Caveo Learning

Corporate Strategy and Learning Center

Measuring Return on Investment for Training Initiatives

Posted by Caveo Learning on February 26, 2015

l-and-d-return-on-investment-600pxTraining and performance initiatives can provide significant benefits to an organization. However, recognizing the specific return on investment (ROI) and other organizational impacts of the training and showing this causality is another matter entirely.

Those of us in the learning & development field understand that showing clear metrics not only justifies the investment behind the learning programs, but also makes it easier to secure funding for future performance improvement initiatives. Further, helping executives understand the true impact training initiatives have on key business achievements helps to build leadership support for future projects.

But how do we clearly illustrate the effectiveness of a specific learning solution on the bottom line, and how can we use this information to adequately predict the strategies that will bring about future organizational changes?

Develop the measurement criteria during the planning phase.

The first step when undertaking any new training initiative is to fully understand the business rationale. This must include the specific and measurable goals the business is trying to achieve. If you can't pinpoint the knowledge or skill that is required or the behavior to be modified and what the result of those changes will be with respect to the ultimate objective, you should question whether training is really needed. Too many times we see training organizations involved in an initiative with no understanding of the true need.

With the overall business objective in mind, you can now identify the overall learning objectives for the training event and the key performance indicators (KPIs). The learning objectives and KPIs should be both very specific and very measurable. The more specific you can get in terms of measurable performances, the more accurate the return on investment measure of performance will be. A common mistake is implementing measurement strategies after the training is already in progress or, worse still, after much of the training has concluded. It is far better to consider the KPIs during the planning phase. Not only does this help to determine how to measure efficacy, this also helps justify the implementation of the training solution in the first place, making it more likely the organization will follow through and fully support the efforts.

Highlight the impact of training.

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Most training events occur in concert with other initiatives and functional areas, resulting in improved achievement of business objectives in various areas of the organization. Therefore, it is critical to partner with the other functional teams that will have a shared stake in the collective outcome. This means aligning on the intended outcome of the overall project and understanding which components of the ROI will rely on training, either directly or indirectly.

For example, suppose the organization is experiencing less-than-expected sales growth and determines that would-be customers do not understand the product benefits. Several initiatives are launched, including sales training, to fill knowledge and skills gaps within the sales team. Ninety days later, sales are up 15%. Who gets the credit? The sales organization, of course! The objective was increased sales and the sales organization owns this outcome. However, even though the sales organization owns the business case and the ROI, it could only have been achieved with the knowledge and skills gained through the training.

Too many training leaders are uncomfortable making the case for the impact their efforts had on ROI. Being unable to show causal impact, especially when the ROI is owned by another department and there might be many initiatives applied other than training, often hurts their cases for future programs or defending budgets.

It is important to remember that all areas of the organization face this challenge, not just training. For example, marketing often seeks to illustrate ROI on specific marketing campaigns or elements of those campaigns, which cannot always be isolated from consumer demand, product availability, salesforce effectiveness or other outside variables.

Recognizing success starts at the outset of the training initiative, not at the end.

Devoting the necessary time up front to identify KPIs and metrics for capturing progress provides a baseline against which future business results can be measured.

The objective is to identify and review all of the measurements the training solution might possibly impact, its effect on other areas and owners of other KPIs and ROI, and how specific performances will change in those areas.

By clearly defining impact and being able to show specific metrics to support the ROI behind the training, you will prove the learning organization’s role as a true business partner and a critical element of major initiatives. Also, you will be better able to predict future results—and better justify your organization’s investment in training and performance initiatives.

Measuring Training ROI: A Checklist

Here are four steps to ensure the impact of your training is effectively measured, and is fully appreciated by all the stakeholders:

  • Identify the training investment: What is the purpose? What are the business objectives the solution is intended to address? What are the key performance indicators (KPIs) that will show achievement of the intended objectives?
  • Isolate the role of the training solution: What will be the contribution of the training initiatives to overall business outcomes? What other initiatives may contribute to overall performance improvement?
  • Build a detailed and specific evaluation plan: How will you assess performance outcomes incrementally and what are the metrics and approach? How can you plan to flex learning and performance initiatives with changing business goals and objectives?
  • Define assumptions and barriers: What is the impact of other factors on potential ROI measurements? What challenges might materialize and how can you mitigate them?

Ultimately, building ROI metrics into the foundation of the training initiative and segregating training measurements and results from overall business outcomes will highlight the value of training initiatives.

Watch the On-Demand Webinar Designing an L&D Budget You Can Defend: Top-Down and Bottom-Up Budgeting

Topics: Training ROI, Business Alignment