Top vs. Bottom
The HRD profession is becoming aware of the power of demonstrating hard and soft dollar impacts on business. "Show the ROI," we hear. "Demonstrate your effect on the Bottom Line." We know that we have to be business partners with the C-level executives responsible for approving our budgets.
The problem is that, for many of us, the concept of a "bottom line" is little more than a corporate buzzword. We might generally understand that the bottom line has something to do with profitability and have no idea if there is such a thing as a top line. This situation is unfortunate because being able to describe and prove a top line impact can be much more powerful and exciting.
To show how this works, let's first discuss the definitions of bottom and top lines. The bottom line refers to the cost of producing a unit. When you reduce the bottom line, you reduce this cost: it saves money. An increased top line is talking about increased sales dollars or volume. The impact makes money.
Training always has an impact on the bottom line. We make employees more productive, more accurate and help retention. More units per employee per hour means fewer salary dollars invested in each unit. More accurate employees mean less waste. Increased retention mean fewer recruiting and training dollars. If you add up all these savings and compare them with the amount of money spent on the training, you are showing ROI.
A top line impact comes from training salespeople or customers. More productive salespeople sell more. More accurate salespeople lose fewer customers and increase the amount sold to each customer. More productive, happy customers buy more products from you. In these examples, training makes money.
This is especially important since psychology shows that people are more accepting of risk then anticipating gain than when avoiding loss. In other words, $100 feels more productive when invested in stocks than when spent on insurance. Use this: think about whether you, in your HRD role, might have a legitimate top line effect. Your CFO would stand up, applaud and throw money at you, if you could say, and prove, "This cutting-edge training program could mean two million dollars in additional sales."
The problem is that, for many of us, the concept of a "bottom line" is little more than a corporate buzzword. We might generally understand that the bottom line has something to do with profitability and have no idea if there is such a thing as a top line. This situation is unfortunate because being able to describe and prove a top line impact can be much more powerful and exciting.
To show how this works, let's first discuss the definitions of bottom and top lines. The bottom line refers to the cost of producing a unit. When you reduce the bottom line, you reduce this cost: it saves money. An increased top line is talking about increased sales dollars or volume. The impact makes money.
Training always has an impact on the bottom line. We make employees more productive, more accurate and help retention. More units per employee per hour means fewer salary dollars invested in each unit. More accurate employees mean less waste. Increased retention mean fewer recruiting and training dollars. If you add up all these savings and compare them with the amount of money spent on the training, you are showing ROI.
A top line impact comes from training salespeople or customers. More productive salespeople sell more. More accurate salespeople lose fewer customers and increase the amount sold to each customer. More productive, happy customers buy more products from you. In these examples, training makes money.
This is especially important since psychology shows that people are more accepting of risk then anticipating gain than when avoiding loss. In other words, $100 feels more productive when invested in stocks than when spent on insurance. Use this: think about whether you, in your HRD role, might have a legitimate top line effect. Your CFO would stand up, applaud and throw money at you, if you could say, and prove, "This cutting-edge training program could mean two million dollars in additional sales."
posted by Varda Lobanov | 4:21 PM
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