Why CEO & CFO's Overlook the Learning Transfer Problem

My first job after I received my MBA in Finance was as a financial analyst with DuPont.  Most of my job was analyzing possible capital investments and acquisitions to determine if the company would earn a financial return high enough to justify the investment.   So I learned a lot about how CFO's and CEO's evaluate financial returns from investments.

The range of returns on investment they see are quite a bit lower than the returns from learning investments. Consider a few examples:

• The historical return in the U.S. stock market is around 10%. 
• Wal-Mart, the largest U.S. company, has a return on assets of 9.15% and return on equity of 22.5%
• ExxonMobil, the second U.S. largest company, has a return on assets of 8.49% and return on equity of 19.9%
•  Royal Dutch Shell, the largest company outside the U.S., has a 5 year average return on assets of 9.3% and return on equity of 20.7%

As you can see, CFO's and CEO's live in a world of small investment returns compared to what we can achieve through learning!  But because they are used to much smaller percentage returns, they can totally overlook the learning transfer problem in their organizations.

Let me illustrate with a little math. Suppose we run a training program for 20 people that costs the organization $20,000--roughly $1,000 per person in direct costs and lost productivity.  Now, suppose only 10% of the people transfer their learning--that's only 2 people.  In order to earn a 20% return on investment--which a CFO/CEO would typically be quite happy with--all they have to do is make the company $2,000 each as a result of their new skills!  And if 30% of the learners transfer their learning (6 people), they only have to make $666 each!

I apologize for all the math but this illustrates why the learning transfer problem flies under the radar in many companies. Because the truth is, the POTENTIAL return from that $20,000 investment was $160,000 if done correctly! 

But, CFO's and CEO's don't live in a world of 800% returns, or even 100% returns.  Because they view the world through a 10 - 20% lens, they are easily seduced into thinking their training is really working when its not.  They totally miss how how big the learning transfer problem is and how much money they are losing from poor transfer.

Its time we educated our CFO/CEO's on what they are missing.  Learning remains one of the most powerful investments an organization can make with HUGE potential returns--but only if strong learning transfer happens.