Profit U

Ensuring employees do their jobs effectively and develop into the best workforce possible are the first priorities of trainers. If you’ve mastered that, how about turning your training department into a profit center?

By Margery Weinstein

Preparing your employees for the immediate work in front of them is a challenge. You already have a big task on your hands making sure they understand how the new products they will have to sell work and how to use your new customer relationship management software, for example. Not to mention all the soft skills you’re charged with teaching them—communication, business acumen, and, eventually, how to function as managers. Training a workforce in those skills is a lot of work, and, unfortunately, also costly. In unstable economic times, more Learning and Development functions may try to start covering their expenses—and maybe even turn a profit for their organization—by offering training services to individuals outside their company’s payroll. While most companies are still mastering effectively training their own workforce, some, such as Training magazine Top 10 Hall of Famer The Ritz-Carlton Hotel Company, have set up for-profit academies open to the public.

Recognition=Opportunity to Teach Others

When Ritz-Carlton won the national Malcolm Baldrige Award not once but twice in the 1990s, the company knew it had an opportunity. The hotel, renowned for its customer service, had become a master at creating engaged and loyal guests. The way it did that was through a workforce that fully understood what it meant to keep those guests happy. The company’s Learning and Development professionals wondered if they could benefit other organizations by sharing the lessons they taught their own employees. In addition to being a good corporate citizen, the company knew that sharing its customer service training wisdom also could generate a new profit stream. It wasn’t long before The Ritz-Carlton Leadership Center was born.

“The Ritz-Carlton Leadership Center, a corporate university open to the public, was fortunate because we had a built-in platform,” says The Ritz-Carlton Leadership Center Vice President Diana Oreck. “We launched The Leadership Center in December 1999 as a result of winning the national Malcolm Baldrige Award for the second time. We won the award for the first time in 1992 and then again in 1999. Only five companies have ever won the award twice. There was and continues to be a strong demand to benchmark our culture transformation, legendary service, and leadership practices.”

Let the Market Drive Curriculum

Trainers often have their own learning ideals that may or may not be tied to the needs of their business. They may think, for example, that it would be useful for all employees to learn a second language over the next five years with in-house help or for each worker to master a new technology that only a fraction may end up using. Those ideals that are not tied to business goals usually aren’t the best approach when you are just serving internal clients. But there definitely is no place for them when you are operating a public, for-profit academy. Oreck says she and her colleagues at The Ritz-Carlton Leadership Center developed a curriculum designed to cater to the specific needs their customers expressed to them. “A key to our success is we listen carefully to our customers,” says Oreck. “By doing so, we are able to design at least one new relevant offering per year to suit their needs.”

The most notable example of that is The Ritz-Carlton Leadership Center’s Radar On-Antenna Up—The Ritz Carlton’s Fulfillment of Unexpressed Wishes & Needs program. “In 2008, during the time of the financial crisis, we received a call from a financial advisor who had several high-net-worth clients,” says Oreck. “He told us it was not business as usual. Some of the clients he had had for years said they were scrutinizing everything and they were upset they had to call him to find out what was happening during the economic crisis. They asked him, ‘Where is your anticipatory service?’ That is how we came up with the idea for the class.”

Start Small

If your Learning and Development function is at the point where you have fully mastered serving your internal clients and are ready to branch out to serving the public, make plans to do so in increments. “Do not try to be all things to all people,” Oreck advises. “Start small and only offer one or two programs that you know your company excels at. Once those are in demand and have been refined, move to offering a more expanded curricula.”

The evolution of The Ritz-Carlton Leadership Center illustrates Oreck’s principle of taking it one step at a time. “When we launched The Ritz-Carlton Leadership Center in December 1999, we had only one offering, Legendary Service, which we knew we really excelled at,” says Oreck. “Today, we have eight offerings on a variety of topics. We have introduced one new offering approximately every 18 months and keep refining it. We do not recommend offering a big suite of new offerings all at once.”

Strategically Price Offerings

Giving your wisdom away to the public for free won’t work, but neither will charging so much money that other organizations would be hard-pressed to afford it. You need to take a moderate approach that more than covers the expenses of operating the public curriculum and each year turns more and more of a profit. “It is important to understand demand and also to price your offerings correctly,” Oreck recommends. “Do not deeply discount your offerings. However, it is critical that the content can be easily applied and is relevant. When that happens, people are willing to pay a reasonable price.” Oreck says it’s helpful to take a look at what other public, corporate university-run academies are charging for their offerings. “Start by knowing what your competitors charge. Then decide what the market can bear,” she says. “You will know if there is price resistance because people will say they cannot afford it.”

