Is ROI a ‘Dead Metric’ for Learning & Development?
Who doesn't like good ROI numbers, and the numbers from this recently released research are enough to make any learning & development (L&D) leader salivate:
- Accenture: 353% return on its learning investment.
- Cigna: 129% ROI from its educational reimbursement program between 2012 and 2014.
- Discover: 114% ROI on its tuition reimbursement efforts.
- Advocate Health Care: Education assistance program helped the company achieve a 4.3% ROI ($1.3 million in net savings from lower talent management costs).
You’ll have what they’re having? We get it. But is the holy grail of ROI for L&D worth the efforts? And why are we even asking? Shouldn’t ROI be the goal for every workplace initiative?
Here’s the deal: ROI ranked last (24.2%) among answers when L&D leaders were asked in the recently released, Chief Learning Officer Magazine’s 2020 State of Learning report which metrics they use to determine the impact of leadership development programs. Employee engagement (48.8%) and retention/attrition of top performers (48.6%) took numbers 1 and 2, respectively.
And ROI was at the bottom of the answers when the same leaders were asked the metrics they report to company executives to demonstrate the impact of training programs on the broader enterprise. “General training output data” took number 1 there.
ROI: Not Very Useful for L&D
So is it time to abandon the ROI ship as a valuable metric in discussing the value of L&D programs in the workplace? We’re not quite suggesting that maneuver. However, it is worth exploring if that’s the metric basket in which your L&D eggs should reside. The big question for L&D professionals? Is concrete, specific ROI achievable round L&D?
No, says Dani Johnson, co-founder and principal analyst at RedThread Research. “And it’s not very useful either,” she added. “ROI has been gamed by L&D for years, but we find it is generally used by L&D functions to show their own value. We mostly consider ROI a dead metric, meaning it gives you a report card on something you have already done, rather than providing you information that helps you facilitate improvement in the future.”
Metrics Beyond ROI
When it comes to filling skills gaps and the effectiveness of L&D programs, ROI is difficult to measure with a tangible and direct outcome, according to Asfa Malik, VP of L&D, D&I and leadership development at professional staffing and recruitment firm Addison Group.
However, there are several metrics that can be reviewed and measured to gain an understanding of the impact and effectiveness of learning programs, Malik added. ROI of training is difficult to measure. But, by periodically examining multiple sources of quantitative and qualitative data, HR and L&D leaders can determine its success and areas for improvement.
“Examining retention, progression and turnover rates can lend insight into how effective your organization is at supporting the development of employees,” Malik said. “Beyond these sources, L&D leaders should work with business leaders to incorporate questions on skills and training into exit surveys, manager surveys, focus groups, post-training surveys and client surveys. These qualitative sources can help you identify how effective and engaging your L&D program is and whether employees are lacking expertise in certain areas and possible areas for improvement.”
Tangible vs. Intangible Benefits
Mapping ROI figures for L&D is easier seen short-term through tangible benefits, though intangible benefits often are the ones that drive long-term business success, according to Jack Altman, CEO and co-founder at Lattice, which offers a people management software platform.
"Benefits from L&D spend can be broken into two different buckets,” Altman said. “The tangible benefits resulting from increased productivity through additional skills and understanding often measured through revenue performance. L&D also drives intangible benefits like increased employee engagement and retention through a sense of commitment from their company in valuing their wellbeing and growth.”
Related Article: Is Your Organization Ready for the Hybrid Learning Challenge?
Determining Value from Multiple Factors
What are some common ways of demonstrating value from L&D? Respondents in the 2020 State of Learning Report said they demonstrate impact of training on their organizations through:
- General training output data
- Training output data aligned with corporate initiatives
- Learner satisfaction with training
- Employee satisfaction with training availability
- Employee engagement
- Business impact
- Employee performance data
- Planned to actual budget, expense, revenue data for training group
- Stakeholder satisfaction with training data
- ROI measures
- Net promoter score
- Employee satisfaction with company data
The biggest challenges L&D leaders will face is isolating the effect that training has versus other variables that may be affecting the outcome, according to Johnson. She cited the example of an organization that wants employees in a call center to push a certain offering. Correlating the number of those that took the training against the number of times the offering was pushed only gives half the picture, she said. Other things — such as incentives — would need to be considered to give a full picture.
“It gets even hairier,” Johnson said, “by trying to tie training or learning to actual financial outcomes. In that case, you’re not just trying to account for other things that could affect behavior of the person making the offering, but environmental and financial factors that could affect someone’s willingness to accept the offer.”
L&D leaders should begin by looking beyond ROI, Johnson said. Understand what types of outcomes they’re looking for and craft live metrics. These are metrics that “allow them to make changes to what they’re doing instead of simply looking for how they did.”