Designing Learning and Development for Return on Investment

Carrie Foster

• Publisher: Business Expert Press
• Year: 2017
• Print ISBN: 9781631577420
• eBook ISBN: 9781631576393
• Topic: Business
• Subtopic: Finance
• Index: Business

Learning practitioners have, for too long, been struggling to shift the perception of learning and development from a function that is a cost to the organization, to that of a function that is central to delivering value-added activities for the organization. The ability to deliver a return on investment is not about investing in good evaluation mechanisms, although this is important. It is imperative that the learning practitioner owns the numbers and works with financial metrics in order to bid for adequate resources and support the organization's strategic ambitions. This book offers a brief overview of both a theoretical and a practical framework. The theoretical underpinning provides an examination of how the theories and research about human and group dynamic processes and self-renewal can be utilized in intervention design. The emphasis is on the "self-renewal" ability of the individual and the facilitation of the movement of groups to improve the health and effectiveness of organizations in a sustainable way.

CHAPTER 1

Introduction

In Learning and Development circles return on investment (ROI) is something that is quite often discussed in whispers in corridors, wide eyed, and with increasing amounts of anxiety. ROI involves formulas and some kind of financial analysis, and results in the learning practitioner developing the look of the condemned as they try to prove that something as intangible as changes in behavior, skills development, or knowledge can be measured and plotted on a graph. Recent research found “that just 35 percent of organizations measure the business results of any learning programs, and only 15 percent measure return on investment.” (Ho, 2016)

The purpose of this book is to demystify the process of calculating ROI, explain how to use the formula, and enable learning practitioners to understand that it is possible to use existing mechanisms to deliver ROI analysis and develop a commercial mindset by designing learning and development for ROI.

Defining Evaluation

There is no single universally accepted definition of evaluation, and evaluation can mean many different things. Scriven (1991, 39) describes evaluation as “the process of determining the merit, worth or value of something or the product of that process.” Whereas Russ-Eft (2014, 550) defines evaluation as “the systematic and on going processes for gathering data about programmes, organizations, and whole societies to enhance knowledge and decision making.” Patton (2008, 38) explains that evaluation contributes to decision making as it allows those making decisions to make “judgments about the programme, improve or further develop programme effectiveness, inform decisions about future programming, and/or increase understanding.” The common themes within literature regarding evaluation include the following:

• An assessment methodology that is systematic
• A focus on something that has intrinsic or extrinsic value to the person or organization
• A judgment that is delivered to provide a valuation of outcomes or impact on something
• A feature which is useful or advantageous

Return on Investment as an Evaluation Method

One of the reasons that ROI can seem so daunting is that it is difficult to ascertain the direct and indirect benefits that a development intervention can deliver. The level of learning that an individual takes from a development intervention is considered to be immeasurable in terms of before and after. They might demonstrate the development of knowledge by regurgitating facts, but learning, at least effective learning, should have a whole person impact, which is more difficult to quantify. It is certainly impossible to measure, for example, the financial impact of someone who is thinking or behaving differently, especially if that change is subtle and only noticeable over a period of time, or in a particular situation.

In approaching the concept of ROI, it is important to remember the common themes of evaluation. By systematically approaching ROI calculations from the perspective of outcomes that are valued by the organization and which demonstrate the usefulness or advantage that has occurred as a result of learning or development, it is possible to remove the indefinable and indistinguishable from the evaluation process.

The Importance of Return on Investment

The Holy Grail of ROI has been expounded by human resource (HR) professional bodies and literature for some years now, but as with all best practices it is important to consider the reason why being able to understand and calculate ROI is so critical not just as a learning practitioner, but for anyone working in human resource management (HRM).

Put simply someone, somewhere has provided resources, whether in time, people, or money, including the learning practitioners salary or fee and that someone, whether an institution, organization, or individual, will want to know what those resources have been used for. More importantly, they will want to know whether, having invested the resource, it has been worthwhile or whether they could or should have used that resource better elsewhere. Learning practitioners need to understand that investors and business leaders “expect every business activity to provide a financial or non financial ‘return’ for the money allocated.” (Pangarkar and Kirkwood, 2013)

HR and learning and development have been considered a cost center in businesses for too long, and HR functions and leaders have been content with arguing their value based on non-financial returns such as employee performance improvements. In tough economic conditions or competitive markets, cost efficiency is a key lever of organizational performance, which is short hand for saying HR budgets will be cut and squeezed until there is nothing left. Cairns (2012) states that “business leaders will continue to challenge expenditures for training and development unless HR and learning practitioners can demonstrate the value in a way that goes beyond offering superficial metrics.” The ROI of development interventions must therefore be communicated in terms of outcomes that are valued by the organization, which are business metrics and financial measures.

Overcoming the Fear of Numbers

The reason why a sizable proportion of learning practitioners avoid ROI, or at least resist having to use financial metrics, is because they are unfamiliar with the commercial aspects of business or are uncomfortable with numbers. Sometimes, the impression is given by learning practitioners that numbers are scary and should be avoided unless it is counting the number of participants who are attending a workshop. The only way to overcome a fear of numbers is by getting to know them and understanding that they are a tool, which releases the learning and development agenda and development activities from being considered to be a nice to have within the organization. A learning practitioner’s best friend in the organization should be someone in the finance department, ideally a business analyst. Learning practitioners should schedule time to spend time with them, ask their advice, and learn from them. It will be the most important connection that can be made when trying to understand what outcomes are valued by the organization and how they are measured.

