How to measure the ROI of learning and development

Reading time: 10m

AuthorNatalie Ann HolborowDigital Content Specialist
Reading Time10 minutes

“Prove that your training has worked for our organisation.”

The C-suite inevitably will want to know the answer to this question.. But how exactly do you prove the return on investment from learning and development beyond just the bottom-line figures?

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What is the return on investment of learning and development?

Return on investment is essential to gain continued buy-in from executives. They need to see the measurable return on the financial investment they’ve made toward learning and training in your organisation. Without it, you’d be hard-pressed to justify your existence, the strategies you design, and the choices you make.

Like any other cost centre in the company, your L&D department must demonstrate that it delivers tangible benefits to the business. However, if you’re making decisions based on cost and learner feedback, you need to start looking at the processes you can put in place to include the measurement of effectiveness if you want to prove your worth successfully. A stack of positive learner ‘happy sheets’ is all well and good, but what difference has your learning and development strategy actually made to workplace performance?

A positive answer to this is your key to getting your hands on those bigger training budgets. However, it’s going to mean that you’ll have to start getting comfortable with data analysis.

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Why is proving the ROI of learning and training so tricky?

If data analysis is not one of your strengths in L&D, you’re not alone. A recent LPI survey revealed that over 90% of learning leaders find it challenging or even difficult to demonstrate ROI to the business.

What are the reasons we find ROI so challenging in L&D? Some common reasons include:

  • “There are too many external factors to be able to measure the effectiveness of training.”
  • “We just do things how we’ve always done them and it seems to work. Why complicate things?”
  • “We wouldn’t know what data to compare it to.”
  • “We’re only accounting for costs – we count it as a success if we stay within budget.”

For those who are applying metrics to their learning programmes, 89% collect course attendance and 74% measure course completion according to that same survey. Yet these metrics alone aren’t enough to evaluate performance improvement or demonstrate actual return on investment within the business.

It’s time to be brutally honest: you must start being accountable for ROI if you want your L&D department to succeed. Nobody else is going to take ownership of this important task in your organisation.

It’s L&D professionals like you who are responsible for measuring the ROI of learning and training. But how?

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3 steps to measure the ROI of L&D

Let’s take a look at five steps you can use to successfully prove the impact of your L&D programmes.

1. Identify your business challenges

Firstly, you need to isolate the key business issue or challenge. What issues are you trying to resolve with the learning programme or training intervention?

To initiate the programme and gain that critical support from the wider business, problems must exist that need fixing. Those that have a cost increase the likelihood of the business supporting a resolution and have the added benefit of being measurable. For example, could issues with quality control contribute to losses through returned items or lost custom? How great is the financial loss to the business and how much could be saved with a focused training and mentoring programme?

Creating a scientific measurement environment to demonstrate progress in terms of the reduction of financial loss will always be well received by business leaders.

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2. Set criterion for measurement

Once you’ve identified the key business challenges, you need to understand exactly what you are measuring. For example, this could be:

  • Cost
  • Revenue
  • Attainment

What do you class as a return? Remember, this is not always just about the money – you might want to think about other critical measures for success. For more ideas, take a look at our blog post, ‘How do you really measure learning transfer?’.

3. Baseline your data to measure the impact

Finally, to measure the impact of your learning programme or training intervention, you must baseline the data.

Identify your criteria for success and measure where the business is currently so you can compare results before and after the learning programme is rolled out. It helps if you can minimise the variables in the experiment so the results can be accurately attributed to your learning programme.

Use a/b testing to your advantage. This is where two control groups are measured, one with the learning programme and one without. What difference has your intervention made?

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What can be measured in terms of ROI?

There are several models of learning evaluation you can look at, the most popular of which we’ve summarised in our blog post ‘What learning evaluation model should I really be using?’. From good old Kirkpatrick to the more complex but highly effective Learning Transfer Evaluation Model by Will Thalheimer, think about what you’re trying to prove and which model will best help you do it.

In this example, we’ll use the Kirkpatrick-Phillips model. Kirkpatrick defined the level of satisfaction up to results, then Phillips added the ROI cherry on top, which is what we’re trying to prove.

Level 1: Satisfaction

This describes the learner’s immediate reaction to the learning programme. These are the questions you would usually find in your feedback ‘happy sheet’, such as:

  • Was the training useful?
  • Was it practical?
  • Was it relevant?
  • Would the learner recommend it?

The responses to these questions determine how well-received your learning programme was. Although we can’t solely rely on learner feedback forms to prove ROI, it’s important to get a positive response at this level to enable subsequent levels to occur.

Level 2: Learning

This is where we measure learning outcomes. This can be done through assessments, skills practices, performance demonstrations and simulations. This is typically measured before, during and after the learning activity to ensure the learning outcome has been retained and the learning has become embedded.

To measure learning outcomes, we need to define what those outcomes actually are. Ask yourself the question: “What do I want the learner to be able to do as a result of the learning?”

Learning outcomes need to be mapped to a recognised standard of consistency and clarity in both the learning design and measurement of outcome. This is where Bloom’s Taxonomy proves useful.

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Level 3: Impact

At this level, we want to measure the behaviour change of the learner so they can successfully apply what they’ve learned in the workplace. Measurement can be carried out through observation in the workplace using coaching, job shadowing, self-appraisals, 360 appraisals and/or mystery shopping (if relevant to your business).

Success at this level is dependent on several factors, such as:

  • Design of the learning around job requirements
  • Time elapsed between learning and application
  • Management support for the learner
  • The work environment.

    Level 4: Results

Here, we measure the impact of the individual’s behaviour on organisational performance. What measurable improvements to the business are taking place? This could include:

  • KPI figures
  • Turnover figures
  • Efficiency
  • Employee satisfaction scores
  • Customer satisfaction scores

Level 5: ROI

What are the benefits of the learning programme on a monetary level? Can we calculate that the learning programme has made more money for the organisation than what has been spent on it?

These are the figures you need to prove that all-important ROI and prove to the business that the learning programme has made a real difference.

In summary…

If you’re still relying solely on Level 1 of the Kirkpatrick-Phillips model, ‘Satisfaction’, we’re not going to tell you to stop what you’re doing. After all, learner feedback is still a critical factor to consider. However, it’s time to move beyond learner ‘happy sheets’ and start looking at the levels that will take you to that all-important ROI so you can prove the value of learning and development to the wider business with confidence.

If you’ve created a standout learning programme you’re sure will make a difference, that’s great.

Now it’s time to prove it and watch that L&D budget grow.

Want to know more? Get your hands on our free expert guide and start proving results with confidence.

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