Commercializing OD-Linking OD Metrics with Business Metrics to prove ROI

Tim Drinkall, Head Of Learning and Organizational Development, Metro Trains Melbourne

As many organizational development (OD) teams and leaders will attest, OD is regularly considered a ‘cost center’ to a business, and in an economy that is experiencing a downturn, can be at risk of having funding reduced, or removed all together. But what if OD teams could prove their value to the business and even provide returns on the invest made in the team?

Instead of relying solely on my own insights and experience, I collaborated with our company's CFO, one of our most influential business stakeholders, regarding this topic. Through multiple discussions, we pinpointed the most effective strategy to commercialize the OD function within our company. Our objective was to transform its perception from a mere 'cost center' to a vital catalyst for business metrics, augmenting value and nurturing success. The outcome is this 5-step strategy –

1. Find the data and map your baselines

2. Define ‘Value’ Add / Impacts

3. Link impacts – primary, secondary and tertiary

4. Report regularly and specifically

5. Reinvest whenever possible

This five-step process for commercializing the OD function is a strategic approach that aligns the efforts of OD teams with the broader business goals and demonstrates tangible value to stakeholders. Let's delve into each step in more detail.

1. Find the Data and Map Your Baselines

Find relevant data sources within the organization that can provide insights into both OD activities and business performance metrics. This may include employee surveys, performance reviews, financial reports, customer feedback. In my last article[E1] , I shared ‘Tim’s Top Ten’ for data sources. Importantly, we need to snapshot the ‘as at’ baseline to use to demonstrate value and impact.

2. Define Value Add/ Impacts

How do you measure the Value of OD? Five areas are identified –

• People Profit – Cost avoidance and value add through People

• Business Profit – Bottom Line and ROI

• Business Impact – Reputation, Customer Experience, Capability

• Strategic Impact – Proof of Concepts for multiple-year rollout

• Business Problem Solving – Solutions to specific issues facing the business

This step requires mapping out the causal relationships between OD interventions and their impacts on the Value areas above. Start by identifying primary impacts directly attributable to OD initiatives, then secondary and tertiary effects that may be more indirect but still significant. For example –

3. Report Regularly and Specifically

Create a reporting framework to effectively convey the influence of OD initiatives on key business metrics. This framework serves as tangible evidence of impact, utilizing data to bring to life the insights discussed above. Recognizing the challenge of unequivocally attributing business enhancements solely to OD efforts amidst various potential influencers like process enhancements, tools, and technological advancements, we adopt a scientific approach. Through the implementation of control/intervention groups, we aim to methodically showcase the value generated. This involves identifying two comparable teams, designating one as the control group while the other receives our interventions. By meticulously tracking and comparing the business outcomes of both groups, we can confidently discern whether our interventions directly contributed to the improvements.

4. Reinvest whenever possible

Reinvesting in successful programs or scaling up interventions that have shown promising results can further enhance their impact. Continuously evaluate and refine OD strategies based on –

• Feedback

• Results

• Evolving business needs

• Improvements in performance

• Future workforce requirements

By following this process, OD teams can shift perceptions from being perceived as a 'cost center' to becoming strategic partners in driving business success. It allows them to demonstrate their value in concrete terms and secure ongoing support and investment from senior leadership.