Organizations invest millions of dollars each year in learning initiatives, but few actually calculate the return on investment or effectiveness of their investments.
In many cases, the investment is reactionary and not properly planned before the launch of associated business initiatives. The learning initiative may be related to implementation of new technology or have a business application.
It may be attached to a change in business processes or in the organization. In all cases, the effective use of learning investments can be calculated by tracking how employees take advantage of the learning assets and events and what information they seek to do their jobs well.
The business case starts with a valid business reason. According to Cushing Anderson, program vice president at global market intelligence firm IDC, to enable organizational capability, employee skills are imperative.
In his May 2012 research, “Impact of Training on Success of ERP Projects,” feedback from IT executives indicates team members’ knowledge and skills are the most critical factors leading to project success (Figure 1). Then, it is all about how effectively the team works together to solve problems.
What Is Effective?
Like beauty, effectiveness is in the eye of the beholder. In business, there are a lot of beholders, so it is important to declare what it means so that mission success in the growth and maintenance of workforce investments is clear.
To clarify what constitutes effectiveness, learning leaders can determine the criteria, quantity of learning content, quantity of new content development, number of new development projects and requests, volume of students in classes, utilization of e-learning content, size of learning staff, student satisfaction, requestor satisfaction, curricula completion and number of certifications.
If the learning investment is made because of a business change, the questions would be less about learning assets and activities and more about the business.
For instance, questions may be asked about adoption of new business processes, operating procedures, business applications, physical plant, equipment, mobile devices and management structure.
Or, leaders might ask about improvement in individual performance, business outcomes, operating procedures, business processes, customer satisfaction, mobile device use and exploitation of management structure.
Claudia Faerber, senior manager for user sustainment at pharmaceutical distributor McKesson Corp., said she gauges the effectiveness of spending and effort on employee impact by asking: Are they able to perform their work more efficiently?
Are they able to exploit all resources available to them? Are the business processes in which they engage completed with more value to the company? Positive answers provide validation about investments.
Negative answers provide direction for subsequent actions. Faerber said with current, innovative methods and technologies, these answers are attainable with more objectivity than subjectivity.
The aforementioned IDC survey found that a small change in skill measured with various methods yielded significant outcomes in project success as measured by the project owners.
There was a similar conclusion when Anderson correlated the project investment in training to project success. An incremental investment of 1.5 percent for the total project budget yielded up to 30 percent improvement in project success.
Who Owns the Training Dollars?
It’s also important to know who owns training resources. Is it the training department? HR? Lines of business? The CFO?
Actually, the enterprise owns the funds, but they may be housed under a centralized training department’s control, so investments and funding must be made wisely and with the entire organization in mind.
Further, allocating funding to enable the workforce is like allocating any funding. A proper return is necessary to demonstrate financial responsibility.
In February software company Ancile Solutions interviewed 15 executives who led IT and learning initiatives such as enterprise-wide software implementations to identify criteria with which to analyze the business value of investing in workforce learning and performance support.
Initially, participants documented their issues and obstacles to developing learning assets. They also identified areas of value that could be analyzed to calculate that value and the effectiveness of their investments.
According to the study, those areas of value were to: Increase efficiency for authors and administrators; reduce learning infrastructure and support spending; increase employee efficiency; and reduce time to employee proficiency.
Once learning leaders determine the ins and outs of their investments, they must determine the investments’ value, or their relevance and the impact. Relevance begins and ends with the owners of the information, expertise, initiatives or projects, and various lines of business.
To ensure the most effective use of training dollars, consider empowering these owners to enable the employees they manage or support so any effectiveness analysis is close to home.
A centralized learning team may be in support, but the actions and investments belong to the business or operations units.
In some businesses, learning is increasingly recognized as a revenue stream rather than an expense item only. Technology Services Industry Association (TSIA), an organization of companies that offer technology services to their markets, recognizes the necessity and value in providing educational services to ensure customer satisfaction and retention.
Further, constituents assess the effectiveness of training investments from various angles.
“People need to succeed with their learning objectives, but the real value is when they also succeed with their business objectives,” said Maria Manning-Chapman, senior research director for education services at TSIA.
“For the TSIA constituents, that means they have an educated customer base that is loyal, proficient and ultimately satisfied with their technology solutions. The evidence of success is the longevity of their customer relationships. The ROI calculation is based on the financial value of those relationships enabled by the learning strategy.”
When asking employees or business owners what they need to acquire knowledge or skills, replies often focus on classroom training. In this context, learning professionals’ skills and success frequently rely on their ability to ask the right questions, including: where the learners work, the devices available to them and the time allocated to learning.
“People in my organization always ask for instructor-led training,” McKesson’s Faerber said. “I fly trainers across the country, and of the 50 people who registered, seven show up. That is a bad training investment.”
She said she learned that when done well, e-learning can lead to satisfied, well-educated employees, and that training effectiveness is diminished when simply substituting a virtual classroom for a physical one. To satisfy the audience and optimize the training budget, leveraging assets, investments and technologies pays off.
Are Reuse and Recycling Effective?
Ecologically speaking, recycling is considered an effective investment in the future. When analyzing the expenses and efforts involved with recycling paper, plastic and glass, however, there is sometimes debate about the financial return.
However, it is difficult to argue with recycling’s ultimate value. Learning leaders can leverage or reuse existing content by:
• Republishing with the latest technologies and formats.
• Deploying using the latest methodologies and platforms.
• Accessing content using the latest devices and networks.
This reuse of training assets should be met with applause, especially from the chief financial officer. By demonstrating fiscal innovation, learning leaders can gain executives’ attention.
Discussions can then evolve beyond training to learning, knowledge management, collaboration and workforce performance, which relate directly to the effective use of training dollars.
“There is great value to the education organization extending its reach by becoming a curator of knowledge from other sources in the company — a use case from sales, a knowledge-based article from support, procedural information from publications, etc.,” said TSIA’s Chapman.
“Given that any training organization is looking to reduce costs, to me it only makes sense to leverage content from any and all resources and reuse it twice. Take content that already exists in the company (first use) and publish it out to multiple formats/modalities (second use) — talk about recycling.”
“Training can provide organizations a real return on their investment, or it can lead to excessive costs and inefficiencies,” said Pat Phelan, a research director at Gartner Inc.
Phelan published a report titled “Methods for Delivering ERP/Business Application Training” in September, which surmised three relevant points. One, training prevents costly mistakes.
With an integrated system, such as ERP, a small mistake in one place can become costly elsewhere. Two, undertrained workers are at least five times more expensive to support than trained workers. Three, training ensures that users take full advantage of the applications they use, which increases ROI.
She also found that training effectiveness dilutes over time. “Organizations must make a real commitment to training — not only during implementation, but in a support capacity post-implementation, or as part of a Six Sigma or process improvement program.”
Effectiveness is in the eye of the beholder. To ensure learning leaders can positively answer questions related to effectiveness of training dollars, there is no arguing with moving the needle in the business or operational dashboard.
The analysis starts with the performance objectives for learning and performance support investments. If they match business objectives, the analysis of effectiveness is relevant, concrete, demonstrable and positive.
Malcolm Poulin is director of product strategy for software company Ancile Solutions. He can be reached at editor@CLOmedia.com.