Understanding the Role of ROI and Learning & Development
In a time when budgets are tighter than ever and the need to prove how any investment will make an impact and be worthwhile, it isn’t uncommon for essential business activities such as learning and development to be cut.
Demonstrating the return on investment within training has been an ongoing challenge for businesses for some time, with 89% of individuals finding it hard to measure and prove ROI in learning.* A big reason for this is the difficulty in understanding and measuring output and engagement that don’t directly correspond to a financial value of income to prove the worth and therefore return on the initial spend on training. So, we are here to support you, not only with why learning and development (L&D) is so important for the continued growth and success of the business but also with how to measure the impact of the training and ultimately measuring return on investment.
So, why is measuring ROI for learning and development so important?
Measuring ROI on training within any organisation holds the same importance as measuring ROI elsewhere in your business. Having an accurate and true understanding of what you’re getting back and ultimately the result of your investment is integral to continued business success. ROI forms part of business analytics where the results shape future strategy and inform decisions, the same methodology applies to learning and development.
However, with training being skills-based, it isn’t as easy to measure the return compared to a project plan or marketing campaign. If we apply the traditional view of ROI to training, we assume that we can correlate financial income with someone having taken a training course. Though this is still true of L&D ROI, when it comes to proving educational impact, we must look at other measurements of return on investment aside from financials.
“Understand what your true aim is for L&D, if it is to financially prove success you need to understand there is more to gain from training and culture within your organisation that contributes to financial gain.”
With this in mind, we begin to understand the importance of measuring ROI for learning and development within organisations and why it extends far beyond business income. According to the Chartered Institute of Personnel and Development (CIPD), only 22% of organisations are trying to improve how they gather and analyse data around learning despite almost all of the audience wanting a better understanding of the impact.
Therefore, with this understanding and insight, organisations can make learning interventions better. Whether you have an internal learning professional or outsource your training, there is a level of accountability to make sure your chosen programme has the desired value and impact on the business. Analysing the results can lead to stakeholders having a bigger appetite for additional training programs and further investment that deliver more value in the future.
How to Measure ROI of Learning and Development
Measuring ROI within L&D isn’t as straightforward as we might hope due to there being multiple metrics of return on investment, as previously mentioned. For example, we need to measure increased revenue as a direct result of training as well as reduced costs due to increased skills. Reduced costs in the workplace and increased resource efficiency can be attributed to higher concentration levels, better time management, more effective meetings and improved communication. All of these are new skills acquired and learnt from the training that has had a direct, positive impact on the business but technically sit outside the traditional measurement of ROI. We therefore should perhaps be asking; can we measure the cost of this training against the benefits to both the individuals and the organisation?
Understanding that the measurement of return is not solely financial means we have multiple metrics we can measure and for many businesses, this is the most challenging question, what to measure? So, when an organisation is struggling to directly attribute income to a training programme, where should they start? Our Learning and Development Manager, Rob Kennie outlines his suggestion to start measuring engagement.
We should consider engagement as both attendance and participation in a training course whilst also being demonstrated by learnings being applied by training participants within their role. We look at these two examples of engagement separately because although they are both measurements and evidence of impact, they are likely to occur at different times. For example, the natural engagement towards learning something new and how this can help someone is the short-term engagement and return whereas the longer-term impact and return comes when ‘the penny drops’ and learnings are directly applied with confidence in the workplace. This means that the business benefits from innovation, an increase in productivity and the affectivity of processes, projects and other important fundamentals within a company.
For measurement of both short and long-term engagement, one of the simplest tools is to use surveys and your Learning Management System’s (LMS) activity reports. Things to look at are this set of measures to look at your ROI as LinkedIn suggests below.1
Qualitative feedback from Clients/Employees
Satisfaction with using online tools (E-learning/LMS)
The number of Clients/Employees that consistently engage with your learning content
Engagement Survey Scores
Qualitative feedback about behavioural changes – For example, new coaching methodology
The number of courses completed or attended
An increase in the number of skills your employees are developing
Team/Project/Company metrics performing after intervention
Time saved/productivity increased
The above is a starting point and an organisation would need to gather further analysis of behaviour changes and evidence of successful skill acquisition and implementation to demonstrate impact.
It is clear that learning and development within any organisation has multiple forms of return on investment, including an increase in financial revenue albeit this is often from an increased skillset being applied in the workplace. However, in addition, companies also benefit from decreased employee attrition and cultural improvement, by understanding your staff’s skill gaps and providing them with the tools to flourish in their roles.
In short, investing in your learning and development programme and in turn, your staff can yield returns for both people and business and therefore could be argued to have more gain than your typical ROI.
*Source: The LPI (Learning and Performance Institute), Learning Live, September 2022.