Learning programs unable to prove their worth are unlikely to survive in today’s complex business environment. Learning is almost always funded on the expectation that its benefits will outweigh its costs, which makes it ever more vital that return on investment (ROI) be measured.
In the past, those holding the purse strings were often willing to take a leap of faith on learning. But faith is in short supply these days due to an anemic economic recovery, which has led to tightened budgets for all corporate departments, learning included.
Here are 10 helpful tips for incorporating measuring ROI into a learning program.
1. Don’t go overboard. Calculating true ROI for learning can be difficult; learning isn’t always easily quantifiable. Showing ROI does not need to be perfect — it simply needs to provide a reasonable and credible indication of value. If it is too difficult and costly to calculate, it’s probably not the right approach.
2. Shift thinking from a quality mindset to an impact and results mindset. ROI is more than a calculation. It’s a way of thinking. Learning professionals must be aware that a conscious effort to focus on the impact of learning — not just the quality of training — is a critical step.
3. Calculate ROI continuously. Calculating ROI once every couple of years is certainly better than not calculating at it all, but a snapshot approach does not allow for real-time changes to the program. It’s also not always helpful to calculate ROI after the fact — the program may be in the red with little to no room for prevention. Build ROI into the course evaluation process to provide continuous feedback and allow for mid-program changes.
4. Build the case for ROI step-by-step. Producing a single ROI number addresses the question, “How much value?” However, that alone does not provide a credible indication of actual business value. It’s key to demonstrate exactly how and where the learning brings value to the business by calculating data such as percentage of learners who reported that they impacted the business result and total percentage improvement on business result since training.
5. The more data points, the better. Most senior executives — COOs and CFOs — are analytical, and they will likely want an explanation behind the ROI conclusion. Validate findings with as much data as possible, from as many perspectives as possible. That means capturing learner responses immediately after training as well as a couple of months later after they have had the opportunity to apply it. Also, managers’ input should be collected to round out the feedback.
6. ROI isn’t just about dollars. It is equally important to quantify value in training quality and effectiveness, job impact and business results. Determine indicators that tell the story of the program and provide credibility to the ROI number.
7. Be as conservative as possible in deriving ROI calculations. Any self-reported scores that are used for ROI calculations should be factored down — typically by one-third — to compensate for bias that often occurs due to learner enthusiasm. A follow-up survey 60 to 90 days after the course tends to yield a more accurate result.
8. Know the investment outlay. Since ROI by definition is a return on investment, the investment must be determined. Some factors to consider include cost of training development and delivery, student travel and lodging, and student salary (time away from work).
9. Communicate the story behind the numbers. When presenting ROI to stakeholders, don’t just throw out numbers. State program goals as first envisioned, the challenges in delivering the program, and how these challenges were overcome to yield positive results.
10. Don’t be discouraged by low ROI numbers. Low ROI can be improved by taking a proactive stance and a comprehensive view of job support and other adoption practices for learning programs.
Generally, people understand that learning programs bring value to the organization. But the issue is usually how much, exactly? ROI is the best weapon to ensure that valued learning programs remain a critical priority for organizations.
Mark Bashrum is vice president of corporate marketing and strategic intelligence for ESI International, a global training company. He can be reached at editor@CLOmedia.com.