Is L&D a profit centre?

I got inadvertently drawn into a Twitter chat today where this question was posed:

Tricia Ransom responded with the following:

Which I responded to by saying that I don’t think this will ever happen as long as L&D remains an internal function. The only way it could become a profit centre is if it directly sells its services to external clients of the company.

I could end this post right here, cos that’s pretty much my whole argument. But, well, it’s my blog and I’ll carry on if I want to. So here’s the longer version of the answer.

What I’m not arguing is that L&D doesn’t add value to the business. It very much can and does. I wrote about this some while ago about how the perception of thinking of L&D as being about ‘soft skills’ is a fallacy.

I understand the intent behind Tricia’s message. It’s about saying we need to look at ourselves differently as a function. We need to stop thinking of ourselves as as support function, and start thinking of ourselves as a business critical function. It’s about saying that without L&D happening well, a company won’t survive and won’t innovate. I get all that. None of that, though, means we become a profit centre, because none of that is about bringing in revenue.

As much as I might want it to be the case, nothing I do actually brings in revenue. Not directly. When I facilitate a training session or a workshop or team building event or other learning event, I am using people’s time to develop their skills in some way. That activity will not bring in revenue. It will help make someone different and new happen, but bringing in the cash isn’t an intended outcome.

This is the prime reason why this function is often the first to get cut when times are hard in a business. As I said above, the only way an internal L&D function becomes revenue generating is by selling its services to external clients of the business. But that’s often not the purpose of the function, and if it was, it would require a different business and operation model.

Indeed an internal function can operate like a mini business by logging its activity. You simply log how much time you spend on various activities over a period of a month and by doing so gain some hard information. That information will tell you where you’re spending your time and if it’s value adding or not. It also means you can tighten up certain processes where needed and you make better use of resources because of what you identify. Again, though, none of that means you become revenue generating, you just become a true value adding function.

Your thoughts, arguments and counter-arguments are very welcome.