Employee Learning and the Return on Investment (ROI) Scorecard

Knowledge is crucial to remain competitive in any industry. Learning and development (L&D) is an investment that can deliver many benefits, including a healthy ROI.

In the last quarter of 1986, I became one of 15,000 employees at Sundstrand Corporation, Sundstrand Aerospace to be specific. At that time, a new 150,000 sq. ft. Sundstrand facility was being built in a small Colorado community. Sundstrand’s Advanced Technology Group decided to bring the manufacturing of aluminum parts and components for advanced technology aerospace systems to Grand Junction, Colorado. At the time, it represented a huge boost to a community that in the previous four-year period lost almost 6,700 jobs – nearly 20% of its workforce due to a nationwide recession.

To quickly bring their new workforce up to speed, Sundstrand GJT invested in training programs and materials, a dedicated training room accessible around the clock, and brought in subject matter experts from Sundstrand Corporate. Advancing employee skills was crucial to building the kind of high-performance team that could reliably produce technically complex products to the highest quality standards demanded by the aerospace industry.

Our employee training was SMART – Specific, Measurable, Achievable, Relevant and Time-bound. It was documented, certified, celebrated and fun! In essence, we had the likes of our own Sundstrand GJT University.

I’ve worked with clients to develop learning and development programs, new curriculum, SOP’s and enhancements to a company university. This is my seven-step process: (1) Have a commitment and a plan, (2) Be clear in your goals, (3) Ensure alignment with company strategy and goals, (4) Distinguish your university “brand”, (5) Find the best communicators for trainers, (6) Identify other learning partners, (7) Local colleges and universities, technical and trade schools can be great resources.

Corporate Learning Word Salad

Hang with a group of corporate learning and development people and you are likely to hear these words bandied about: Training, Learning & Development (L&D), Training & Development (T&D), Learning Management System (LMS), Workforce Development (WFD), Corporate or Company University.

Let’s make it easy. Here’s a short glossary of the three most important concepts - in order of value to both a business as a whole and an individual employee.

Training is the process of teaching skills to new employees to equip them to perform the specific roles, functions, and duties they were hired for. It supports the basic “what to do” needs of an organization.

Learning is acquiring information, knowledge, and understanding. It answers, "the why” questions associated with trained skills “the what”. This advanced understanding enables employees to use informed judgement in performing the skills and “what is” of their responsibility. To learn how to drive one must know not only what the brake pedal does, but also how to recognize a stop sign, pedestrian or other vehicle, and judge how hard to press the brake pedal given the circumstance. Learning is required to enable the application of circumstantial judgement.

Development is an ongoing education roadmap that builds complex and deeper levels of understanding and often takes a narrow path: technical, managerial, financial, or leadership. Individualized development programs (career path) might include a coach or a mentor ?

Benefits of a Learning and Development (L&D) Program

L&D is often found on the top ten list of challenges for CEO’s. Building a culture of operational excellence, continuous learning, leadership development, and ensuring employees are engaged in L&D programs can be particularly demanding, particularly while the business and competitive landscapes are evolving at warp speed!

The owners and executives in charge of businesses of all sizes understand the critical need to provide training for employees. Even small businesses, which comprise 99.9% of all U.S. firms, recognize that training requires an investment of time, money and resources.

A 2023 Training Industry Report?by Training?magazine, showed overall, on average companies spent $954 per learner in 2023, compared with $1,207 per learner in 2022.

Services organizations spent the most per learner at ($1,172) followed by Nonprofits ($1,105), Small ($1,420) and Midsize ($751) companies spent more per learner than large corporations ($481).

Whether you call it L&D, training, workforce development (WFD) or a corporate or company university, in-house training efforts produce positive ROI results. Improved employee onboarding, employee retention, job performance, and communications skills can produce an immense impact on quality, customer satisfaction, brand reputation, a company’s ability to command price premiums, and the ability to attract and recruit the best employees.

?Having good processes and measurement disciplines in place is a good start. While L&D metrics, such as number of employees trained, total training hours per employee and courses completed are worthy of tracking, they don’t really reveal their impact on the bottom line.

Company executives must be aware of how their L&D initiatives directly reinforce company objectives and strategy. They want to understand how L&D directly impacts the culture of the organization and ultimately the bottom line. They are looking for results.

Connecting L&D to ROI

A basic rule of connection is… the right behaviors lead to the desired outcomes.

Like with other business investments, ROI in learning and development is?a calculation used to define the costs and benefits of an investment. The ROI of learning and development considers the cost of training, and the business outcomes produced by the program.

How might your company’s learning and development program impact your customers’ perception of your business? Helpful, knowledgeable, well-trained staff register positively with customers. Customers remember a good customer experience and your brand.

According to authors Buzzell and Gale, “The most important factor affecting a business unit’s profitability is the customer’s perception of the quality of the firm’s products compared to its competitors.” 1

Owners and executives in charge must invest in and measure the success of L&D programs that directly impact the customers’ perceptions of quality leadership.

One might simply ask the question: “How will this L&D program directly improve the customers’ perceptions of the quality of our product(s) compared to our competitors?”

Measuring the ROI of Learning and Development

The metrics you select should fit your organization and your culture. Consider using multiple sources for data:

·???????? Data Collection: Whether using a simple check sheet and tick marks or a sophisticated data collection program, collect data from training evaluations, short surveys, assessments, etc.

·???????? Metrics: Learning metrics should be your own and fit your organization and culture i.e. participant satisfaction, learning outcomes, performance improvement, quality of learning materials.

·???????? Outcomes-based Metrics: Include the impact on employee engagement, team effectiveness, individual performance, and business-process improvement.?

·???????? Capabilities: Measure how well the L&D function helps employees build & develop the skills they need.?

·???????? Data Analysis: Present results or data analysis with charts, graphs, visuals.

·???????? Strategic Alignment: Measure how effectively the learning strategy supports the organization's strategy, objectives, goals, and priorities.

·???????? Organizational Health: Many organizations measure organizational health – the degree to which learning strengthens or positively impacts the overall health of the organization.?

Final Word

The importance of L&D for organizations of any kind – from sports to Nonprofits to commercial enterprise – is difficult to argue against. The target for its purpose is Quality, as perceived by the organization’s most important constituency – its customers, clients and donors. The outcome, in all cases, is return on investment (ROI).

That ROI may be realized in reduced manufacturing costs, reduced employee turnover, increased market demand, increased selling prices, customer satisfaction or brand preference. And once a customer makes that connection to “quality perception”, the ROI impact becomes clear. It may not be immediate, but it is real and has been proven through much research.

The concept is simple…

L&D -> Improved Quality -> Improved ROI

1 ?Buzzell, R., & Gale, B., (1987) The PIMS (Profit Impact of Market Strategy) Principles, Linking Strategy to Performance.

Diane Gibson is President and Founder of DMG Consultancy, LLC, a firm she started in 2006. Diane’s consulting focus is helping manufacturing firms align leadership, strategy, learning and culture for greater effectiveness. She is a Regional Co-Director for Women in Manufacturing, Washington Chapter (Spokane). You can reach her at [email protected].