How do you prove the ROI of workplace learning?

The glob­al work­place edu­ca­tion mar­ket may now be worth a vast $240 bil­lion, but find­ing effec­tive ways to mea­sure the return on invest­ment (ROI) of learn­ing and devel­op­ment (L&D) is not prov­ing easy for many organ­i­sa­tions.

The sec­tor grew by 7 per cent last year, accord­ing to indus­try ana­lyst Josh Bersin, with such out­lay equat­ing to about $1,200 per employ­ee a year.

Bud­gets are fair­ly even­ly split between nur­tur­ing soft, behav­iour­al skills, such as lead­er­ship, and tech­ni­cal exper­tise, such as dig­i­tal, says Octavius Black, co-founder and chief exec­u­tive of organ­i­sa­tion­al change con­sul­tan­cy Mind Gym, although atten­tion is start­ing to shift increas­ing­ly towards the for­mer.

L&D has huge poten­tial to real­ly make an impact on people’s per­for­mance, but in many instances, it will require new ways of think­ing

“It’s a large mar­ket grow­ing at a decent pace because employ­ers are now recog­nis­ing the val­ue of improv­ing the effec­tive­ness of their staff,” Mr Black explains. “Recruit­ment has a mixed track record suc­cess-wise and so organ­i­sa­tions are try­ing to make the most of what they have.”

But change is also start­ing to take place in how L&D is deliv­ered, among ear­ly adopters at least. While con­tent-dump­ing via class­room or online train­ing has until now been the most com­mon approach to learn­ing, the prob­lem is that unless infor­ma­tion is rein­forced, the Ebbing­haus for­get­ting curve – the decline of mem­o­ry reten­tion over time – indi­cates it is lost in a mat­ter of days.

Indeed, research by cog­ni­tive sci­en­tist Art Kohn found that humans for­get on aver­age 50 per cent of any new infor­ma­tion with­in an hour, ris­ing to 70 per cent with­in 24 hours and 90 per cent after a week.

ROI of learning and development

As for try­ing to eval­u­ate the effec­tive­ness of learn­ing, no mat­ter what its type, it seems there are chal­lenges there too. The Pro­fes­sion­al­is­ing L&D report by the Char­tered Insti­tute of Per­son­nel and Devel­op­ment and mar­ket researchers Towards Matu­ri­ty reveals that a mere 36 per cent of prac­ti­tion­ers are assess­ing spe­cif­ic met­rics.

More­over, while 96 per cent pro­fess a keen­ness for devel­op­ing a bet­ter under­stand­ing of the impact of their activ­i­ties, only 22 per cent are active­ly try­ing to improve the way they gath­er and analyse such data.

But Nick Shack­le­ton-Jones, direc­tor of learn­ing and per­for­mance inno­va­tion at man­age­ment con­sul­tan­cy PA Con­sult­ing, believes until the approach of L&D func­tions change, it will be unable to demon­strate an ROI because “there isn’t one”.

“The over­all pic­ture is that it’s cost­ing a lot of mon­ey to take peo­ple off the job, but it’s not hav­ing an impact. In oth­er words, you’re not going to get an ROI for L&D using exist­ing approach­es,” he says.

Instead what is required is a “shift in mind­set from struc­tur­al towards user-cen­tred design”, he argues.

“So the focus changes from ‘Have you learnt this infor­ma­tion and how do you rate it?’ to ‘What is your job and how will this help you per­form more effec­tive­ly?’” says Mr Shack­le­ton-Jones. “Tak­ing this tack helps to solve the ROI prob­lem because you’re solv­ing the busi­ness prob­lem.”

Pos­si­ble approach­es include mea­sur­ing an individual’s per­for­mance and the impact on it over time of a par­tic­u­lar inter­ven­tion, which includes run­ning pilot projects based on con­trol groups. Anoth­er option is to intro­duce project-based learn­ing ini­tia­tives based on spe­cif­ic busi­ness cas­es that are linked to cer­tain out­comes.

What­ev­er the method employed though, Chris Jones, chief exec­u­tive of voca­tion­al skills devel­op­ment organ­i­sa­tion City & Guilds Group, agrees that being able to mea­sure impact is becom­ing increas­ing­ly sig­nif­i­cant. In his view, this is actu­al­ly more impor­tant than cal­cu­lat­ing the ROI of learn­ing and devel­op­ment.

Measuring L&D’s impact

“ROI is dri­ven by finan­cial direc­tors ask­ing to see the bot­tom-line ben­e­fits for every pound spent, but it’s arguably just one lim­it­ed mea­sure,” he says. “Eval­u­at­ing the impact of invest­ing in peo­ple, how­ev­er, looks at how things have improved in terms of pro­fi­cien­cy lev­els or staff reten­tion, so it’s a more strate­gic set of ques­tions relat­ing to busi­ness per­for­mance.”

The start­ing point for L&D pro­fes­sion­als in this con­text is to eval­u­ate where the busi­ness is now, where it needs to be in the future and what prob­lems need to be solved to get there. Once desired out­comes have been estab­lished, the next step is to come up with appro­pri­ate mea­sures to under­stand whether the inter­ven­tion led to them being met or not.

But the effec­tive use of both human resources (HR) and oper­a­tional data can also play a use­ful role by enabling L&D pro­fes­sion­als to iden­ti­fy busi­ness prob­lems and link tan­gi­ble out­comes to expen­di­ture.

Pat Ash­worth, direc­tor of learn­ing solu­tions at HR con­sul­tan­cy Advis­er­Plus, says: “Infor­ma­tion on attri­tion, atten­dance and per­for­mance issues can all help to iden­ti­fy chal­lenges around line-man­age­ment activ­i­ties. Once you have this data, you can pin­point the areas of devel­op­ment need­ed to enhance man­agers’ skills.”

The effec­tive­ness of this devel­op­ment activ­i­ty can then be assessed using indi­ca­tors, such as employ­ee engage­ment or a reduc­tion in churn rates, to mea­sure suc­cess.

But such data is also usu­al­ly much more con­vinc­ing to senior exec­u­tives when try­ing to make a busi­ness case for invest­ment or artic­u­lat­ing the ben­e­fits of upskilling employ­ees than sim­ply pro­vid­ing them with anec­do­tal evi­dence.

As Mr Shack­le­ton-Jones con­cludes: “It’s about being able to show a clear pic­ture of what the future will look like, for exam­ple, by say­ing ‘This is cur­rent­ly Bob’s expe­ri­ence when he joins the organ­i­sa­tion, but in future, it will be that’. L&D has huge poten­tial to real­ly make an impact on people’s per­for­mance, but in many instances, it will require new ways of think­ing.”