Let Legal In

It may be tempting to charge ahead with plans to get your public curriculum off the ground as fast as possible, but you also need to consider the legal aspects of what you are doing. “The main mistake companies make is not consulting with their legal department early in the process when they are opening their corporate university doors to the public,” says Oreck. “It is key that your intellectual capital is protected. It is important to know what material can be copyrighted. How much, if any, of your material are you willing to share electronically?” Including your legal department in the planning process protects the Learning and Development function from charges that it shared materials it was not authorized to share. “It is important that people protect their proprietary information,” says Oreck. “With today’s technology, many students want to photograph slides that are proprietary, so with legal’s assistance, companies need to determine if that is a practice that is allowed. If not, there must be the appropriate language in the enrollment documentation that video, photography, and taping are not permitted.”

The Right Governance Structure

Your internal Learning and Development function should be structured to ensure smooth processes and efficient operation, and so should your public curriculum offering. You can’t just put the classes together and then haphazardly roll them out. The classes need to be part of a larger structure that can be branded to the public as a unified offering. “Think through governance issues carefully. Having the right governance structure with a strong charter right from the beginning avoids headaches later on,” Oreck stresses. “We have an Internal Leadership Center Advisory Board that meets twice per year and is made up of senior leaders in our organization. It discusses The Ritz-Carlton Leadership Center’s marketing plan, trends in corporate universities, budgeting issues, and curricula, etc.”

A well-organized program that offers proven benchmarks for success is a value-add to other organizations—and to your own in the potential profit you will turn.

The For-Profit Rollout—Five Steps to Success

“Becoming a profit center requires a shift in culture at the leadership level. Training is no longer a department. Effectively, it’s a small business,” says Dan Cooper, partner and CEO of e-learning and development provider ej4. “Training leadership must go from a corporate mindset to an entrepreneurial self-view.” Cooper and his colleagues at ej4 offer the following advice for companies that seek to develop for-profit training offerings:

“It doesn’t start with the product. It’s not about training programs or curricula. One of our mottoes is, ‘Without a need, don’t proceed.’ Here’s the process:

STEP 1: Identify a potential constituency with money.

STEP 2: Find their unmet needs. What targets are they missing? What problems are they dealing with? What is so important to them that they’d take money out of their own pockets to resolve?

STEP 3: Value the need. How much are those issues costing them? How much can you save them? That’s your justification. If it’s not more than your cost, then you can’t proceed. We know lots of situations where there is tremendous need, but there’s just no money in it.

STEP 4: Create the solutions for it. This can’t be the traditional expensive classroom and boring click-and-read e-learning stuff. Your for-profit constituencies don’t have that kind of money, and they won’t put up with it. It needs to look like TV. It needs to be short. It needs to be tactical. It needs to be delivered to all six screens (TV, PC, smartphone, tablet, iPod, route handheld).

STEP 5: Sell it. This isn’t communicating it. This is a complete marketing and sales effort in the traditional sense.

It’s the classic business cycle. You’re an outside training provider now. You’re only as good as your value above and beyond your cost.”

Profit Center Quick Tips

  • Use public recognition such as business and training industry awards to launch a for-profit academy. Your recognition from parties outside your own organization will give you credibility with potential customers.
  • Listen to the market—meaning listen to your prospective
    customers—to design a public-offering curriculum. It is better to base curriculum on the expressed needs of your customers than on your own training ideals and abstract goals.
  • Don’t worry about offering a full-scale curriculum during your first year of for-profit operation. Take the internal course or curriculum you most excel at, and which you may have been publicly recognized for, and make that your introductory offering. You can slowly build on that first course in the years to come.
  • Take a moderate approach to pricing. Look at how much your for-profit learning competitors price and then price accordingly. Cover your expenses and turn a profit but always be aware of the financial strain potential customers are under and take note when they tell you they can’t afford your courses.
  • Consult with your legal department. You need to know which learning and business materials it is OK to share with the public, and allow customers to reproduce, and which materials are strictly proprietary or confidential.
  • Create a cohesive governance structure. Your public offerings need a governance structure that is as well organized as the structure you use to govern your offerings to internal customers. You want to present an organized, efficient package of learning to those who may be stretching their resources to pay for it.
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