ROI.
Is there a more dreaded ratio in training and development?
ROI stands for return on investment, though notably it is also the french word for “king” which seems appropriate given the prominence this ratio has received in our industry.
Even though many learning leaders I’ve spoken to believe that this is a near impossible calculation, there is a underlying sense of guilt or anxiety that comes through…”but if we were good enough, we would be doing this.”
Dave Vance, in his wonderful book The Business of Learning, provides the most robust formula for calculating the return on learning that I have ever seen. Not surpisingly, for Dave is an economist as well as a learning leader, he is able to break down the component of both the costs and return in as close to an objetive formula as is possible.
I recommend reading about this as well as encouraging your teams to take basic finance courses if you truly believe, as I do, that “running training like a business” is the model for managing our departments. Even if your organization is not prepared to calculate return at this level, it will stretch and engage your thinking.
Objections Corner
Have you ever seen someone blanch at the idea of figuring out what value (in monetary terms) that learning provides? Or dismiss it outright? Or completely ignore it?
Philosphically, this makes no sense. A significant portion of the world economy is service-based and the basic tenet of any marketplace is that there is a price for all goods. That “price” is determined by value – the price you’re willing to pay is some amount less than (or at most, equal to) the benefit you believe you will receive. So what makes our services any different?
Well, for one, you may say – we work within a company and are thus a “support function”; ie non-revenue generating.
Setting aside my personal bias against the implicit notion that support functions are far less valuable sales functions, I understand this critique.
First of all, salespeople are on the front line and they bring in the dough.
Secondly, “support” functions cost money and do not directly bring in revenue.
But we all should agree that support functions play a role in supporting the financial health of the company, although the belief may range from “necessary evil” to “strategic enabler”.
As a learning leader, I know what side of the continuum I need to be on.
So, back to the question with the implied answer: what makes us any different?
Well, another issue is, how can we set financial targets and goals? What if we don’t achieve them?
My only response to that is “Welcome to the real world”. To go back to our sales friends, how does a salesperson know they are going to meet their targets? They don’t – but they do have a clear goal to work towards.
Finally, one might ask – so fine, we should do it. How do we do it in the absence of an internal marketplace, with business partners who think of us as support and the concern of our teams that they will be held to financial targets that are hard to measure.
Good question.
A simple framing of the issue suggests on one extreme that we don’t do anything at all and the other that we must become financial wizards.
Let me suggest a third path.
ROO – or return on objectives.
I would venture to say that for most organizations, trying to directly align T&D’s value to financial results (income, shareholder return etc) is futile. In fact, you may undermine your own credibility because of invisible resistance to the very concept (fair or not).
In this type of culture, logic and facts do not make your case.
Exceptions: Corporate cultures that are extremely data-driven and T&D organizations that are very financially savvy.
But for the rest of us, ROO allows us to address what many executives already believe: even if we can’t quantify the results cleanly, we believe that there is direct benefit to talent outcomes.
I believe out sales people will have stronger relationships with their clients if they have good client servicing skills. I believe we will have a more engaged workforce if our employees have easy access to quality development programs. I believe we can be a more productive workforce if we have strong managers who know how to motivate and delegate. Because I believe this, I believe your department adds value.
- At the beginning of an engagement, lay out the objectives of the training in terms of talent outcomes: engagement, capabilities and leadership.
- After agreement, align quantitative measurements to these (for example: one year after launching a mentoring program, we expect 20% of the workforce to be active participants, we expect to increase engagement scores by 3 points and satisfaction scores will be 80% or better).
– Maybe you won’t make these objectives, but you will have a clear goal and a unified platform from which you, your team and stakeholders can operate from. And of course, you may exceed these objectives and if so, great work!
– For the most part, these measures will come from surveys and assessments that are taken prior to start, during the run of the program and at the end, or if it is an ongoing initiative, on a regular basis.
Golden Rule: Never agree to take on an engagement without laying out the objectives and a measurement plan to assess return.
That’s easy to say but sometimes hard to do. But the more you get into the habit of doing this, the easier it will become until it is part of the culture’s DNA. You may find your own clients beginning to ask this proactively because it helps them frame the engagement with their own management.
What matters is the dialogue. One day, our technology, cultures and skills will evolve to the point when we can begin to tackle ROI. To get there, start with ROO.
With this established, you will be better positioned to tackle the final “R” which will be addressed in the next post.
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