ROI: The Most Difficult Metric for Employers
Bob Mosher | Chief Learning Evangelist, Apply Synergies
Yes, we gather lots of data; course and classroom stats including percent completion, pass/fail rates, number of student days and smile sheets. But what we’re talking about is data that shows we’re making a real, measurable business impact to the bottom line.
The traditional definition of return on investment (ROI) is it’s a measure of financial benefit by subtracting the costs of a particular effort from the financial gain as a result of that effort. This traditional definition has proven to be an elusive target for traditional formal training organizations.
But organizations embracing true performance solutions can aggressively broaden this definition. ROI is a measure of the strategic and financial benefits learning and performance support efforts bring to an organization including reduced time to competency, increased productivity and key performance indicator (KPI) achievement (that inherently drives profitability.)
Many have explored ways of proving the value of their training efforts. No doubt, most have heard about the Kirkpatrick model. Kirkpatrick’s model measures four levels of the outcome of training: reaction, learning, behavior and results. Most are measuring levels one and two pretty well. The challenge is, you really can’t measure ROI until you can measure all four levels.
Because each level is dependent on the one below it, you can’t assess the level four “results” measure and get to a true ROI metric until you can measure behavior. When we talk about level three, the “behavior” level, we’re talking about the application of knowledge, skills and/or attitudes on the job as a result of training and performance support. Is the worker actually applying what he or she has learned?
In order to get to a true ROI, businesses want to measure closer to the point of impact. For example:
- Successful performance for business critical skills
- Reduced time to proficiency
- Completion of job-related tasks
- Reduced time away from job
- Reduced time to changed performance
- Lower support costs
- Increased user adoption
- Optimized business processes
- Customer/employee loyalty, morale and/or retention
- Usage of business-critical assets (policies, business rules)
- Shifting work to less-experienced employees
- Reduced implementation costs (for a system, product, new process, etc.)
- Reduced handoffs of work, calls and problems to others
- Narrowing the gap between less experienced and star performers
Speaking of bottom line, the final level of the Kirkpatrick model is the “results” level. The metrics are typically cost savings, such as costs associated with less re-work or less time spent searching. Now we’re talking money, and this is what will make your executives stand up and take notice.
So let’s think beyond training metrics that only prove the value of formal instruction and class time. Let’s think about the metrics that prove we’re making an impact to the organization and that matter most to the business — especially in terms of direct impact on KPIs.
Author Perspective: Business
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This is never more true than in a downturn. It’s really tough for me to go to my boss and go to bat for doing training programs through a particular school when I can’t show how valuable it is to the company.
We all know education is a conceptual good, but what about in practice? That’s where it gets tricky.
I think the first step is for employers to get better at tracking data — both qualitative and quantitative (e.g. feedback surveys, productivity measures pre- and post-training, etc.) It’s up to employers to then assess the collected data, measure it against pre-set benchmarks and use the results in long-term planning. The problem is that many employers don’t have the time or resources to do the above. Instead, they’re satisfied with superficial assessments of the results of training (e.g. survey results immediately after training, but no follow-up several months’ later), which to me is a waste of effort and money.
I agree that measuring ROI is difficult when it comes to employee training. One way some employers have sought to address this is by partnering more closely with institutions/partners in developing the training to ensure it specifically addresses the KPIs set out beforehand by the employer. It remains to be seen whether this strategy is working.