1. Measuring the ROI of TalentDevelopmentKim Richards, VP Organization DevelopmentLPL FinancialJosh Davis, Consultant, Linkage Inc.

2. The Model for Strategic Organization ImpactTMWhy we are here: To outline the LPL To highlight how to tieFinancial journey totalent development toalign OD/Talent business metricsManagement withBusiness Priorities To showcase thefindings from a study of To explore the evolution20+ companies onand role of LPL talent developmentFinancials TalenteffectivenessCouncil in shifting andshaping a TalentDevelopment Culture To show how LPLuniquely quantifiedculture to demonstratethe effect on bothengagement &performance 3. A TALENT MANAGEMENTJOURNEYPL FINANCIAL A TALENTDEVELOPMENT JOURNEY 4. Largest independent broker/dealerin the country Headquartered in Boston,Charlotte, and San Diego 12,962 affiliated financial advisors Our Commitment Creednationwide 4th in industry ranking customers are the most important people to our company Our by numberof 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 andtechnology 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 passionatebrokerage assets their partner $110.8 billion in advisory assets rely on us to help them prosper Our customersunder management 2011 annual revenues of $3.48billion 4.2 million funded accounts 5. Talent Management JourneyReinvest & Realize Integrate &Dividends2012-2013Compound the Build skill Invest & Lay theInvestment Define Leadership Foundation2011-2012 and create Talent2010-2011 Foster Mindset Assess CurrentDevelopment Evaluate progress State culture & reevaluate Create Vision & Build & strengthen strategy Strategypractices Raise the Bar Build TM Establish baseline Innovate Framework Scope, scale & link Align to Business practices Strategy Launch Foundation practices 6. Invest & Lay the FoundationThe Business Context for Talent Management at LPL Our BusinessChallenges &Key People Opportunities Points Growth Sustain LPL Employees drive ComplexityCore Values our business; Accelerateperformance & Marketengagement isHeadwinds pace &critical to growth Industrychange; & retention inRegulationcontinual tough economicimprovement times Shareholders &Analysts Create scale & Every LOBcross-statedfunctionalneed/desire forsynergies key Talent Attract,Managementengage, retainpracticestalent Business wantsmore capacity & Build skill,strategicbusinessguidance &acumen andpartnership forleadershipPeoplebench Strategies 7. Invest & Lay the Foundation: Talent CouncilCreate an environment &Align business planningculture to support& objectives with talentachievement of the 5 management activities to Year Strategic Planensure exceptionalthrough employees, business performance &leaders & teamscustomer serviceIncrease the internal talent Increase engagement, pool of future leaders and retain critical talent and contributors, creating aimprove performance bypipeline of ready talentsupporting ourready to execute businessemployees growth &strategy, assume greater developmentlevels of responsibility and achieve business objectives 8. Invest & Lay the Foundation: People FrameworkGet theRight Talent Onboard Align &Manage &Plan Our Pay for Corporate Performance DNA Move the Grow &TalentDevelop TalentSuccess Measures 9. ROLD LPL CultureSenior Leaders indicated:Need toStrengthsDevelop Leadership ability is vital tocurrent and future success Lack confidence that currentworkforce has right mix of skills Not enough leaders in thepipeline to meet future demands Do not believe we havereputation for exceptionalleadership 10. Impact on Business Results Learning &EquityDevelopment (revenue, relationship,Culturereputation, etc.)EmployeeDevelopmentEngagement JobExperiences & Perfor- Commitment mance to LPLSenior LeaderCommitment toBusinessTeaching UnitGenerally, the more Perfor- The more engaged mance employees perceive LPL to employees are, the engage in Leadershipstronger job performanceactivities, the more engaged & and more equity they committed they are to LPL.have. 11. Building Capability & CapacityFromTo Functional Silos Enterprise Thinking Subject Matter Experts &Deep & Broad Business AcumenSpecialization (General Managers) Managing & Controlling Work Leading & Empowering People Diversity of perspective & One way, the right way approachMake no mistakesLearn. Grow. Innovate. 12. Impact on Culture Talent What? Talent Managers Management is manage workkey strategy Nobody cares 2011 Manager-led about my development development 160 in Voluntary HR is operations Talent Who? Competitive focusedE.D.G.E. Managers vs.leaders New CHCO I dont have reports to CEO;time forpart of EMC 2010 development HR adopts2012PeopleFramework &restructures 13. LPL 2012 Corporate Goals Focus onOne of the most critical Employeesfactors in helping usachieve our mission andgrowth objectives isleadership ..Mark Casady,CEO (April 2012)Talent Management is a #1 priority. Mark Casady, CEO (VP+ Management Forum inApril 2012) 14. Measuring the Bottom-line Results ofLeadership Development 15. Agenda: How to measure impact in your own organization Key findings from a study of talent developmenteffectiveness 16. Linkage Leadership Impact StudyROLD (Return on Leadership Development) measures the impactof leadership development initiatives. To date over 20 companieshave 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 17. Types of Leadership Development InitiativesEvaluated Action learning Job rotation Classroom programs Mentoring Elite university National programs for programswomen High potential programs Networking systems Hybrid programs and events Individual and peer 360 Feedback coaching International assignments 18. 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. 19. Five Levels of Training EvaluationLevel 1 ReactionLevel 2 LearningLevel 3 Behavior / Application / PerformanceLevel 4 Results- Business ImpactLevel 5 Return on Investment (ROI)Kirkpatrick, 1959JJ Phillips, 1996 20. Examining Effectiveness of Leadership DevelopmentSystems: ROLD Model Strategy Innovation Effectiveness Measurement of the Measurement of innovative nature of the quality of the methods used inleadership leadership development and development and thethe impact it is impact leadershiphaving on business development is havingresults. on company innovation. Productivity Efficiency Measurement of the Measurement of companys leadership the real cost of pipeline and bench leadership strengths. development. 