Summary

• There is no single universally accepted definition of evaluation.
• Systematically approach ROI calculations from the perspective of outcomes valued by the organization and demonstrate the usefulness of development interventions.
• Business leaders expect you to provide both financial and nonfinancial values added for resources invested.
• Communicate ROI in terms of business and financial outcomes that are valued by the organization.
• A key connection in the organization should be someone in the finance department, ideally a business analyst.

CHAPTER 2

The Growth of Strategic Learning and Development

The world is changing fast, and organizations are no longer content to allow functions to amble along without demonstrating that they are adding something to the strategic direction of the organization. The learning and development function must provide a strategic response to match the learning and development activities with the organizational environment. Taking into account the full scope of the function’s activities, the learning practitioner must ensure that the structure of the function, its practices, and procedures contribute to the achievement of the organization’s goals. Strategic management is a discipline, which focuses on the long-term continuity of the organization. This requires an assessment of how resources can be allocated to ensure that learning and development activities are used to take advantage of opportunities available to the organization and respond to issues or challenges that the organization faces.

The strategic management of the learning and development function is concerned with contributing to sustainable performance within the ­organization and setting strategies and plans based on the analysis of external and internal factors. There are a number of forces within the business environment, which are causing business leaders to turn their attention to the people resource:

• Key skills shortages
• Requirement for a more flexible and adaptable workforce
• Difficulty in aligning individual employees to organizational goals
• The cost of high levels of staff turnover
• Low productivity
• Health and safety issues, legal consequences, and risk of fines
• Speed of technology change
• Globalization
• Social changes and the evolving meaning of work

The strategic management of learning and development involves more than simply responding to the business strategy, but also involves shaping the evolving business strategy. This approach to learning and development deviates from the traditional focus on training administration and reactive delivery of instruction toward an entity, which is focused on developing a strong learning culture, adopts a strategic approach to learning and development, and focuses on organizational change and sustainable business performance.

The Importance of Learning and Development

It wouldn’t be possible to write a book about designing learning and development for return on investment if there wasn’t an underlying belief that learning and development can and does add value to the strategic goals of the organization. There is also another principle that must be considered, that is, that learning and development is a fundamental component to the achievement of strategic goals. This goes beyond learning and development being a nice to have, instead it is a belief, which advocates that the best learning and development functions are essential to the creation and achievement of the strategic goals of the organization.

If learning and development is to have a positive impact on organizational performance outcomes then the learning and development strategy must encompass short-term operational tactics, medium-term plans, and long-term strategic programs. This involves the learning practitioner developing an insight into the current organizational people resource requirements in regards to knowledge, skills, and abilities to build the organization’s capacity and achieve today’s goals as well as proactively developing the people resource capabilities requisite for the future people resource needs of the organization.

Therefore, the strategic management of learning and development goes beyond simply delivering skills development and instead advances and shapes the human resource to continuously adapt in response to the organizational environment. Key questions that the learning and development function must answer include the following:

• What is known about the environmental context of the organization and how does that impact the learning and development strategy?
• What role should learning and development play in shaping and achieving the strategic goals of the organization?
• How is alignment achieved between the learning and development strategy and the organizational strategic goals?
• What skills, knowledge, and abilities does the organization need now, and in the future?
• How is learning and development capability being developed to meet the needs within the organization?
• How will a pipeline of talent be successfully developed, grown, and nurtured within the organization?
• How will learning and development interventions continuously improve and be evaluated?

Who Should Organizations Invest In?

The budget allocated to learning and development is normally finite, and as such the usual approach to learning and development budgets is to make difficult decisions in regards to which sections of the employee population should be invested in. When the economic climate gets tough, the finance department proposes two areas for cost saving and reduction: the marketing budget and learning and development budget. Although organizational resources are limited, a strategic management approach to learning and development turns the budget question on its head. Instead of waiting for the business to throw coppers into the budget begging bowl, learning and development builds its strategy and explains, using a business case (see Chapter 6), what budget is required in order to support the organizational strategy as effectively as possible. This approach avoids the unsolvable dilemma often faced by learning and development as to whom the organization should invest in. Investment should be made into areas of the business that add value and helps achieve the organization’s strategic goals. Strategic management shifts the focus away from ...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Contents
• Acknowledgments
• List of Figures and Tables
• Chapter 1 Introduction
• Chapter 2 The Growth of Strategic Learning and Development
• Chapter 3 The Learning and Development Cycle
• Chapter 4 The Evaluation Phase
• Chapter 5 Development Needs Analysis
• Chapter 6 Delivering the Business Case for Learning and Development
• Chapter 7 Design Elements for Sustainable Organizational Effectiveness
• Chapter 8 Learning and Development Audit
• Chapter 9 Calculating Return on Investment
• Chapter 10 Challenging Attitudes to Learning and Development
• Conclusion
• References
• Index