For years, I’ve said that connecting employee learning with business impact doesn’t have to be a mind-bending challenge. In response, training professionals often ask me to illustrate what I mean. The following story from my personal life is a good example.
Recently while traveling in Santa Barbara, California, we visited two high-end wineries with friends. In both cases, employee learning directly influenced our customer experience. In both cases, learning also affected business outcomes, but not in the same way. Let me explain.
Wineries depend heavily on customer discretionary income. In other words, on any given day, visitors are free to choose whether they will visit a specific winery and whether they’ll purchase wine from that source.
Successful high-end wineries know which aspects of their business directly influence customer decisions. They realize that people who spend discretionary income on fine wine expect attention to detail. Their visitors expect personalized treatment and they want to be informed.
The best wineries understand that an effective customer experience involves a blend of education, enjoyment and product excellence. Visitors look forward to tasting various wines and learning about them before selecting one or more bottles to purchase.
When these ingredients work together to create a successful customer experience, they directly affect business outcomes. And in our case, as customers and learning practitioners, we discovered just how strong the connection can be.
Winery Visit 1: Our Customer Experience
After being seated, we were eager to order our tastings, but first we had questions for our young server, Kayla. Noting that she was new to the job, Kayla warned us that she might not be able to help, but she would try. So with limited assistance, we made our initial selections.
This wasn’t the first impression we expected from a reputable, high-end winery. Why place uninformed employees on the front lines without adequate preparation? As Kayla began pouring, we asked additional questions, but she was unable to provide more information.
Kayla’s lack of knowledge and experience left us unsatisfied. So we moved on, regretting that we had wasted time and money at this location, and agreeing never to return. Worse, our California companions vowed never to recommend this winery to others.
Winery Visit 1: Near-Term Business Impact
Let’s quickly calculate the immediate business impact to the winery (known to L&D professionals as “Level 4” on the Kirkpatrick Training Evaluation Model) as a result of Kayla’s poor performance (or Kirkpatrick “Level 3″):
Our visit to the winery generated revenue of about $100. Therefore, I estimate that the profit was about $35. This assumes that the cost of the wine = $25 (75% gross margin), Kayla’s salary attributable to serving us = $15, and other overhead expenses = $25 (25% of gross margin).
The downside for Kayla is that she received a substandard tip of less than 10% (we gave 10% and our friends less). Had she provided knowledgeable service she could have earned a tip of 20% or more.
More importantly, no one else stepped in to offer the kind of individual attention high-end winery visitors expect. The owners never greeted us to ensure that we (and our disposable income) were enjoying our visit. As a result of this weak customer experience, all four of the people in our group left without purchasing even one bottle of wine. The average price per bottle at that winery is $80. So assuming $80 x 4 customers, the winery never saw at least $320 in additional revenue they could have otherwise captured.
Bottom line: $100 revenue – $320 minimum uncaptured revenue = $-280. In other words, the immediate business impact of our visit was really a loss of at least $280.
Winery Visit 1: Long-Term Business Impact
Now let’s estimate the potential long-term business impact from lost recommendations, or worse, from negative word-of-mouth. We may not be able to forecast the future with 100% certainty, but why would any business ignore the possibilities?
According to a study by ZenDesk, 54% of customers tell more than 5 others about bad experiences. So based on this statistic, it’s likely that the 4 people in our group will tell at least 20 other people about our bad experience.
If you multiply these 20 connections by the $25 tasting cost per person, that represents more than $500 of lost sales from would-be visitors who hear our story. What’s more, this doesn’t include lost potential bottle sales of more than $1,600 from people who might have otherwise visited.
Plus, there’s an incalculable cost to the winery’s reputation. Over time, this kind of experience can spell disaster for a high-end brand in today’s competitive wine market.
Winery Visit 2: Customer Experience Makes All the Difference
Fortunately, the news is not all bad. After our group’s shaky start, we moved on to a second winery that exceeded our expectations in every respect. The service was exceptional, staff members were knowledgeable and the overall impact was memorable.
Not surprisingly, this directly influenced our buying behavior. In addition to purchasing tastings, three of us purchased wine totaling nearly $500. We also look forward to returning in the future and recommending the winery to others.
How Learning Improves Business Impact
Here are three simple (but essential) ways to develop learning solutions that make a measurable business impact:
1) Know Your Customer
Our poor customer experience at the first winery was not Kayla’s fault. The owners and managers could have avoided this by providing her with better product knowledge, as well as ongoing guidance about how to engage and educate discerning customers.
On-the-job training and performance support could help new servers like Kayla understand why customers visit, and how to offer an experience that leads to wine purchases, return visits and glowing recommendations. Framing training efforts around the right skills can make all the difference. Obviously, the second winery makes this a priority.
2) Know Your Decision Maker
Business leaders expect to make a profit. However, profits depend on the ability to generate sales while appropriately allocating scarce resources. Knowing that Kayla was inexperienced, the first winery should have supported her with an experienced wine expert as a temporary “shadow” or ongoing mentor.
By appealing to a business leader’s profit motive, you’re much more likely to win support for the appropriate allocation of training resources. Start with profit and sales as a common goal and the rest should follow.
3) Know Your Employee
Did anyone ask Kayla what she expects to learn about the wine market in general, the winery she represents and the wines it produces? Did the winery assess Kayla’s existing level of knowledge before or after she was hired? Was Kayla’s training designed to focus on what she needed to know? Or was she overwhelmed by too much unfiltered information?
Only the managers at Kayla’s winery can answer these questions. But it’s not unusual for organizations to develop learning content without focusing on an employee’s existing knowledge, skills and job priorities.
Ready to Uncork the Possibilities?
It’s time for L&D to own its responsibility as an internal business function that can deliver business value through employee training. As my winery tour reveals, it happens when you connect deeply with customer needs, reconcile business expectations, and respect what each employee must do to help your organization succeed.
As an experienced accountant, let me assure you that employee learning isn’t about cost recovery. It’s actually about leveraging existing resources to improve employee performance. If you do this consistently, you’ll also improve organizational performance, and business results won’t be far behind.
Now that’s worth a toast. Here’s to better business through learning. Cheers all around!
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