Karen Michaels, the chief operating officer, burst into Maria’s office. “What is this!?” Maria ignored her.

“Maria, I’m talking to you.”

“No you’re not,” Maria said. “You’re yelling at me. You’re not my parent and you’re not my boss, and I don’t respond to people who talk to me in that tone of voice.” Civility in the workplace had become an issue for Maria and she didn’t want Capital View to be a place where people spoke to each other like that. She definitely wasn’t going to let it be a place where people spoke to her like that.

“Well, there’s something we need to talk about.”

“Then let’s talk. Please calm down and have a seat.”

“I’m sorry for the tone,” She said. “But I tend to get angry whenever I see this company wasting money.”

“OK, I’ll bite. Where do you think we’re wasting money?”

“I’ve been looking over the proposed budget, and I saw that you want to expand our training and development budget by over 40 percent.”

“That’s right,” Maria said calmly. She could see Karen was getting excited again and didn’t want to add fuel to the fire.

“I don’t know if you’ve been able to keep up with our financials, but revenues are flat. We need to cut costs, not spend more.”

“Karen, I am perfectly capable of keeping up with the financials.” Maria said. Maria had observed that people tend to think that HR executives don’t understand the financial side of the business. Maria had an MBA from Columbia Business School so she was more than capable, but she didn’t want to dwell on that part of Karen’s rant. “Given the current financial environment, I think the budget for learning is more than justified.”

“How can you say that?” Karen started raising her voice again. “With flat revenues, spending on training is a luxury we just can’t afford. I’m going to recommend to Will and Bobby that we cut the training budget, not expand it.”

“Training is not a luxury. It’s a necessity. And I would argue that in tough financial times, it becomes more important, not less.”

“That’s insane and I’m not going to let this happen.”

“It’s not your call.”

“Maybe not, but as chief operating officer, I have a say in the budget process and I’m going to bring this issue to Will and Bobby.”

“Why don’t we see if they’re available now and we can see where they stand on this?” This would be a good test of Will’s support and she’d love to find out where the chief financial officer’s thinking was.

“I can’t do it right now. I have to go talk to Regina about the marketing budget. As chief marketing officer, she’s trying to increase spending on advertising. Don’t you people get it? Revenues are flat—we can’t increase our spending.”

“Why don’t we do this—let’s schedule a meeting with Will, Bobby, and Regina and the five of us can discuss these issues,” and then she added, pointedly, “in a calm and rational manner.”

“Fine,” Karen said. “Why don’t you connect with my assistant and try and coordinate everyone’s calendar?”

“I’ll be happy to,” Maria said.

The meeting was set for the following Monday morning. It was one of those late fall days in New York in which the sky was completely gray and the cold wind came whipping in from the water. Maria hoped the weather wasn’t foreshadowing the tone of the meeting. At least there were bagels. That was always a good sign.

Regina Clark, the chief marketing officer, looked a bit concerned as she entered. Will, Karen, and Bobby followed her in.

Will started, “Maria, why don’t you tell us why you’ve called this meeting?”

“Actually, Will, I’ve scheduled it on behalf of Karen, who has some issues about next year’s proposed budget.”

Will was confused. “Aren’t the departmental budget meetings scheduled for next week?”

The company’s annual budget process was in full swing. Department heads submitted their proposed budgets, they were reviewed by senior executives, and then meetings were held, department by department. Department heads were expected to defend their budget proposals and address questions posed by the senior executives. The company’s annual operating budget was then finalized by Bobby and Will.

Karen responded, “Yes, but I’ve seen some of the proposed budgets and I’ve got some concerns that I thought should be addressed prior to the departmental budget meetings.”

Maria said, “I agree. If there are some philosophical differences about how this company is going to address the lack of growth, I think we should discuss them now as an executive team prior to having the line-by-line discussions with the department heads next week.” At least Maria and Karen were on the same page about the process. And it couldn’t hurt to start off with some agreement, rather than butting heads at the start of the meeting.

Will understood. “Fine,” he said. “Karen, what are your concerns?”

