17 Apr, 2013

Investing in People: How to Quantify the Value of Competency Development

For all the emphasis placed on competency development, training budgets are almost always the first cut during any kind of down turn.  For competency management to become more than a Human Resource Management fad it will have to demonstrate quantified financial return.  This abstract outlines one approach to quantify the return on competency development investments.

It’s simple, but worth reiterating, that economic value is created when there is a positive net present value (NPV) of an investment’s cash flow stream.  Keeping track of the net cash flow versus time is the only way to quantify the ultimate value of an investment: A positive NPV means an investment is a winner. The only way to know if a potential investment is likely to be a winner is to reliably predict the investment’s NPV. In the petroleum business kinds of managers make all kinds of investments by predicting, with some level of certainty, cash flow versus time.  Investments in production facilities, exploration concessions, well re-completions, new computer systems, etc – in fact investments in any real business enterprise – are all normally subject to this kind of scrutiny.  Of course the certainty and precision of these investment predictions vary, but they are still subject to the same form of analysis: understanding how business choices affect cash flow.

Investments in competency development should be subjected to a similar type of analysis or they cannot really be considered management. Without such scrutiny such activities cannot be called competency management; instead, they would have to be called competency administration or maybe even competency art.  Unless competency management efforts are specifically designed to add value to the organization, they will only succeed through luck.

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J. FORD BRETT is a recognized worldwide as a leader in the area of Petroleum Project Management and has spoken professionally and conducted scores of seminars in over 40 countries on five continents. His technical background and work experience qualify him as an expert in the area process and project performance, and petroleum training.

He has received many honors, including the 2000 Crosby Medallion for Global Competitiveness by the American Society for Competitiveness for its work in “global competitiveness through quality in knowledge management, best practices transfer, and operations improvement”. For his work on improved drilling techniques he was honored in 1996 with a nomination for the National Medal of Technology, the US Government’s highest technology award. He has authored or co-authored over 32 technical publications, a book titled “Organizational Learning – the 24 Keys to High Performance”, and has been granted over 30 U.S. and International patents - including several patents relating to elimination of “Drill Bit Whirl” (which the Oil and Gas Journal Listed as one of the 100 most significant developments in the history of the petroleum industry).

He is registered Professional Engineer and a certified Project Management Professional. He holds a B.S. in mechanical engineering and physics from Duke University (where he was elected to Phi Beta Kappa), an M.S.E. from Stanford University, and an M.B.A. from Oklahoma State University.