ROI: Make training pay

Learning & development / 01 June 2010

Effective post evaluation is about much more than a simple happy sheet, it should be part of your DNA. Pepi Seppal investigates why measuring return on investment creates an ongoing dilemma for managers

Few companies know how effective their training initiatives are because only a minority measure the return on investment (ROI) of their learning and development (L&D) initiatives. And with training budgets under pressure, the importance of evaluating this return cannot be underestimated.

Latest research from CIPD’s 2010 Learning and Development survey found that 52% of organisations plan to reduce investment in training this year.

To add to HR managers’ woes, the training that is actually being provided has also come under fire with half of respondents to a Citrix GoToTraining survey stating that their training programmes featured irrelevant content, while 49% complained about the poor quality of trainers.

 

When learners receive line manager support, 94% goon to apply what they learnt, demonstrating a positive correlation between the transfer of learning to the workplace, line manager support and performance improvement

Kevin Lovell, learning strategy director, KnowledgePool

With training budgets of millions a year, it is critical to spend money effectively and ensure that what you are spending delivers results. The American Society for Training and Development estimates that only three per cent of global companies measure ROI in this area.

However, there are signs that British assessment levels are higher. The latest European figures from training firm Cegos claim that a quarter of companies in Europe measure ROI, with the UK leading the way as almost half of companies (47%) claim to assess the effectiveness of their training programmes. 

Experts in the field are not convinced. Hedda Bird, managing director of ROI Academy, says: “Statistics for the UK appear to be high because many HR professionals make the mistake of equating ‘happy sheets’ with ROI.” Most training programmes have some form of effectiveness measurement, even if it’s as simple as immediate feedback in the form of a ‘happy sheet’ or post event questionnaire completed by course participants.

“ROI requires more than just filling in happy sheets,” says Bird. “If you want to prove that an initiative has changed a participant’s ability to do their job, increased productivity or reduced costs, it requires more indepth analysis. And very few are actually doing that.”

In the public sector, there is growing interest in measuring effectiveness, says Ann Gammie, director of ER Consultants. “Public sector organisations tend to be more concerned about evaluation as they have to provide a business case for commissioning any learning and development, and then provide evidence that the programme is delivered against that business case.”

Increasingly, as budgets come under pressure and performance measures and outcomes become more important, particularly in the public sector, training effectiveness will gain momentum.

Dee Fitzgerald, director of training and development at business psychologists Xancam, agrees: “There’s increasing pressure on HR to justify training and development, and show a commercial return on spend, so clients are increasingly coming to us for support with their business case.”

Tools of the trade
But how do you measure return on investment? The standard ROI measuring tool tends to be the five levels of evaluation model first devised by Donald Kirkpatrick back in the 1960s.

The challenges of measuring ROI on the value of training revolve around these measures. Emma Jeffries, employment development director at data specialists Iron Mountain says: “Coming up with the right measures is difficult as some things are harder to measure than others. For example, soft skills such as leadership development are much harder to measure than sales training because the business links are not always obvious.”

There are also ingrained barriers to effective measurement. Fitzgerald says: “Training measures are still very much tied to HR and tend to look at the impact on retention, engagement and recruitment. However, to assess ROI these measures need to be linked to the bottom line and shareholder value. But for many in HR, it’s too hard to do because the links are more tenuous, and this is the reason why many seek external help.”

Not for the faint-hearted then. “Many HR professionals don’t measure the return on their training because it takes time and effort to do the groundwork, build the business case, find the right measures and link them to the business strategy, and analyse the results,” says Jeffries. “It’s not that it’s difficult, it’s just not as straightforward.”

But there are also financial concerns. Measuring ROI oftenrequires sophisticated analysis which can be expensive and time consuming, says Tom Redman, professor of human resource management at Durham Business School.

“Most companies simply don’t have the tools, skills or resources,” he says. “They intuitively know that investing in talent is good business practice and there’s plenty of well-established data which proves that training works. So HR shouldn’t get hooked on proving ROI.”

Management support
Instead, organisations should focus resources on ensuring that current training programmes are effective. And you don’t need statistics to prove whether an initiative is working or not; sometimes the answer is closer to home. The latest survey by training provider KnowledgePool found that a quarter of all training in the UK fails to yield significant performance improvement, mainly due to the lack of line management support.

This failure to translate learned skills into workplace productivity is a critical issue. “The hardest part of applying learning is the transition from ‘I know how to do it better’ to actually doing it,” says David Pardey, head of research and policy at the Institute of Leadership & Management.

“When an employee comes back from training, work has usually piled up, and everyone jumps on them to do x, y and z. They revert to their prior state, although they might have been ready to do things differently by applying the new learning. Instead, the line manager should take some time out with them and ask questions such as ‘What did you learn?’ and ‘How can I help you apply that learning?’”

In reality this doesn’t happen, says Pardey: “Firms spend several thousands of pounds on training, yet they don’t spend a few hundred more to ensure the training has been effective by investing in such workplace support.”

Kevin Lovell, learning strategy director at KnowledgePool, says: “When learners receive line manager support, 94% goon to apply what they learnt, demonstrating a positive correlation between the transfer of learning to the workplace, line manager support and performance improvement.”

Of course, workplace support requires skills, such as effective coaching and mentoring, which all line managers may not have. “So an investment there will also make sense,” says Pardey. “When management support is offered to individuals that want to put a change plan into practice after training, a clear financial ROI – equivalent to a saving of between £2,000 and £15,000 per project – has been demonstrated. So you’ll get much better access to ROI if line managers take responsibility for training and ensure that learning is applied.”

Robust evidence
Once you know training is being supported, you can concentrate on implementing a few robust measures to ensure a return. “Build the business case by demonstrating how your training is going to deliver the strategy,” says Mary-Louise Angoujard, managing director of communication specialists Rapporta.

“And get business directors and line managers involved. Getting the business to own the ROI initiative and enlisting senior executive sponsorship will make a huge difference. This can be as simple as a senior member sending an email about the importance of the programme.”

That’s why training initiatives in companies such as McDonalds tend to be successful. “The development of talent is an important investment in our business, which delivers significant returns both in the short term through the enhanced competence and confidence of our people, and in the longer term by ensuring that we earn and retain the commitment of these key individuals,” says David Fairhurst, HR director at McDonald’s UK.

“If an organisation is serious about these issues, it’s important for the executive team to be visibly engaged with the programme – making time to demonstrate why the business is choosing to invest in its people and offering support and encouragement from the highest level.”

The return on training at McDonald’s speaks for itself – not just in monetary terms, but in terms of awards such as winning the Best Place to Work in Hospitality award for the last three years. No wonder it continues to spend £30m on training each year.

Focusing on the front end of training will pay dividends later, adds Gammie. “Before you invest in any programme, agree observable outputs – what do you expect to see as a result of investment in individual/team behaviour, with the business and any external partners? If you specify upfront what you expect to see, evaluation becomes much easier because the right measures will already be in place.”

In short, if you create the business case for training by linking it with the company’s strategy, invest in the right form of focused training and ensure that the learning is being transferred with line management support, you’re more likely to see a good return without getting too bogged down in ROI calculations.