Learning and development professionals have always been under pressure to demonstrate the value of learning interventions. The hierarchical model first identified in Kirkpatrick’s 1975 study, is still widely used today to evaluate the effectiveness of training, although of late, the focus has shifted towards a stronger reliance on ROI measures. But, other models that don’t rely on ROI are emerging.
The idea is relatively simple, calculate the incremental value added by the intervention, and express this as a percentage of the investment. Now why would ROI not be a useful tool for measuring the value of learning? Surely, economic return on investment is the correct tool to measure value added? Well, yes and no. ROI is a great tool to measure the value created by investments in plant and machinery, and in other capital budgeting decisions, but it is a fairly blunt tool for measuring value created through intangibles such as human capital. Sure, there are methodologies for measuring intangible value, but in my experience, these methods place too much reliance on questionable and sometimes tenuous assumptions.
Even more importantly, ROI evaluation is a very poor tool for considering strategic choice. It is a relatively clear cut decision whether to rent or buy plant and machinery, or to provide a training course to meet a tactical training problem, but once the decision-making context moves beyond tactical into the strategic area, then ROI is simply the wrong tool for the job. In the same way that ROI is of little use in deciding whether to fundamentally change the way in which an organisation does business such as launching a controversial innovative new product, ROI is of little value in deciding how to plot an organisation’s future human capital strategy.
As a human performance improvement consultant with a professional finance background, I find it surprising that the learning and development profession places so much reliance on ROI, when there are alternative strategic evaluation models. Too often the tool of choice is ROI, which is not always appropriate when evaluating strategic value.
The CIPD (Chartered Institute of Personnel Development) has a similar view, and urges training professionals to move away from traditional evaluation methods such as ROI, towards measuring the value learning and development contributes to strategic business objectives. This is the central argument presented in ‘The Value of Learning: from Return on Investment to Return on Expectation’ (published on November 26, 2007) by the CIPD commissioned Valerie Anderson of the University of Portsmouth Business School, to examine ‘how organisations are currently measuring and reporting on the contribution of learning to strategic value’.
The research was conducted because: “The development of learning capabilities has become a key feature of people development strategies in many organisations. Executive decision-makers, are becoming aware that intellectual and knowledge assets form a large part of the intangible value of their organisation. To manage effectively their investment in human capital they require timely and relevant information to assess the extent to which investment in learning is contributing to organisational performance.”
In essence, learning and development is important, and it is important to measure its success.
Martyn Sloman, CIPD Learning, Training and Development advisor, said: “The development of a new approach to valuing learning is long overdue. For 30 years, we have regarded a hierarchical approach based on return on investment as the only way to approach the problem – it has become a holy grail for the profession. The world of learning has changed and new models are needed.”
The report acknowledges that although evaluation is a fundamental part of the work of learning and training professionals, it presents many challenges, some of which include:
• 80% of HRD professionals believe that training and development delivers more value to their organisation than they are able to demonstrate.
• Learning and training practitioners find ‘serious’ evaluation to be too time-consuming.
• Practitioners find that line managers rarely show interest in ‘traditional’ evaluation data.
• Only about one-third (36%) of UK organisations seek to capture the effect of learning on the ‘bottom line’.
Sloman continues, “Trying to measure learning by figures and financial results is a bit like driving with your eyes fixed on the rear view mirror. Return on investment can be a valuable measure in some circumstances but it is not the answer on its own."
Return on Expectations
So what kind of model does the report suggest? The report argues for a shift away from trainer-centred and return on investment models of evaluation, towards "return on expectation" models. It argues that effective value and evaluation processes require L&D professionals to develop and use measures that are relevant to organisational stakeholders, and the needs of the business. It concludes that measures of "return on expectation", rather than return on investment are more likely to meet these needs.
A careful reading of the report shows that the author is not simply suggesting that L&D give managers what they ask for – ‘training’ is good so long as the manager says it is good – but rather that there are particular types of measures that are valuable to stakeholders.
Learning interventions are particularly valued by key stakeholders when they can be shown to contribute to:
• The ‘strategic readiness’ of employees
• The delivery of performance improvement
• The delivery of cost-effective labour
• Career and talent-management
The true value of the findings of the report is that it forces L&D professionals to re-examine their approach towards demonstrating value from learning interventions, and to align their services closer to those of the business.