| Training and development is a key priority for all | | | | HR professionals. |
| organisations and staff. However, how do you | | | | In a recent survey by consultancy, Lane 4, other |
| know whether you are getting true value from | | | | criteria for measuring return were considered to |
| your training budget? The positive impact of | | | | be more relevant than financial ROI measures. |
| people development through better | | | | Whether this is because these are easier to link |
| communication and more motivating leadership | | | | directly to training or whether, as HR |
| has been documented over the years. But what | | | | professionals, we are more comfortable talking |
| of the financial Return on Investment (ROI)? Few | | | | 'behaviours and people' rather than 'numbers and |
| know what it looks like or how to measure it. | | | | figures', is anyone's guess. |
| There are many benefits to measuring ROI: * To | | | | Certainly, there is a considerable volume of |
| uncover what works and what doesn't * To | | | | research linking different aspects of people |
| track the impact of people development on | | | | development to behaviour change and |
| desired goals * To justify the investment in | | | | performance. For example, the development of |
| people development | | | | transformational leadership is associated with a |
| Perhaps one of the most important reasons | | | | number of positive outcomes at both the |
| though, is to raise HR's profile and standing in the | | | | organisational and individual level, such as lower |
| business community as a function which is more | | | | levels of work stress, increased employee |
| than just an overhead cost but one that delivers | | | | motivation and customer satisfaction. The |
| real financial benefits to the business. | | | | development of improved communication skills has |
| How do you define it? | | | | been shown to result in greater team innovation. |
| ROI is the added value created from an | | | | The HR professional must take this one step |
| investment in terms of cost saving, cost | | | | further and link performance indicators to financial |
| avoidance or income generation created from an | | | | ROI - cost savings, cost avoidance and income |
| investment. Of course there are other benefits to | | | | generation. |
| training and development beyond these financial | | | | The best return on training and development |
| measures but when we talk about financial ROI | | | | occurs when performance indicators which are |
| we are really talking about the financial benefits | | | | linked to achieving an organisation's strategic |
| delivered to an organisation as a result of the | | | | objectives are used as part and parcel of the |
| training or development intervention. The ROI | | | | design criteria for a training course. For instance, if |
| percentage is obtained by calculating the benefits | | | | a company identifies that retaining customers |
| minus cost, divided by cost, multiplied by 100. | | | | delivers better profit (because it reduces the need |
| Kirkpatrick's Model (1959) highlights 4 levels of | | | | for direct selling and marketing) training and |
| 'payback' on development: Level 1 - Reaction - | | | | development interventions aimed at customer |
| participants' reactions to a development event | | | | handling skills and relationship management will |
| Level 2 - Learning - the degree to which learning | | | | deliver the greatest return on investment. |
| occurs as a result of the project Level 3 - | | | | In summary, if we want to be respected by our |
| Behavioural Change - the transfer of learning to | | | | colleagues for delivering a financial contribution, we |
| impact on job behaviour Level 4 - Organisational | | | | must start measuring and talking hard measures |
| Performance - the impact learning has on the | | | | and link each and every training intervention to a |
| organisation | | | | hard measure: cost saving, cost avoidance or |
| Whilst feedback on training and development is | | | | income generation. It's not easy and takes |
| often gathered at level 1 and sometimes even at | | | | practice but the simplest way is to design each |
| levels 2 and 3, financial ROI, which really impacts | | | | training intervention with a key performance |
| at level 4 - organisational performance - is rarely | | | | indicator in mind and link that performance |
| measured. The reason given is that it is just too | | | | indicator to a hard measure. |
| difficult to calculate 'true' financial ROI for many | | | | |