To her credit, Karen responded calmly and thoughtfully. “Will, I’ve been concerned that our revenues have been flat. Given the current market, I don’t see much growth happening next year. To maintain our profitability, I think we need to cut costs, not increase our spending.”

The CEO nodded, but didn’t say anything. Bobby, the CFO, was the one who responded, “Makes sense. So what’s the problem?”

Maria knew that Will would keep an open mind during this discussion. She was eager to find out where Bobby would land. Was he the type of CFO who would always look to cut costs, or would he be open to ideas that might help grow the company?

Karen continued, “When I looked at some of the proposed budgets, I was shocked that some of our departments,” she looked pointedly at both Maria and Regina, “were increasing spending in certain areas where I don’t think we can afford to spend extra money.”

Bobby took the bait, but he did so with his characteristic impish grin, “Gee, Karen, is there any way we could persuade you to share with us what those areas might be?”

Karen either ignored or didn’t pick up on Bobby’s playful tone and continued, “To start, I think training and advertising are luxuries that we just can’t afford to spend more on when revenues aren’t growing.”

Regina was visibly upset. “Luxuries?” She said. “How can you call advertising a luxury?”

Karen could see that she had touched a nerve with Regina and didn’t want the meeting to be personal or confrontational. “Perhaps luxury was too strong of a word,” she said. “I don’t want the company to have to do layoffs—and I know Maria would agree with me there.” She looked over to Maria, who just smiled and nodded. “We have to spend money on payroll. If we can’t cut that, then we have to cut other places. Payroll isn’t optional, but advertising is. Training is the same way—we don’t have to spend money on training. When we’ve got the money, I’m all for spending some on training. But when money is tight, we’ve got to cut costs, and I think our optional spending areas should be cut, not expanded.”

Regina was livid. “Wait just a minute…”

Before Karen could respond, Maria intervened, “Perhaps I can help. I think I see the source of our,” she paused, searching for the right words, “philosophical differences.”

Maria turned away from both Karen and Regina and turned toward Will at the head of the table. “Will, as you see it, what is the purpose of advertising?”

“Well, when done properly, advertising should bring in new business.”

“And Will, in your view, what is the purpose of training and development?”

“If done properly, training and development should make our people more effective, efficient, and productive.”

“So why on earth, in times of flat revenue, wouldn’t we want to invest in bringing in more customers and making our people more productive?” Maria asked. By now, she had turned back to Karen and was more or less addressing the question to her.

Seeking an ally, Karen turned to the CFO. “Come on, Bobby, you’ve been around long enough,” she said. “You know that when costs need to be cut, advertising and training are two areas that we always trim.”

Bobby answered cautiously, “Yes, historically that is how we’ve done it in the past.”

Before Karen could continue, Maria chimed in again. “I think I see the problem here. Karen is viewing our budgets for advertising and training as a cost.” She said.

Karen took the bait. “I’m looking right at your budget,” she said. “You are looking to spend a lot of money on training and development. If that’s not a cost, then what is it?”

Maria answered without hesitation, “It’s an investment.”

Karen looked annoyed. “That’s just semantics,” she said. “This is too important to play word games.”

Now it was Maria’s turn to be annoyed. “Yes, it’s semantics,” she replied. “‘Semantics’ refers to the meaning of words, and meaning is important and shouldn’t be trivialized or dismissed. There’s a difference between a cost and an investment and if we’re trying to grow the company, we need to be mindful of those differences.”

Karen interrupted, “Yes, but…”

Maria continued, ignoring the interruption. She picked up the bagel she had been nibbling on. “You see this bagel? We spent money on this. When I eat this bagel, it will be gone and the money has been spent. It’s a cost. The hope was that we would get some satisfaction or nutrition from it, but there’s no future benefit. When we invest in advertising, there is every expectation that every dollar we spend will bring back two or three more dollars.”

Regina jumped in, “Ideally it would be 10 dollars!”

