What is the Return on Investment (ROI) from Executive Education?

“Technology can help us do something that’s very important in education, which is measure progress,” said Sheryl Sandberg in 2015. But is this applicable also to executive education?   

Certainly, intuition, experience, and myriad surveys show that developing talent is directly related to the investment companies make in training their managers and directors. Yet conclusively demonstrating that a specific investment in a training program has produced measurable results in terms of a company’s performance is another matter.[i]

A survey published by UNICON, the global consortium of executive education providers, over a significant number of companies showed that 88 percent of the human resources (HR) managers agreed that “HR professionals will have to get better at improving the worth of executive education in the future,” along the same lines as other departments have shown that other intangible resources can be measured in some way.[ii] The survey also showed that 43 percent of HR professionals think that in most cases it is not possible to objectively calculate the ROI of executive education initiatives, and concluded that finding a way to do so was akin to the search for the Holy Grail.

Chief Learning Officers (CLOs) have long sought for ways on how best to measure the impact of their companies’ investment in training and development programs for executives, and whether they increase profitability. Sadly, the results of their efforts have not always been entirely satisfactory. Perhaps there simply is no model as yet that establishes a cause and effect between better-trained executives and a bigger number on the bottom line.

It’s pretty much the same story with corporate social responsibility (CSR): are companies more profitable because they have invested in CSR, or do they invest in CSR because they are already more profitable than those that don’t? The fact that there is a relationship between one and another doesn’t mean that there is necessarily causality. It’s basically a chicken and egg situation.

I understand the pressure CLOs are under to justify the return on investment in training. As with any other aspect to do with assigning resources in companies, an economic explanation that goes beyond the qualitative arguments about education boosting talent. CLOs like to keep things simple and talk in the same language as CFOs.

Nevertheless, the search for the magic formula that connects investment in training with the bottom line continues without success. Until new methods are found that can establish that connection in the future, perhaps in tandem with analytical accounting that links the quantitative with the qualitative, the only hope for the moment is to try to connect an investment with the individual development of the executives involved, by measuring how education can bring about a transformation in terms of his or her knowledge or directorial skills.

In a series of posts here in LinkedIn Pulse, I will discuss assessing the impact of training on a business’ performance and value creation, both from the individual and corporate perspectives. As regards the individual, I will look at the most commonly used methods for measuring how successfully the objectives of training have been met. From the corporate point of view, I will examine the best-known systems used to accredit or validate in-company training, as well as the overall structure dedicated to developing talent in a business, as is the case with corporate universities. As said earlier, mine is essentially a qualitative analysis, although its impact on the company’s results is hard to question. 

Evaluating the impact of training can be done in two main ways. The first focuses on the improvement experienced by the individual or participant, measuring his or her progress in terms of knowledge acquisition or the development of new directorial or interpersonal skills. The second is based on evaluating the quality of the activities of the human resources department or the corporate university by carrying out an assessment as to whether they are aligned with the company’s strategy, its contribution to growth, and in general, to its dynamism as a corporate learning organization.

Notes

An expanded version off this article was previously published in Santiago Iniguez de Onzono: Cosmopolitan Managers: Executive Education That Works (London: Palgrave Macmillan, 2016), Chapter 5.

[i] See:

-M. Buckingham and A. Goodhall, “Reinventing Performance Management”, Harvard Business Review, April 2015.

-M. Eiter, J. Pulcrano, J. Stine and T. Wolf, “Same Solar Planet, Different Orbits: Opportunities and Challenges in Executive Education and Corporate University Partnerships, UNICO (Executive Education Consortium), 2014

-Bersin by Deloitte, Global Human Capital Trends 2014: Engaging the 21st Century Workforce, deloitte University Press, 2015.

[ii]K. Charlton, Executive Education: Evaluating the Return on Investment. Bringing the Client Voice Into the Debate, Ashridge Business School and Unicon, 2005