When it comes to learning and development – be it through training, coaching or some other activity – businesses struggle to assess the return they get from their investment. And many professionals offering learning and development services don’t know how to help clients to measure the return on their investment either.
For professionals (trainers, coaches, consultants etc.) part of the problem is that they are already sold on the benefits so that their focus is on providing the services they feel so passionate about. At the same time, even for the most commercially-focused service provider, measuring ROI is a complex area.
With this in mind, I was interested to read the posting below by Jane Massy, CEO of abdi (www.abdi.eu.com) in response to a posting on the Training Journal Daily Digest. abdi describe themselves as the experts in evaluating learning and development. I reproduce Jane’s response with her permission:
It’s always interesting to read these discussion and I’d like to add a few thoughts from our side and hopefully dispel a few myths! My comments are based on the experience of carrying out and/or supporting L&D professionals in the evaluation of about £2bn of investment in workplace learning and development and nearly two decades of calculating business impact and value!
Firstly, any ROI (based on the traditional formula of dividing the money value of net benefits by full costs) can only be derived from the data about business metric improvements. Some of these business metrics will be convertible into money, and can be used in the calculation and some won’t (what are called ‘intangibles’). Furthermore, there is no way to show direct cause and effect in these human capital (and in fact in any) type of investments – it simply isn’t possible.
What is possible is to build a chain of impact through collecting data throughout each of the (Kirkpatrick/Phillips) levels. Data in the chain of impact includes engagement, learning, performance change and business impact data. Understanding each of the results as well as their relationship is essential to confirm the chain of impact. Our experience is that most L&D and HR people don’t actually understand the nature of these data items, don’t analyse them and don’t explore the relationships between the data items at different levels.
All investments need to be planned with this chain of impact outcomes in mind. Investing without measurable documented outcomes agreed at all levels and deciding to see if it was worth it without this advance planning is both unprofessional and also inefficient and ineffective. Part of planning is establishing baseline data and planning for isolation as well as forecasting costs.
You can isolate for the influence of other factors and you should definitely do so if you wish to calculate the ROI – otherwise you will look like a fool and your report will not be credible in front of the senior management/board who will have a clear idea of what influences business metric improvements and will want to know you have taken these into account when doing your calculation. I recommend you read Jack Phillips’ Return on Investment. If you want a copy, e-mail me and I’ll happily arrange for one to be sent to you free of charge!
I would add that the ‘me’ in that last sentence is Jane – you can reach her at jane@abdi.eu.com.