Measuring ROI in L&D: Key Challenges
Welcome to part two in our series for National Learning and Development Month in which we're talking about measuring the ROI of L&D.
As mentioned in the previous article, L&D is no longer just an ancillary function but a key to achieving business objectives. Organizations that prioritize strategically aligned employee development are better positioned to adapt to change, innovate, see greater efficiency and productivity gains, and maintain a competitive edge.
Of course, that value must be demonstrated in numerical terms. Calculating training ROI is critical for:
Despite these clear benefits, many L&D departments struggle to demonstrate their value in concrete financial terms – and in this article, we’ll explore why.
The Challenges of Calculating Training ROI
The key challenges of measuring training ROI include:
Misalignment with Executive Priorities
There’s so much talk of tracking engagement metrics – and while that’s important in its own right, these metrics alone are not of value to your CFO – not without showing their financial implications. Executives want to know about tangible financial results, such as:
These are the types of questions to answer and L&D’s measurement strategy must include metrics that illustrate these connections. For example, if a sales team undergoes training that improves their closing rates by 15%, this can be translated into increased sales figures.
Intangible benefits are of course important but it depends on the context and the specific priorities of the organization at a given point in time. For example, if an organization is facing leadership shortages, demonstrating how L&D contributes to building future leaders can capture executive attention. As such, programs aimed at developing high-potential employees should be highlighted for their long-term impact on organizational stability.
To sum up, the first challenge in proving ROI is actually aligning measurement with executive priorities. By mapping training initiatives directly to strategic goals (such as digital transformation or market expansion) L&D can demonstrate its relevance.
Complexity of Measurement
There are a diverse range of learning outcomes and associated metrics to track, and intangible benefits such as engagement need to be codified and quantified.
Cross-departmental collaboration is necessary when it comes to measuring tangible results such as efficiency gains. Let's consider an example from manufacturing – tracking defect levels, production speed, or resource utilization may illustrate the benefits of training on lean methodologies.
Isolating the Effects of Training
How can you determine the direct effects of training on the metrics you’re measuring? How can you know for sure that improved performance is the result of a specific training program as opposed to repeated practice of tasks and processes?
What if employees have improved due to assistance from other staff – or perhaps watching a few YouTube tutorials not provided by your company? And what about the variation of these effects among different employees?
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You can’t account for all of the extraneous variables which is why control groups are sometimes used. With a control group going through the training and the other group missing it out, you can get a more accurate picture of the effects of training on the KPIs you’re measuring. Trend analysis is another option i.e., tracking performance metrics over extended periods to identify changes coinciding with training initiatives.
Long-Term Impact
Monitoring long-term outcomes is valuable, yet complex. Leadership training, for example, encompasses a range of skills that are difficult to measure quantitatively and may take time for the individual to integrate.
Likewise, training for roles such as software development or quality assurance may take time to produce results. The impact might only be visible after several months or even years, making it challenging to attribute improvements directly to specific training initiatives.
To fully understand the enduring impact of training programs, organizations need a longitudinal perspective that extends beyond immediate results. This is essential for assessing how training contributes to competitive advantage over time and impacts the value of an organization’s intellectual capital.
Let’s consider the example of retention. If an organization was prioritizing employee retention to save costs, metrics to focus on may include:
Data Accessibility and Quality
Obtaining reliable data is a critical hurdle in ROI measurement. Many organizations struggle with decentralized or outdated systems for tracking training activities and outcomes, leading to incomplete or inconsistent data sets.
This lack of quality data can undermine the accuracy and validity of ROI calculations, making it difficult to derive meaningful insights from L&D investments.
To address this challenge:
Conclusion
Measuring training ROI is complex and multifaceted, extending far beyond engagement metrics. L&D strategy should be aligned with organizational objectives in the first place – and if it is, calculating ROI will be easier from the start. It will be easier to demonstrate the financial impact L&D is having.
However, there are still obstacles such as isolating the effects of training, gathering comprehensive and reliable data, quantifying intangible value, and measuring long-term impact.
Due to the complexity involved, there are frameworks for calculating ROI that help to provide a more scientific approach – and that’s what we’ll look at in the next article.
Kurricula provides e-learning services to corporate and commercial clients around the world, from Instructional Design to full training solutions. Reach out to us to learn more or visit our website here: