The Discussion Continues on Impact and ROI

We continue October’s discussion this week on ROI (level 5) and impact (level 4). Some argued ROI was unnecessary, too confusing or just too complicated. I argued that it is a simple, straightforward calculation once you have isolated the impact of learning, which can always be done using the industry standard participant estimation methodology.

Here we will focus on why impact and ROI are so important. L&D exists for many reasons, but I suggest the most important reason is to help our organization accomplish its business goals, such as higher sales, increased productivity, reduced costs and greater customer or patient satisfaction. Of course, L&D is positioned to help achieve HR goals as well, such as higher employee engagement, which in turn will contribute indirectly to realizing all the business goals. Most L&D departments are also responsible for leadership development, which is sometimes itself a business goal.

These are all important high-level business or HR goals. Organizations invest considerable time and money in learning to achieve these goals, so it follows that CEOs would want to know what they are getting for their investment. What difference does learning make? Is it worth doing? Jack Phillips asked CEOs what they most wanted to see from L&D; more than 90 percent said impact, and more than 80 percent said ROI. Fewer than 10 percent were receiving any impact data at the time and only slightly more were getting any ROI information. The best practice here is to carefully align your learning to these goals, plan it in partnership with the goal owner, set targets for impact and ROI, then jointly manage the program to ensure the targets are achieved, including the level of application required to deliver the planned impact and ROI.

From both a planning and a follow-up point of view, some measure of isolated impact and ROI are the only ways to ensure learning (not L&D, but learning, which must be co-managed by the goal owner and L&D in partnership) delivered on its promise. The CEO, head of L&D, program manager and goal owner will want to know how much difference learning made and what opportunities can be identified for improvement or optimization. The upfront agreement on impact will drive a discussion on what is possible and what level of effort by all parties will be required. The upfront agreement on ROI is nothing other than the business case for the investment. Whether it is ROI or net benefits, all parties will want to be sure that benefits are expected to exceed the costs. If not, why would you proceed? Afterward, everyone will be interested in what impact and ROI were achieved. Actuals will never exactly match plan, and that is OK, but hopefully they will be close to the plan. If not, there is a learning opportunity since the plan or execution of the plan was off.

So, impact and ROI are important for high-level goals. How about lower-level goals and day-to-day business needs? Here, the answer depends. Most organizations have limited resources, so those resources should be focused first on the most important organizational goals. Plus, lower level goals may not have easily identifiable outcomes and thus it becomes harder to identify impact. Some learning, such as compliance training, onboarding and basic skills training is simply essential and there is no need for a business case or ROI. For this essential learning, the goal should be to conduct it as effectively and efficiently as possible. So, employ levels 1 through 3 to measure effectiveness and focus on minimizing the time and cost to be efficient.

In conclusion, impact and ROI are important for learning professionals, organizational goals owners and senior leaders such as the CEO. These measures are important up front to help plan the level of effort required and to reach agreement with the goal owner on roles and responsibilities. The higher the desired impact and ROI, the greater the effort must be. Once the planning is completed and the program is underway, the targets for impact and ROI can be compared to year-to-date results to determine if midcourse corrections are necessary. In other words, this is not a set it and forget it exercise. Programs must be managed monthly to achieve the planned impact and ROI. Last, at the end of the program, once the impact and ROI have been estimated, there will be an opportunity to learn from any variances to plan and improve.