By Patti P. Phillips, Ph.D. and Jack J. Phillips, Ph.D.
There are five reasons why you should consider measuring the impact and ROI of your programs. However, there are situations where maybe you shouldn’t measure the ROI—but we will come back to that. First, let’s review what is involved when measuring ROI.
Essentially, an ROI evaluation requires evaluating the success of a learning program on five levels of outcomes. The first level is the reaction to the program in terms of relevance, importance, and intent to use. The second level is learning the knowledge and skills required to make the program successful. The third level, application, is tracking how the content has been used and how much success participants have had with its use, along with any barriers and enablers.
The fourth level is impact—the connection of the program to key business measures. At this outcome level, steps must be taken to isolate the effects of the program on those measures and then convert the business measure to money and calculate the ROI. The fifth level, ROI, is the comparison of the monetary benefits of the program to the costs of the program.
Now that you know what’s involved in an ROI study, let’s discuss why you should measure the ROI of your programs:
- To make the programs better. This has always been our preferred reason for pursuing the impact and ROI analysis. In the past, most of our efforts have been aimed at evaluating level 1—(reaction) and level 2 (learning). However, executives who provide the support and funds would prefer to see the impact of the program. Of course, impact won’t develop unless there is application. The challenge is to improve level 3 and 4 (application and impact) results. An ROI evaluation will indicate if a program is successful or not. If it’s not, the evaluation will show what should be done to make the program better. If it is working, the analysis will give insight for how to make the program even more successful.
- To satisfy key stakeholders. Programs have many stakeholders, but no one is more important than those who sponsor, support, or provide the budget for programs. These individuals want to see the business connections. Even in governments or nonprofits, alignment to business measures is still something stakeholders want to see. Dozens of studies have shown this is needed, and it is not debatable. Just ask your top executives.
- To please your team. When we first used this methodology many years ago, we were involved in managing learning and development teams. We wanted to know that our work was connected to the business. There is a sense of satisfaction in knowing that you are making a difference and the difference is not just having people attend programs and provide good ratings. It is the realization that the participants are using what they have learned on the job and are having an impact in their work and in the organization. That’s a great feeling.
- To maintain or enhance your budget. This is the No. 1 reason we see ROI implemented now. Globally, economies are in a state of uncertainty. When that happens, organizations must be lean and agile to sustain what is next to come. To do so, budgets are trimmed—eliminating anything perceived as a cost or otherwise not absolutely necessary. Unfortunately, this almost always affects the L&D budget. One of the best ways to convince an executive that your program is not a cost (that should be cut), but rather an investment, is to determine the return on investment, using the same calculation that a chief financial officer would use.
- To change the perception of the L&D function. Sometimes learning and talent development programs are considered a “necessary evil” or compulsory. Many executives agree with this comment: “We know we have to fund training for compliance and to teach people how to do their jobs, but beyond that, we don’t like to provide courses unless there’s extra money.” This is not a positive statement. We have hundreds of studies that show that the highest ROIs come from soft skills programs, such as team building and leadership development, and it is now the time to invest heavily in these areas. But it’s difficult to invest more unless executives see the value. Having consistency within your L&D function routinely—showing the value and the connection to the business for major programs—is the best way to change the perception from a necessary process to a business driver. This will lead to more support, better partnerships, and yes, a seat at the table.
So there you have it, five reasons to measure ROI. But, as we stated in the beginning, maybe you shouldn’t measure your program. This process is not intended for every program. Only programs that are important to the organization, expensive, strategic, or those that attract the interest of top executives should be evaluated at this level.
Our benchmarking studies show that this should not be more than 5 to 10 percent of programs each year. Consider the advantages of and reasons to evaluate a program, and then decide—is it worth it? For more information, email Info@roiinstitute.net.