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How to measure the ROI of Learning and Development

1/5/2013
Keri Bennington & Tony Laffoley

This post is an executive summary of a white paper by Keri Bennington and Tony Laffoley from UNC Executive Development.

A recent report by the Chartered Institute of Personnel & Development found that evaluation of learning and development (L&D) programs was a top priority in organizations. Despite this finding, calculating return on investment (ROI) on L&D programs is seldom done, and too often, it rarely involves going beyond asking for feedback (e.g., “smiley sheets”) from participants immediately after the event.

Calculating the effectiveness of L&D programs can be a challenge, particularly when the programs involve the development of softer skills such as improved collaboration, decision making, innovativeness and the ability to think strategically—common learning objectives in many leadership development programs and a critical development area in many organizations. It can be difficult to assign a hard-dollar value to such skills, or to show a correlation between the learning initiative and acquisition of the targeted skills.

These challenges can be overcome, though, and the acquisition of skills—even soft skills—can be assessed. When developing a new L&D program or revamping an existing one, consider the following steps when determining how ROI will be measured.

  1. Agree as a team (senior leaders and HR staff) on what will constitute the desired return on investment. The conversation should identify ROI measures that are linked to strategic objectives, related to employee and organizational performance after the experience, and tied to a dollar figure when possible – for example, time saved or increased output as a result of improved performance.
  2. Go beyond “smiley sheets.” Smiley sheets can be biased due to the immediacy effect. To minimize this bias, re-assess participants 3-6 months after the program and combine the data with concrete examples from participants that outline how they applied what they learned.
  3. Add real business challenges to L&D programs. Leadership programs often focus on helping high-potential employees think and act more strategically. To measure such a program’s effectiveness, consider building actual strategic business challenges into program design so participants can apply what they are learning. For example, if a strategic challenge is global expansion, challenge individuals or teams to craft and present a market-entry plan to the executive team.
  4. Integrate learning programs into the performance management system and hold all stakeholders accountable. For example, at IBM Europe, a key aspect of a leadership development program for high-potential women is a robust mentorship program. To ensure the program is working as intended, the company expects participants to be promoted within a year of the start of the mentorship. Failure to obtain a promotion is seen as the sponsor’s failure, not the candidate’s.
  5. Assign actual projects for participants to complete after the learning experience. For example, if the goal of a leadership development experience is to improve project management skills, assign participants an actual project to manage after the program concludes and establish check-point measurements as the project progresses. Check-point measurements could include the participant’s ability to assemble a compelling strategy, the effectiveness of his or her communication skills, and the ability to acquire the necessary resources and meet budgets and timelines.
All business units today are expected to meet higher standards of accountability, and the L&D function is no exception. All L&D programs should be designed with rigorous evaluation in mind to demonstrate that they are positively contributing to an organization’s strategic priorities and organizational objectives.