Cost Centers Are Not Where Profitability Is Found

Cost Centers Are Not Where Profitability Is Found

What I often hear when meeting learning practitioners is how they have to prove their learning efforts and "deliver a positive financial return." I understand their underlying intention, but I don't believe they do. Practitioners fail to realize that they'll never face the same scrutiny and pressure profit centers do. Whatever stakeholders expect from the learning function is a fraction of what they expect from their profit-focused counterparts. It begins with the loaded statement, "deliver a positive financial return." Take it from a CPA, you can interpret this statement in a variety of ways. But why do practitioners believe they have to "deliver a positive financial return"?

It's a straight-up lie that began with the training ROI movement. Regretfully, training ROI proponents convinced practitioners that training must prove that operational financial results must exceed training costs, essentially, show a profit. This sounds sensible, but it's highly misleading.

Profit Expectations

Let's begin with the profit expectation. Learning can never deliver a profit since the learning function isn't any different from marketing, finance, and production; it's a cost center! Even so, cost centers must show value but this doesn't mean to show profit! Cost centers must show value by improving operational performance. Subsequently, improving performance is supposed to deliver some form of positive financial outcome.

Practitioners fail to grasp this indirect or causal correlation. For practitioners, it's easier to grasp the direct approach of positive financial results (essentially profit). But for your leaders, this approach is too simplistic and not how they actually evaluate cost center contributions. Your leaders are formally educated to measure cost center performance to deliver performance value and profit centers to deliver profits. This means the learning function, like other cost centers, is not held to the same financial standards or expectations as a profit center.

Cost Centers Vs. Profit Centers

Every profit center cost and expense must deliver immediate positive financial results, with no exceptions. Whereas, leaders are somewhat more patient with cost centers recognizing that something like learning can't tangibly demonstrate direct financial results, however, it will eventually, and indirectly, contribute to profitability.

This doesn't mean the learning function or any cost center for that matter is off the accountability hook. You remain very accountable. Always keep in mind you're a cost to the profit center since they're ultimately the ones paying for your solution. And as I stated, every profit-center cost must deliver profit. Leaders may not hold you accountable for profit they must deliver but they do expect you to improve employee performance to deliver profitability.

For example, say you're asked to develop training for the sales team. The improved sales revenue regardless of the added cost for training should show increased profitability. You're probably exclaiming, "See! I told you the training cost had to show profitability!" Learning practitioners get into trouble with their operational leaders making this type of claim, but let's run with that thought. So, if sales go up practitioners quickly claim it's because of training and the training costs were worth it. The claim is since revenue went up, and possibly more profit, then training made a difference. But did it actually? Can you tangibly prove it? Can you make a direct connection that it was actually your training that made the difference? Probably not.

The profit center, the sales department in this case, is accountable for costs incurred. The support activities chosen to improve the sales team rests upon the sales manager. How the manager allocates their budget will reflect in the sales results, good or bad. So, the sales manager is accountable for their spending choices. Again, you're probably saying, "But that means training is directly accountable!" This is partially true. You'll be held accountable for whether training made any difference, but you're not the only accountable cost choice. Many other support activities also play a role in delivering sales results. You may face some pressure but it's usually shared across the sales manager's choices.


Stop desperately seeking approval for your efforts. Doing so will get you into trouble you didn't expect. You will take credit for efforts involving other operational support activities. You'll alienate others in your organization. And, if you do take full credit, are you willing to be accountable when your training doesn't work? You can't have one without the other. Realize training is not the only tool in your leader's operational toolbox. Also, recognize training's accountability isn't as precarious as those who are actually responsible for delivering profitable outcomes. So, the next time you feel the need to take credit for a successful operational outcome resist the urge...and then...get over yourself.

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