ROI analysis is the elephant in the room for many L&D leaders. We know it’s expected of us, but how do we really address it? It’s all in how we design our programs – if they’re designed to achieve a specific ROI number, impact measure or performance goal, we can easily answer the question.
First, let’s get on the same page with terminology. ROI stands for Return on Investment. Simply, ROI answers: Do the monetary benefits of the improvement in business impact measures outweigh the cost of the program? Or in laymen’s terms: does your program produce a measurable monetary effect upon a specific business metric that outweighs the costs of the program? ROE stands for Return on Equity – let’s not confuse the CFO with learning industry acronyms like Return on Expectations. That’s not the data he’s asking for.
Second, we must shift from an activity-based approach to learning design, to an outcomes-based approach. As learning leaders, we must understand the business reason for implementing a learning program. We must be able to state a measurable business reason for building a program.
|Outcomes-Based Impact Measures:|
Source: ROI Institute, Inc.
Third, not all programs require a ROI. Some business leaders will ask for ROI, but really only care to hear about the behavior change or impact resulting from the learning program. Ask for clarification on exactly what outcomes are desired, and then build your program with those end-goals in mind.
|Measurement Objective||Learning Metrics*|
|UTILIZATION: Did they take it?||Utilization, Completions|
|REACTION: Did they like it?||Satisfaction, Relevancy, Perceived importance, Return on Expectation|
|LEARNING: Did they learn something?||Understanding, Awareness, Knowledge, Skills, Readiness, Confidence|
|APPLICATION: Did they apply it?||Scrap learning, Return on Expectation, Application, Implementation, Use, Increase/Decrease in Activity|
|IMPACT: Did it improve the bottom line?||Absenteeism, productivity, quality, sales, time, turnover, efficiency, input/output, penalties/fines, cycle times, downtime, process time, waste, fraud, theft, market share, new accounts, grievances, engagement, churn rate, accidents, complaints, defects, rework|
|ROI: What’s the ROI?||Benefit-to-Cost Ratio: Benefits ÷ Costs
ROI: (Net Benefits ÷ Costs) x 100
*not an exhaustive list
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We’re pleased to bring you a short series by Kristin Thomas, Certified ROI Professional and Skillsoft Learning Consultant, covering the “why, what, where and how” of measuring learning. Today’s post, the second in the series, covers the “what,” defining learning metrics.
By Kristin Thomas, Certified ROI Professional and Skillsoft Learning Consultant