ROI

an electronic newsletter from Stratevative Learning International AB

Vol. 2, Issue 3, March 2003

ROI

www.stratevative.com

Measuring value and return on investment for training and e-learning has always been important, but now organizations want to be assured that the training they're spending money on actually works. Return on Investment (ROI) has never been more vital than it is in today's economy.

In most departments within a corporation, determining a return on a given investment is a straightforward accounting exercise that produces factual and typically uncontested result. But when it comes to soft-skills training, (I would like to start calling it s-learning), computing ROI suddenly becomes a complicated procedure requiring thoughtful chin-stroking, serious seminar time, and earnest input from consultants and vendors. We can measure loads of data about sales; productivity; waste reduction; technical skills; turnover; cost savings; etc. However, for softer skills, such as leadership; attitude; communication skills; coaching; etc., organizations are befuddled by what metrics to measure by. Furthermore, turning data about s-learning into qualified information is not a simple calculation if you are using a standard monies spent:monies saved ratio.

Why is that?

There are reasons aplenty. Among them are that the acquisition of s-learning designs, programs, courses, consultants, or methods produces an array of hard and soft cost-savings that often factor into the equation. But not always, every situation is slightly different.

The problem is that companies and organizations may not be looking at the right metrics in soft skills areas, because...

	ROI is a traditional financial measure based on only one kind of currency...money...rather than on the currency of environment, atmosphere, spirit, culture, attitude, value of organization to employees, etc.
	ROI is a backward-looking metric that yields little or no insights into how to improve results in the future.
	In education organizations, ROI has been used primarily for self-justification rather than for continuous improvement.

How many companies do you know calculate training under "investment" rather than "cost" in their financial reports?

7 Tips - What To Do When Asked for s-Learning ROI

Be very specific about the competencies to be measured, and the behaviors or tasks that support those competencies. And, of course, do this first, before you design ANY training. Once you get the hang of how to write measurable soft-skills competencies, behaviors, and tasks, even for traditionally non-tangible things like "attitude," you can show "before and after" results. For more insight about this, please send a request.

Get good at talking about using a different currency. Companies are not only successful because of their financial bottom line, but also because of their reputation as employers, the way they treat their employees, the work environment, the attitude in the atmosphere, the creativity and innovativeness, and the opportunities provided.

Ask "why?" What is the need for the information? Is it to justify training or measure improvement? If the answer is truly to identify the success of the skill training as directly related to cost savings or profit increase (a hidden way to justify that the training should continue or not), suggest an alternate form of currency for measurement, related to job performance, such as:

Conduct review processes with the bosses, peers, and direct reports (360-degree) of the person who received training specifically tied to the competencies that were trained or are being trained.

Ask behaviorally-based questions, tied to the competencies, that make a clear differentiation between "before" and "after" training.

Identify business-related results such as: increased communication between management and employees, higher job satisfaction, better productivity, lower turnover, more innovative contributions, etc.

Never take on an ROI project "after the fact" when no up front work has been done. Like any measurement, you must have control of the data from the beginning to know what, who, how, why you are measuring.

Ensure that you have the stakeholders on board from the beginning. Training professionals don't own the business problem or the data for measurement so they must partner with the business unit (or position level) and key stakeholders to understand the unit's business (or position level) needs, as well as the objectives that business unit (or position level) is being directed to deliver that year.

Start the process by delivering an ROE (return-on-expectations) survey. It should be highly visible and pave the way for future sponsorship and participation in real ROI projects.

Keep it simple. Don't overcomplicate things with ROI that yield too much data and little information. With the invention of spreadsheets, computers, and calculators we can slice numbers every which way we want to. This often leads to a standoff of opinions about what all the data represents, instead of what the information means.

This is also an excellent time and opportunity to start discussions about identifying forward-looking metrics that yield many insights into how to improve results in the future rather than improving results from the past.

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