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MEASURING ROI: A LIFELINE FOR LEARNING AND DEVELOPMENT MANAGERS

A training manager in General Electric’s Hudson training centre once asked Jeffery Immlet, then a rising executive in GE to send his team to a leadership workshop. Immlet replied, “If you can prove to me that eight hours in your workshop will contribute more to the bottom line than eight hours working their job, I’ll send them.”

Many learning professionals find themselves in a similar situation on a regular basis, yet they struggle to provide a response that satisfies the business. In the past, executives accepted feedback and an anecdote from participants as sufficient to assess the value of L&D interventions, but with today’s challenging economy, it is no longer business as usual. L&D budgets are receiving more scrutiny than ever and many learning professionals are under pressure to look for more solid evidence to justify the business’ investment in their programmes.

l&d evaluation: the facts & figures

A study by the Association for Talent Development (ATD) on how often companies use Kirkpatrick’s model to evaluate training effectiveness revealed the following:

  • Reaction: 95% of respondents conduct post even survey, asking participants how they felt about the programme
  • Learning: 37% of respondents go a step further to confirm that participants learnt something
  • Behaviour: 13% of respondents say they follow through to make sure people applied the skills they had learnt
  • Results: Only 3% of respondents were able to map the training to achieve positive results

WHY ORGANISATIONS DO NOT MEASURE ROI ON L&D INITIATIVES

Most learning professionals, deep down in their gut, know that demonstrating ROI on learning and development initiatives is the most effective way to show top management the value of learning programmes in clear financial terms, because it helps answer the question; “For every Naira invested in learning, how much does the business get in return?”

In spite of this understanding, many do not pursue measuring ROI due to a number of reasons, not limited to those listed below:

  1. Lack of measurement culture in the organisation

When it comes to measurement, many organisations talk the talk, but do not actually walk the walk. To establish a culture of measuring ROI, it is necessary that everyone in the Learning and Development department becomes well-grounded in ROI methodologies. Knowledge of the process and principles and the actual practice is a good foundation to create and sustain ROI measurement culture in any organisation.

  1. Learning Managers often do not know where to start

The dilemma with many learning professionals is – at what point do they commence measuring ROI? For many organisations, the decision to measure ROI is taken long after the programme is concluded, at which time it is already too late. To have any chance of success at measuring ROI, the process must start when the business outcomes of a programme are defined.

  1. There is a lack of resources to calculate ROI

For some organisations, it is a question of resources. But just what resources are needed to measure ROI?

Typically, a comprehensive ROI process can cost 3%-5% of the overall training budget and for some organisations this could be considered excessive. However, the investments in the ROI process can be offset by the additional results achieved from the process and the elimination of unproductive programmes.

  1. The ROI process is too complicated and there is no discipline to follow through

A successful ROI implementation requires much planning and a high level of discipline to keep the process on track. The learning team may not have enough discipline and a culture of follow through to stay on course. Also, other priorities may compete with the time necessary for ROI implementation.

  1. Fear that a negative ROI on learning and development initiative could cost them their jobs

Some L&D departments do not implement ROI due to the fear of failure. Some fear they may end up with a negative ROI on their programmes and jeopardise their jobs as learning professionals.

Despite the reluctance of Learning Managers to measure ROI, recent trends and the economic climate suggest that it is unsustainable to avoid implementing ROI. As the business continues to exert pressure for greater accountability, it is imperative that L&D professionals rise up to the challenge and show the business the value of their investment in tangible business terms.

 

6 STEPS TO THE MONEY

In the simplest terms, ROI is a key financial metric of the value of programme investments and cost; it is the ratio of the net programme benefits to costs, expressed as a percentage.

The formula can be expressed thus:


For example, if the ROI of a programme is calculated as 45%, it means that for every Naira spent, there is a return of N0.45 to the business.

The process of measuring ROI can be summarised in these 6 steps:

#1. Define the business need

Whether it is to improve the skill of the sales force in closing new deals or their ability to manage existing relationships, it is important to ask – what business challenge do I want to address?