“Exactly,” Maria kept going. “Similarly, our training and development budget is not a luxury. The idea is that every dollar we spend on training and development will return two or three or 10 dollars in increased productivity or efficiency. So while I understand the need to cut costs during slow times, I do not at all understand the desire to cut investment. So I ask again, when revenues are flat, why on earth would we cut back on investing in areas that are designed to bring in customers and increase productivity?”

Now everyone was looking at Karen. She knew she had to respond, but wasn’t quite sure where to go. She started talking and hoped an argument would emerge. “First of all, I understand the difference between a cost and investment. I guess I understand the need to increase the advertising budget.” She looked at Regina.

I guess I’m off the hook, Regina thought, for the moment, anyway.

“But I’ve still got a problem with our training and development budget.” She said and turned back to Maria. “It seems like we do a lot of training for the sake of doing training. People expect it, we promise it, and we just do it because we’re supposed to. I guess I’m not seeing the two or three or 10 dollars that we’re supposed to be getting back from this so-called investment.”

Maria was a bit relieved. “So your issue is not so much with the idea of investing in developing our people, it’s with the execution and effectiveness of our training?” She said.

“I guess that’s right,” Karen conceded.

“Fair enough.” Now it was Maria’s turn to be conciliatory. “As long as we can agree philosophically that the budget we devote to training and development should be viewed as an investment, not a cost, I’m happy.”

“But,” Karen began, then paused for effect, “what about the problem of our not being able to see the return on that investment?”

“It’s a fair question. Suppose I could guarantee you a three-to-one return-on investment for every dollar we devote to training and development?”

Bobby jumped in, “From a CFO’s perspective, I’d love to see that!”

Will followed, “Hey, if you could do that, I’d triple your training budget!”

They all laughed.

Karen was not going to let her off the hook that easily. “Can you? Can you really guarantee a three-to-one return?”

Maria answered honestly, “I don’t know. I haven’t been here long enough to assess the effectiveness of our training and development efforts. But since today’s meeting was about our philosophies for growth and the ideas underpinning our budget, I wanted to at least get agreement that the idea behind devoting resources to training was to increase productivity and effectiveness. That idea is so important to me that it’s one of my Talent Management Principles. It ties directly to the first principle about people being our most valuable asset.”

Karen wasn’t done. “OK, suppose I buy into your premise,” she said. “What happens if we invest all this money in educating our people and they leave the company?”

Maria was anticipating this question. She had heard it many times before. In fact, there was ample research that showed that organizations that provide educational benefits had lower turnover than those that do not. In addition to the increased productivity and efficiency derived from training, increased retention is usually another benefit. But Maria didn’t want to cite statistics here. She had a simpler argument.

Karen grew impatient watching Maria reflect on the question, so she asked again, “Well, Maria, what if we invest in educating our people and they leave?”

Maria responded with a question, “What if we don’t educate our people and they stay?”

There was a moment or two of silence as everyone reflected on that.

That should do it, Maria hoped. Maybe this meeting is finally over.

But Karen had one more arrow in her quiver. “While we’ve agreed in principle that training should provide productivity and efficiency gains, we still haven’t addressed the question of whether the money we’re spending—excuse me—investing in training is actually doing us any good.”

Maria knew she had a point. “You’re right, but that’s a bigger issue than we can address in this meeting.”

“That may be so,” Karen agreed, “but we still need to address it.”

“Absolutely,” Maria wanted to end on a point of agreement. “And I promise I will be looking into this and addressing it soon.”

When she said this, Maria had no idea just how soon it would be.

Organizational Assessment

Questions for Personal Reflection

1.  Was there anything described in chapter 7 that seemed descriptive of your organization?

2.  Do you believe that the training you have received in your career has improved your performance?

3.  Do you believe that the training programs you have designed or delivered have had a positive effect on individual or organizational performance?

4.  What can you do to ensure that future training programs that you participate in will improve your performance?

5.  What can you do to ensure that future training programs that you design or deliver will definitely have a positive impact on individual or organizational performance?

6.  What can you do to help your organization view expenditures on training and development as an investment instead of a cost?