A Financial View of Investments and Value Creation
Organizations everywhere invest in strengthening capability, preparing leaders for new challenges, and enabling people to perform at their best. L&D teams naturally describe these efforts as investments: commitments made today to build value that unfolds over time. For most business leaders, this framing makes intuitive sense. Developing people is the foundation for innovation, execution, and long-term resilience.
Yet when L&D proposes these initiatives to Finance, the conversation often shifts toward budgets, cost control, and short-term financial impact. Even in organizations where L&D and Finance collaborate well, the word investment can still trigger different interpretations.
This isn’t about disagreement.
It’s about definition.
And clarifying this difference is the key to aligning the two functions around true value creation.
Why L&D describes their work as an investment
L&D leaders use the word investment because capability building shapes the future of the organization. Learning programs:
- Build leadership and decision-making capability
- Strengthen execution at scale
- Reduce operational and strategic risk
- Enable innovation by empowering people
- Improve performance across the value chain
These aren’t soft outcomes. They are drivers of competitive advantage.
Josh Bersin’s research reinforces this strategic logic:
“Capability academies are essentially business-led and business-sponsored investments in building capabilities that are strategic to operations, innovation, customer service, and growth.”
(The Capability Academy, The Josh Bersin Company, 2022)
Many organizations invest significantly, often $2,000 to $15,000 per employee, in capability academies and development programs because they are viewed as core enablers of future performance.
This is why L&D calls its work an investment: it creates the capability the organization needs to thrive.
Why L&D and finance interpret “Investment” differently
Finance uses the term investment in its formal, accounting sense. Under financial reporting standards, an investment generally:
- Becomes an asset
- Is recorded on the balance sheet
- Has a multi-year useful life
- Declines in value through depreciation or amortization
- Impacts cash flow differently from operating costs
Most L&D activity does not meet these criteria.
It is treated as operating expense, meaning the full cost is recognized immediately.
Industry research consistently notes that organizations spend 1–4% of payroll annually on training, and this spending is categorized as recurring OPEX.
A brief note on intangible investments
Some intangible assets can be capitalized under accounting rules, such as development costs that lead to a future product or revenue stream (under IFRS). Research expenses, however, must be expensed. Under U.S. GAAP, criteria are stricter, and most R&D is expensed except for certain software development.
These nuances matter, but they do not change the central reality: the vast majority of learning, early-stage innovation, and capability-building initiatives do not qualify as capital assets and are therefore treated as operating expenses.
Where the misalignment begins
When L&D says “investment,” they are describing strategy and intent.
When Finance hears “investment,” they think of accounting rules, capitalization, and risk.
Both are right.
Both are incomplete without the other.
This leads to three predictable challenges:
1. Timing mismatch
L&D benefits accrue over months or years, while the financial impact appears immediately.
2. Measurement mismatch
L&D strengthens capability and behavior, areas where traditional ROI frameworks struggle.
Josh Bersin’s research illuminates this gap:
“Fewer than five percent of organizations regularly measure ROI.”
(The Training Measurement Book, Bersin)
This is not a failure of L&D. It is the limitation of ROI frameworks for capability-driven work.
3. Language mismatch
The same term, investment, carries different meanings depending on the role.
Understanding this is the first step toward alignment.
Why innovation intensifies the disconnect
Innovation investments amplify the challenge:
- Outcomes are uncertain
- Payback periods are long
- Value is often intangible
- Benefits are distributed across teams
- Success depends heavily on human capability
Innovation rarely starts with capitalizable assets.
It begins with exploration, learning, collaboration, and decision-making, the very areas L&D supports.
Without alignment between L&D and Finance, organizations struggle to fund innovation effectively or consistently.
Beyond ROI: The Rise of Value on Investment (VOI)
Because ROI alone cannot capture the full impact of learning, many organizations adopt Value on Investment (VOI) frameworks.
Bersin’s research notes that the wellbeing industry as a whole has embraced VOI, with models like Virgin Pulse’s publicly available VOI framework. While VOI is not yet a mainstream measurement framework in L&D or Finance, it offers a useful way to capture value that traditional ROI models cannot, especially when outcomes are behavioral, cultural, or capability-driven.
VOI helps organizations assess:
- Behavioral change
- Capability development
- Decision-making quality
- Risk reduction
- Productivity
- Engagement and retention
- Innovation readiness
VOI doesn’t replace ROI.
It complements it by capturing the broader value created through capability building.
How L&D can reframe the investment conversation
L&D does not need to argue accounting rules.
But framing their case the way Finance evaluates decisions can transform the dialogue.
Instead of leading with “we need to invest in this,” L&D can lead with:
- What capability gap is affecting performance
- How this gap creates operational or strategic risk
- Expected long-term outcomes
- Leading indicators of progress
- Assumptions behind expected value
- Implications for innovation and execution
- The cost of doing nothing
This shifts attention from cost to value creation in terms both functions understand.
How finance can support capability building
Finance gains strategic clarity when they can see:
- How capability drives operational and financial results
- Where skills gaps expose the organization to risk
- How L&D supports innovation and transformation
- How to balance long-term capability with short-term financial pressure
This enables smarter, more aligned resource decisions.
How L&D and Finance create value together
Why Business Acumen is the bridge
Business acumen gives leaders across functions a shared foundation for understanding financial and strategic decisions.
The Josh Bersin Company’s Global Workforce Intelligence research, covering more than 1,400 organizations, shows that high-performing companies consistently emphasize business acumen as essential for effective collaboration between HR, L&D, and Finance.
The research further notes that business acumen improves “program execution and credibility,” builds “trusted partnerships,” and accelerates the shift from transactional support to strategic partnership.
When leaders understand how financial decisions, capability, and value creation intersect, organizational alignment becomes far easier and more effective.
A checklist for effective L&D and Finance dialogue
Leaders preparing for resource decisions can use the following prompts:
- What problem or capability gap are we addressing?
- How does this gap affect performance or innovation?
- What risks decrease if we address it?
- What assumptions shape expected value?
- What early indicators will show progress?
- How does this initiative support broader strategy?
- What are the long-term implications for performance?
- What happens if we do nothing?
This structure elevates the conversation and aligns both sides around value.
Conclusion: Two perspectives, one purpose
L&D and Finance both want the organization to perform, innovate, and grow.
They simply evaluate investments through different lenses.
L&D focuses on strategic capability and long-term readiness.
Finance focuses on structure, timing, and risk.
Neither view is complete alone.
Together, they form the foundation for sustainable value creation.
When both functions understand each other’s logic, and when capability building is framed as a strategic driver of performance, organizations allocate resources more effectively, innovate more confidently, and build the capacity required to thrive.
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If this sparked ideas, or if you’d like to explore how your team can build financial acumen through Serious Fun, let’s connect. Start a conversation with us: https://celemi.com/contact
Let’s make business acumen everyone’s business!
External Sources for Further Reading
- The Josh Bersin Company – HR and capability-building insights:
https://joshbersin.com - Virgin Pulse – VOI Framework (public PDF):
https://community.virginpulse.com/hubfs/ABX%20Files/Content/Virgin%20Pulse%20VOI%20Framework%20Deck.pdf?hsLang=en - Saïd Business School, University of Oxford – Systematic review on human capital and firm performance:
https://www.sbs.ox.ac.uk/sites/default/files/2024-10/Revisiting_Human_Capital_and_Firm_Performance.pdf