. (I say "how I approach," but training and development has literally defined my company's culture for its 182 years of existence.)

First, our mission in a nutshell: As a mutual company, the best thing we can do for our client/owners is to minimize property loss. That keeps clients in business.

We strive to minimize clients' loss by having skilled engineers counsel clients in loss prevention long before a disruption such as a fire, cyber-attack, or natural disaster strikes. As I'll explain later, we invest heavily in facilities and programs to make this advice effective.

Returns on Investment
As a CFO, I realize I'm expected to quantify the benefits of our comprehensive professional development program. I certainly could, but it would require me to assign hard numbers to benefits that, though concrete, are difficult to objectively quantify.

For example, how do you calculate the value of a disaster that didn't happen?

You really can't. That's just one reason we take the long view of learning. Fortunately, our status as a mutual company makes it possible to look beyond the end of the quarter. Recognizing that a return will hopefully come in some form, in some quarter, we feel good about making the learning investment.

So instead of citing specific figures, I'll list the categories of business benefits a company can derive from aggressive investment in professional development:

1. Avoided loss. Per our mission, all of our professional development is ultimately directed to keeping clients in business by making them resilient, that is, able to resist disruption and rebound when the loss is inevitable. If our client's business rides out a hurricane undisrupted but its nearby competitor is wiped out, the value of the prevented loss could be enormous.

There are two approaches to calculating the value of that avoided loss. The first approach is accounting for the client's benefit. By avoiding a loss, our client would be preserving revenue, marketshare, and shareholder value and potentially capturing part of the competitor's market share. The second value of avoiding the loss accrues to our benefit as the insurer. My company would likely be paying out a lot less on claims than the insurer of our client's devastated competitor.

Calculated either way, a single avoided loss can pay for a lot of professional development.

2. Employee retention. Good employees want to learn, develop, and grow during their careers. In fact, personal growth is a fundamental human need. For employers, it's worth making the effort to fulfill that need. I'm convinced professional development is one of the chief reasons our people stay with employers throughout their careers.

3. Client retention. As every CFO knows, it's more cost-effective to retain clients than generate new ones. Thus, it is beneficial to find ways to strengthen relationships with existing clients. We offer our client risk managers and facilities managers the same in-depth learning activities our engineers enjoy. This strategy helps create a lasting bond based on truly valuable professional experience.

We measure the value of client training in several ways. First, there's the annual client retention rate. Second is the size of clients retained: one-third of our clients are Fortune 1000 companies, and these clients happen to be the very ones making the strongest commitment to taking our training. They often make our e-learning courses mandatory for their employees who can't make the trip to our learning center. Either way, these companies look to us for learning because great companies know how valuable learning is.

Our third client-related metric is the commitment of clients to hold their contractors accountable for training. For example, how many of our clients require their contractors to take our courses before setting foot on the clients' property.

Fourth, how many colleges and universities are visiting our learning facilities to discover how we train our engineers? Professors are interested not only in how to maximize students' engineering potential, but also how to make them good communicators with teams and clients.

4. Productivity. Baby boomers are retiring, and the brain drain is in full swing across all industries. And more retirements are on the horizon: The share of workers 55 and older is projected to rise by 36 percent from 2012 to 2022. Smart companies should be working hard to fill the growing knowledge void. Those who don't may fall behind.

From my experience in investing in employee learning and professional training, I have three pieces of advice for my peer CFOs looking to build a case for such investments:

  • Take the long view of ROI, and an expansive view of the benefits. Every company wants to avoid potential disasters.
  • Fulfill your employees' deep-seated need to grow before someone else does.
  • Train younger people to move up so that brain drain doesn't bring your company down.

What could a bigger learning investment do for your company?

Kevin Ingram is the CFO and the senior vice president of finance at FM Global.

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