#2. Determine the programme solution

There are a number of different interventions that can address business needs, only one of which is training. To achieve a positive ROI, it is important to determine that the business need can indeed be addressed by the intended L&D intervention and that training, for example, is the appropriate solution.

#3.   Determine the training outcome

Always refer to the business need the training is intended to address. Identify the outcomes the training should accomplish and ensure they are in line with the business need. Ask yourself: what will the training ultimately achieve? What will the outcome be for trainees and the business?

#4.   Design the training programme

Irrespective of whether you are designing and delivering the training in-house, using consultants to develop the programme, or sending an individual or group of employees to an existing online or in-person course, you need to understand what type of training is compatible with your target audience, what type of activities should be included, what support is available or should be in place after training to ensure learning is transferred to the workplace and finally if the design would achieve the outcomes you need to achieve.

#5.   Define measurement metrics

This is the all-important question: “How will success be measured?” In defining metrics, you need to revisit the training outcomes in step 3 above. For example, if the intended outcome of a training programme is to close new sales deals, the metric to measure success could be: the number of new sales deals closed.  Beyond defining metrics, it is just as important to determine how the metrics would be tracked.

#6.   Execute the training and measure ROI

After the training, track the metrics defined in step 5 above. However, keep in mind that results would not be immediate as participants need time to apply the skills and knowledge acquired. Results could be measure at predetermined intervals, say quarterly, or even monthly, depending on the programme.

It is also important to consider that business results would not be solely a direct outcome of the training, there are other factors that contribute to business results in the period after training, hence the need to carefully isolate the real programme impact on the business outcomes.

 

A NEW PARADIGM

The ROI methodology is process-driven and is in itself relatively straightforward. However, implementation can be a major paradigm shift for many organisations, hence, Learning Managers must take care to incorporate key steps that will assure success.

  1. Create awareness for ROI in the organisation

For a successful implementation, it is important to create awareness and carry all stakeholders along, this forms part of the cultural change process.

  1. Build ROI Capacity and Expertise within the organisation

To ensure sustainability, it is important to build internal capacity of the L&D team on ROI competence. There are 9 skill areas for building competence in implementing ROI and these are:

  • Planning for calculation
  • Collecting evaluation data
  • Isolating the effects of training
  • Converting data to monetary value
  • Monitoring programme costs
  • Data analysis and ROI calculation
  • Implementing the ROI process
  • Providing internal consulting on ROI
  • Teaching others the ROI process

 

  1. Allocate resources for ROI Measurement

Implementing ROI has to be deliberate and not accidental. It involves serious planning and dedication of resources. Typically, organisations allocate 3%-5% of the training budget as well as a significant amount of time to the implementation of ROI measurement.

  1. Start with a pilot

Implementing ROI is a delicate process, therefore, it is advisable to pick one learning programme e.g. a training course as a pilot to test the implementation methodology. This ensures the L&D team is not spread thin and no step is missed along the way.

  1. Communicate ROI results to the entire organisation

Communicating the results is important, even if it is a negative ROI, to reinforce a paradigm shift in the organisation and lock buy-in. What is more important is that people are carried along and know the outcome of the process.

  1. Flesh up plans for future training programmes with a view to calculating ROI

ROI implementation is a process improvement tool meant to improve design of learning programmes with a focus on the business outcomes. Upon successful implementation of the ROI methodology, the ROI process should be infused into the L&D Standard Operating Procedures (SOP); by so doing we will have better designed programmes that will achieve better business results.

 

TAKE ACTION

Measuring ROI may very well be the lifeline many L&D departments need. The extent to which organisations will be willing to fund learning, and the regard in which it is held will depend on the extent to which L&D professionals can convincingly demonstrate that learning initiatives deliver on management’s expectations for improved performance.

Workforce Group is a top hr consulting firm in Nigeria that partners with leading organisations to develop the framework and tools for measuring ROI. Our unique approach enables our clients build internal ROI competencies through co-creation and practical application of the framework.

To learn more, visit www.workforcegroup.com  or send an email to info@workforcegroup.com

If you have any contributions, questions or enquiries about this publication, please contact:

The HR Community Manager

Olugbenga Gideon
Telephone: +234 903 194 6744

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