21. Impact Measures Individual: Group Employee Engagement Business Unit (3 sub-scales) Performance (past 12 Organizationalmonths) 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 theSkills organization over past 12 Global Leadership Skills months) 22. Tying Objectives to Business ImpactMeasures Example: Large financial services company based in NYCLeadership Business Impact Development (Level Four)ObjectivesMeasures Retain, develop and engage Employee Engagement the most promising future leadersOrganizational CommitmentRetention Rate Enhance commercial/financial and Revenue Goal Achievement leadership impactCost SavingsBusiness Unit Performance Establish networks with peers and with senior leadersRelationship Impact 23. 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 workforcefor the future? Pipeline/Talent Management How strong is the leadership bench? Innovation How innovative are the methods, and how effective is theprogram effecting organizational capacity for innovation? 24. 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 25. Example: A business process and technology management companyBenefit - Costx 100ROI % 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 26. 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 27. Return on Investment (ROI)Benefit - Cost x 100 = ROI % Cost 28. Determining Cost Fully loaded cost 29. Determining Benefits 30. Tool 1: Begin with Business Strategy What is the most important component of your companys 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? 31. Impact Mapping to Determine Measures Leadership Behaviors Business ImpactDevelopment (Level Three) (Level Four) Objectives 32. Case Study 1Company:Diversified Financial Services Company known forstability and customer serviceClientele:10.4 Million Customers72.3 Billion of Assets Under ManagementBusiness Issue:The companys Information Technology (IT) Organization consists of 1600employees located in a small Midwestern city. The organization has set astrategic objective to develop and implement programs to attract and retain topemployees. In addition, customers are requiring that IT leaders become morebusiness focused in order to proactively meet their growing needs. 33. Case Study 1: Impact MapLeadership BehaviorsBusiness Impact Development (Level Three)(Level Four)Objectives Attract and Retain Employee Survey Number of JobEmployees Candidates Improve IT Leaders 360 Feedback Turnover RateAbility to PartnerWith The Business CustomerSatisfaction Survey ImproveManagement Skills 34. 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) 35. 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, # ofpromotions, increases in job effectiveness) Job Attitude (e.g., organizational commitment) Initiative (e.g., implementation of new ideas) 36. 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 37. Tool 3: Creating New DataDefinition of MeasurementA set of observations that reduce uncertainty where the resultis expressed as a quantity.Types of Measurement Quantitative - numerical Qualitative - verbal 38. Hubbards Clarification Chain 1. If it matters at all, it is detectable/observable. 2. If it is detectable, it can be detected as an amount (orrange of possible amounts). 3. If it can be detected as a range of possible amounts, itcan be measured. 39. Creating New Measures Which types of existing data map back to yourtraining objectives? How about new measures you could introduce? 40. 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 41. Tool 5: Converting Data to DollarsIn reviewing your Level 4 business impact measures,which of them can be converted to $ values? Training and Conversion to Development Level 4 Data$Objectives 42. 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 employees 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 43. Calculating ROIBenefit - CostROI % =x 100Cost 44. Calculating ROIExample: A business process and technology management company based in IndiaBenefit - Costx 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 45. Tool 6: Making Metrics Work Who are the participants in the training anddevelopment? Is there a comparison group of similar leaders whodid not (or will not) participate in the training anddevelopment? If Yes, you can create a comparison group design Are there some participants who have not yetbegun 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 46. 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! 47. Correlational Impact Business Impact at Individual Level Leader Leader LeadersManagers Exposure ToExperience PerceivedRating Of Competencies Level With Impact ofLeadersCompetency Competency CompetencyLevel 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) 48. Leadership Impact Findings 49. Finding # 1Across all companies, bench strength isthe biggest concern of seniorexecutivesLinkage Return on Leadership Development (2011) 50. Senior Executive Assessment: Bottom Five ItemsLinkage Return on Leadership Development (2011) 51. Finding # 2Senior executives feel that the largestgap in leadership development is in theextent to which it contributes tocorporate innovation. Linkage Return on Leadership Development (2011) 52. Current vs. Ideal State of Leadership Development As Reported by Senior ExecutivesOther 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, andengagement-Takes advantage of innovative delivery mechanisms-Improves the ethics and moral character of leaders Linkage Return on Leadership Development (2011) 53. Current vs. Ideal State of Leadership Development AsReported by Senior Executives Linkage Return on Leadership Development (2011) 54. Finding # 3A culture of learning positivelyimpacts engagement and performance.Linkage Return on Leadership Development (2011) 55. Case Study: Measuring The Impact of LeadershipDevelopment 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 employeesand managers. People give open and honest feedback to each other. We learn from our mistakes. 56. The Impact of Learning CultureLeadershipLeadershipOverall LPLDevelopment ProgramDevelopment (n=107) (n=24) ComparisonAssessment Item (n=83) Mean SD Mean SD MeanSD Learning Culture 3.28(.58) 3.02(.79) 3.08 (.75) 57. The Impact of Learning Culture 58. Finding # 4: Leaders Preferred Method ofLeadership Development DeliveryMethod Percent of Leaders EndorsingCoaching/mentoring74%Classes with your Senior Executives as instructors49%Career planning 43%360-degree feedback 41%Action learning teams 32%Informal/social learning31%e-learning25%Social networking 22%Online business simulations 18%Discussion boards 17%Wikis4%Electronic games 4%Blogs4% Linkage Return on Leadership Development (2011) 59. Rule of FiveThere is a 93% chance that the median of apopulation is between the smallest and largestvalues in any random sample of five from thatpopulation.Any data is better than no data! Hubbard, 2007 60. Closing Thoughts..What gets measured improves! 61. 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