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To the Editor: The article by Bill Parsons (Learning to Leap, PM April issue ) misses the point about what ROI on learning & development really means.
It is the one clear way that HR people can demonstrate they are making a real contribution to business performance. This can help them become a serious strategic partner rather than a mere service provider. If you really believe that L&D is an investment and not just a cost, you need to be able to measure it in the same way that you would measure any other financial investment. It is not about using the words, it is about actually doing it.This is borne out by our experience researching and creating a robust way that straight forwardly calculates the financial value added to an organisation – across the entire range of HR//L&D activities or for specific programmes.Our methodology does exactly what Bill Parsons claims that ROI does not do, namely it directly connects to an organisation’s business strategy and future success. Value is determined by the match with the strategy. If L&D is designed so that at the end of the process participants can add more value/ contribute more, then ROI is the contribution or added value post-learning (AV2) less added value pre-learning (AV1) divided by the cost:
(AV2 – AV1) COST
Contribution is the consequence or results of a person's on-job behaviour. Added value consists of a measure of a number of contribution factors, each weighted (by the senior executives) according to the imperatives of the organisation's strategy, a role value (the potential that the role - not the person - has to contribute) and the employment cost.
This approach has proved really helpful for some of our clients. One used the ROI data to justify a move to a larger training centre. Another was able to demonstrate that on a programme split between two providers, one produced an ROI of 10 times that of the other. This helped the decision making about future provision.
Others have used it to identify areas or departments in their organisation where support for L&D is less enthusiastic than others (different departments showing significantly different ROI calculations). For many it has helped demonstrate the mismatch between the contribution being made by staff before the L&D intervention and the contribution needed by their organisation in order to achieve its strategic and long-term goals.
The real problem is not as Bill Parsons claims, that we focus on the return on investment (ROI) for a specific tactical initiative, but rather that many HR professionals do not use effective and robust means of calculating the real ROI that is meaningful to their organisation.
Keith Bedingham, Director,
Verax International Ltd
Have your say... Biggest problem standing in the way of accurate ROI calculations is simply managers.<br/>Most managers still do not understand the link between strategic objectives and training / development initiatives. Most link at best to operational requirements and at worst to disconnected personal issues.<br/>Thinking in depth about how any development initiative will benefit all parties involved; clearly linking these benefits to and aligning them with strategic objectives; and finally, quantifying these benefits will enable, providing post intervention evaluation is carried out, an accurate calculation of ROI.
I agree with what you say, Keith, but I'm scratching my head as to why you feel your position is opposed to Bill Parsons'. You state "what Bill Parsons claims that ROI does not do (is) directly connect to an organisation’s business strategy and future success", but Bill didn't say that. He argued for using a broader range of metrics than just economic/financial, but that the latter should have primacy - which to me means measuring ROI!<br/><br/>In your conclusion, the problem you have opposed to one Bill raised is, I agree, a more significant issue, but that doesn't mean the problem Bill mentioned doesn't exist. HR/L&D professionals make many mistakes in evaluation, not least simply not doing it, and I think Bill's contribution to the debate helpfully highlights this.