What is the ROI of learning and development?
According to the Chartered Institute of Personnel and Development (CIPD), only 22 per cent of organisations are actively trying to improve how they gather and analyse data around workplace learning, despite almost all wanting a better understanding of its impact.
Meanwhile, the ROI Institute found at least 80 per cent of chief executives want to know the ROI of learning and development (L&D), yet few get the figures. Time, costs and measurement metrics are among drivers of this mismatch.
“While ROI can be elusive, organisations that do it well are starting with the business metric and examining performance outcomes,” says CIPD head of L&D Andy Lancaster.
“Data proliferates, but its management is harder as it is embedded across the business, requiring broad stakeholder learning to uncover and analyse.
“There are time and resource pressures; a need to invest new time into this practice may not traditionally have been on the agenda.”
ROI of L&D is critical to ensure money is invested wisely and the programme is open to scrutiny.
There are differences between measuring tangible benefits of workplace learning, such as increased revenue and reduced costs, and intangible benefits, like engagement, resulting in higher concentration, wellbeing and commitment to the organisation.
But, ultimately, all roads lead to the same destination, says Professor David Passmore, of Penn State University’s Workforce Education and Development Center.
“There is a lot of ambiguity and lack of definition of what the investment is meant to produce,” he explains.
“People focus on behavioural issues, attempt to raise scores and achieve certifications. But these are proximal outcomes, not the ultimate outcome. Much human capital investment is not orientated to firm financial outcomes.”
A starting point for measuring benefits of workplace learning in terms of business results is to begin analysis before the training to define goals and strategy.
Start with the end in mind is a great mantra to have
A 360-degree process that embeds thinking about ROI at the front end is essential, says Professor Passmore.
“Examining the value of training before the investment is the most critical time, even though all the information won’t be available,” he points out.
CIPD’s Mr Lancaster agrees. “Start with the end in mind is a great mantra to have,” he says, warning against fixating on a one-size-fits-all timescale, rather than considering the organisation’s specific business cycle.
“Trying to measure short-term ROI is prevalent,” says Mr Lancaster. “But it is more useful to examine ROI through the lens of the business cycle. We want instant answers, but behavioural change is not immediate.”
At Shell, a cybersecurity training programme was targeted at specific employees after analysis uncovered correlations between certain characteristics and the likelihood of an employee causing a phishing incident or virus download.
This insight meant Shell could target its training programme at around 30 per cent of employees to address half of potential cybersecurity issues.
The positive impact included lowering the risk of security threats, freeing up the IT department’s time, reducing costs by training only employees most likely to breach cybersecurity and improving productivity of low-risk employees not required to complete training.
Accenture bases its learning culture on a one strategy approach, with its business and learning strategies intertwined.
The professional services company wanted to transform digital engagement worldwide, with a future-focused strategy that grew from flexible L&D.
Measuring the success of this strategy was a key action for Accenture, which found revenues from digital, cloud and security-related technologies grew 30 per cent on the previous year and accounted for half of total annual net revenues.
The ROI Institute, which helps organisations evaluate the success of programmes using the ROI methodology developed by its chairman Jack Phillips, found that Global Systems Corporation achieved an almost eight-fold ROI of training tailored to help new recruits enter the corporate world, increase productivity and reduce attrition.
The programme was evaluated at five levels, using focus groups, post-course tests, further focus groups and surveys after six months, and a calculation of financial ROI based on all design, delivery and evaluation costs.
This was assessed against the monetary value of the 10 per cent increase in productivity recorded, as well as a reduction in employee turnover costs, with the total ROI amounting to almost $775,000 (£600,000).
In addition, the Kirkpatrick model, based on the premise that training programmes must derive from the organisation’s primary purpose, such as profitably delivering a product or service to market, has also been used by businesses to gauge the ROI of L&D.
Wendy Kirkpatrick, president of Kirkpatrick Partners, says it shows respect for training departments to be held to the same standard of productivity as other departments.
“For every organisation and any type of training, the same general formula for evaluating the success of L&D programmes applies,” she explains. “The key is to start programme design by considering the organisational-level outcome you wish to impact.
“Many training programmes have intangible benefits that are of great organisational value. Reporting on these outcomes is wise; the more benefit a programme creates, the better story L&D has to tell.”