Getting an ROI on Training

In 2013, global spending on L&D was about US$164.2 billion, with an average direct expenditure per employee of about US$1,195. (ATD Research, 2014)

What is the return on investment(ROI)on that expenditure? The answer, generally speaking, is that we don’t know, quantitatively. Studies have been done, but drawing conclusions from them is complicated; studies focus on different concepts or terminologies, and even the world ‘evaluation’ can be defined differently from one study to the next. And the evaluation itself is often simplistic, with fewer than 40% of evaluations reportedly using Kirkpatrick’s level four evaluation – impact on the business.

What evidence is there for an ROI on training?

One study seeking to define a framework by which the bottom-line contribution of organisational Human Capital Management (HCM) investments could be quantified (Bassi & McMurrer, 2007), used the following five key drivers:

1. Leadership practices.
2. Employee engagement.
3. Knowledge accessibility.
4. Workforce optimisation.
5. Organisational learning capacity.

The model seeks to uncover a means to tie specific HCM practices to improved organisational performance using a point scale of 1-5 to measure the maturity of 23 different HCM practices under those five key drivers. The study cited the following evidence that the authors’ model was sound.

At American Standard, a manufacturer of air-conditioning systems, bath and kitchen products, and vehicle control systems, Bassi and McMurrer measured the improvement in HCM maturity over a period of four years, using their model. They also measured the sales income in each office. Sales offices whose HCM maturity improvement measures were in the top 50% achieved sales income growth of between 60% and 130% more than those whose HCM maturity improvement measures were in the bottom 50% (see Figure 1 below).

Figure 1: Sales Growth at American Standard vs. HCM maturity measures (click for larger image).

Similarly, measuring HCM maturity rates and accident rates at American Standard showed that the mean accident rates for plants with high HCM maturity scores were between about 10% and 30% lower than the rates for plants with low scores.

In South Carolina’s Beaufort County School District, higher HCM scores correlated directly with growth in students’ achievement in mathematics.

In a review of six financial firms, those that scored below average on HCM maturity had significantly lower subsequent stock appreciation than the firms that measured above average on HCM maturity.

That’s about it for understanding the quantitative return on investment in the workplace, beyond survey-based reports about what managers believe the impact training has on the workplace, rather than what changes they have actually measured.

What people say, and where they spend their money

Last year, I was speaking to a Chief Executive Officer (CEO) in an aged care organisation who told me that “our CDC (Client Directed Care) training is going very well. Our only issue is that our staff still don’t follow our processes and procedures.” This kind of comment is not atypical.

The pathos of this statement for anyone involved in learning and development should be almost too much to bear. And if the pathos does not get you, maybe you see it as outrageous humour.

I also frequently hear “we don’t measure the effectiveness of our training,” including in a national bank with 60,000 employees. The likelihood that learning is effectively transferred to the workplace in an environment where the impact of millions of dollars of expenditure is not measured is quite low.

This was the same organisation that spent tens of millions of dollars on training facilities including a room with a stage and acting props and costumes, a room set up for a cosy fireside chat, a room where all the walls were whiteboards and rolls and rolls of brown paper also adorned the walls. In all, there were six different designs built to facilitate novel training design, except that training was never designed to use the facilities. No one really cared about creating design that facilitated learning. The money was totally wasted. Some rooms, notably the fireside chat room and the stage room, were hardly used as their design did not easily allow for stock standard designed training with desks set up in cabaret or U-shape style.

Here was waste of training dollars on a grand scale.

Unfortunately, it is my experience that the vast majority of organisations do not have a clear view of the ROI on training and most organisations, as in the case of my banking example, waste much of the resources they put into training.

That is not to say that I am advocating that training does not generate a return. I am asserting, however, that most organisations do not get the return on investment they should. I also assert as a corollary, that training, in my experience, is not valued highly enough in most organisations.

Getting design right

The lack of value placed on training starts, to my mind, in the design phase. Design tends to start with the learning outcomes being defined, whereas it should start with the strategy of the organisation. How can we know what learning outcomes we need without considering our strategy and the tasks at both the leadership and operational level that need to be completed to execute it? And the behaviours we need to see demonstrated?

Furthermore, we need to consider how the performance management and personal development system needs to interact with training to achieve our desired outcomes.

Even after we understand our strategy and how our performance management and personal development systems interacts with training, and we measure through a training needs analysis the gaps in our training, it is still not the time to be looking at learning outcomes.

Before working out the learning outcomes, we must consider the workplace environment. We must consider the motivators and blockers in place that affect the transfer of learning back to the workplace.

Motivators/enablers include but are not limited to:

• The presence of supervisors or others skilled in coaching the learning content in the workplace context.
• Colleagues and other workplace personnel encouraging the adoption of new behaviours or adoption of new skills and knowledge in the workplace.
• Capacity to undertake further training in the workplace, in terms of physical, skill, and time capacity.

Blockers include the absence of the above motivators and also:

• Cultural and language barriers.
• No opportunity to apply the learning in the workplace. If learners do not use it within six weeks they typically lose it.
• No measurement of workplace outcomes.
• Supervisors not being held responsible for learning outcomes being transferred to the workplace.
• Instructional designers not considering the workplace environment and day-to-day activities in the learning design.
• Instructional designers not measuring the impact of their design on learner’s knowledge and intention to transfer learning.

After we have considered all of these factors, we can consider the first building blocks of design, the modes of learning. Shall we use eLearning, face-to-face, self-paced learning, coaching, toolbox sessions, or communication boards? Or a combination of two or more? Or other modes not mentioned?

It is only then that we should consider the learning outcomes and the measures of success in transferring them to the workplace.

In thinking about training in this way (Fig 2), not only will we ensure that our training is likely to be effective, but also efficient. The more learning that we can design to happen in the workplace, the less reliance we need on clever design and facilitation of face-to-face training, the most expensive mode of training.

Figure 2: a framework for transferring learning to the workplace (click for larger image)

If you are at all interested in the transfer of learning back to the workplace, then please start with a comprehensive view of the end in mind.

Works Cited

ATD Research. (2014). State of the Industry. Retrieved January 4, 2015, from: https://www.td.org/Publications/Research-Reports/2014/2014-State-of-the-Industry?mktcops=c.learning-and-development~c.lt~c.sr-leader~c.learning-and-development

Bassi, L., & McMurrer, D. (2007, March). Maximizing Your Return on People. Retrieved January 4, 2015, from Harvard Business Review: https://hbr.org/2007/03/maximizing-your-return-on-people/ar/1