A Better Way to Approach the ROI of Training

by David Creelman | Posted | Learning

A Better Way to Approach the ROI of Training

When I speak to HR departments about analytics, there is usually a small group of sharp professionals who look lost. These are the people in learning and development. They are interested in analytics, but what troubles them is measuring the ROI of training. They pray analytics will help; they are pretty sure it won’t.

As we know, measuring training was pretty much sorted out by Donald Kirkpatrick in 1954. In the intervening 60+ years, we’ve learned Kirkpatrick’s model is a smart one, but it doesn’t really help much with the elephant in the room: justifying the cost of training. In reality, it’s usually too hard or expensive to do so.

Steve Kerr, best known for his leadership and development work at GE (no, not the same Steve Kerr who coaches the Golden State Warriors), told me that pushing to get an ROI of leadership development wasn’t just hard, it was damaging. When he was hired by Goldman Sachs, he boldly said he wouldn’t give them an ROI; any attempt to do so would lead to a dishonest attempt to make up some numbers. If they believed, based on their experience, that leadership development was a good thing, then they’d go ahead without hard numbers. If not, well, they could look for someone else to lead the practice.

An alternative approach for calculating ROI

Most professionals in learning and development don’t have the luxury that Kerr had to push back against the value of calculating an ROI. Luckily, there is another approach that falls outside of Kirkpatrick’s model. Peter Navin, SVP of Employee Experience for healthcare provider Grand Rounds Inc. is a big fan of analytics. He leans towards measuring the overall ROI of a business initiative, not training in isolation. For example, opening an operation in a new location involves training as well as many other factors. If the new operation has a positive ROI, then that’s enough to assure the company that training is probably on track.

Not bothering to parse out training’s contribution to ROI isn’t laziness. The success of a business initiative depends on the integrated efforts of many people in many departments. Looking at the success as a whole makes sense. It also removes the almost impossible task of assessing the ROI of a learning and development initiative in isolation.

Fujitsu’s work in assessing the ROI of peer coaching

There are other examples of assessing training as part of overall business performance rather than trying to justify it as a standalone effort. In a not-yet-released study on the ROI of peer coaching, Fujitsu measured the effectiveness of the learning intervention by comparing the profitability of business units relative to how extensively they’d deployed peer coaching. The data suggested peer coaching was linked to getting better results. Fujitsu’s learning and development people can’t prove beyond a reasonable doubt that their intervention alone helped. But we are not in the business of proof—we are in the business of making decisions. If we have reasonably good evidence that peer coaching is increasing profits, then wouldn’t we want to continue doing it? The fact that there were a number of aligned activities across the business at Fujitsu that led to improved profitability doesn’t change that decision around whether to keep peer coaching. Learning is being judged on the overall outcome delivered by these aligned initiatives.

What learning and development can do about ROI

Sometimes, it is possible to measure the ROI of a training program in isolation. You should do this when you can—it makes for a nice case study.

When it’s not possible to measure ROI, we may have to suffice with the lower level measures on the Kirkpatrick scale such as learner reaction to the material. That’s a weak measure, but it will at least identify if any courses are really bad.

Other times, we may have to follow Steve Kerr’s route and suggest to leaders that in the absence of good evidence on the ROI of training, they need to make a judgment call. If they really think giving up on training is the right thing to do, well, they can take that risk. Otherwise, they should continue to fund it.

Finally, there is an interesting alternative to judging training in terms of the ROI of the overall project. Judging training on the overall performance of a project works best if you have a well-defined business project and learning has a well-defined role that integrates with other efforts to achieve results. Often, it’s not like that; often learning and development teams are just a generic support function that does lots of different things with the broad aim of making the organization better. Maybe L&D functions need to shift forward more focused interventions if they want to really connect training to business outcomes.

While it’s great to be able to parse out learning’s contribution to success, we know that’s expensive to do. If we can show that training was part of a successful intervention, then that’s a solid piece of analysis that will help leaders make the decision of whether or not to invest in training.

Want to see the ROI of training in the real world?

Check out the City of Houston’s training journey, which saw them create a more engaged, unified workforce and netting a 280% ROI thanks to reduced turnover and increased revenue!

Read more about the City of Houston here.

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