If learning is the answer, where is the ROI?

Companies spend two percent of budgets on learning. The Board seems to be asking, what and where is the return on investment?

“The answer, my friend, is blowin’ in the wind”, goes the lyrics of the epic Bob Dylan song. Let us muddy the waters further with this oft-recalled quote on advertising before we attempt clarity… “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”.

This is perhaps true of the gargantuan investments made in learning & development (L&D) too at a typical 2 percent of company budgets. The
market size of the global workplace training industry is estimated to reach approximately $ 381 billion in 2023. Total training expenditures in the United States reached over $100 billion in 2022 for the first time. IMARC Group expects the India soft skills market to reach $ 1,184.6 million by 2028, with a growth rate (CAGR) of 11.9 percent over 2023-2028.

ROI, Hunh!?

Learning is the answer, but “what is the ROI?” the Board seems to be asking. According to LinkedIn’s 2023 Workplace Learning Report, only 8 percent of CEOs saw the business impact of L&D programmes, and even fewer than 4 percent had a clear ROI.

An Accenture study shows that although most organisations assess the impact of their L&D initiatives in some way, evaluations are often limited to surveying participant satisfaction. Only 16 percent evaluate behavioural change by assessing impact on core results i.e. increased performance, and metrics such as enhanced organisational culture, collaboration and skills, again impacting KPIs (key performance indicators), including process flow, output and decision-making that impacts results.

Lips Don’t Lie

What do these numbers tell us?

First, that we are asking the wrong question. See Moneycontrol article:Learning is the answer. But what is the question?  In the absence of linkage to business results, the Board might be forgiven for thinking that precious time and resources have been wasted.

Next, measuring L&D effectiveness is a challenge. A lot of time, energy and cost is expended between designing and executing a learning journey, and all the other alignments needed: of platforms, people and processes. It therefore makes complete sense that under-fire L&D professionals will want the results of all their efforts to pay off in tangible impact.

In this context, Lepaya's Impact Labs* Report with insights from over 300 global L&D professionals revealed two common issues:

* There are many uncertainties about what business impact means within their organisations

* Challenges like lack of resources and poor stakeholder alignment hinder the progress of driving impactful learning

Redefine Impact: Moving Beyond ROI

The Impact Labs Report lays out a radical thought and the premise to redefine Impact: Amidst small budgets and constant challenges from senior stakeholders regarding the business value of their work, it’s tempting to put all focus on the one KPI that matters most to stakeholders - Return on Investment (ROI) – measured in terms of revenue.

But when it comes to filling skill gaps and the effectiveness of L&D programs, ROI is difficult to measure with a direct monetary outcome. Moreover, economic return does not provide the full picture when it comes to the impact of learning.

To ensure L&D can set up and drive impact KPIs that contribute to the successful development of the workforce and organisational success, there is a need to redefine the way the impact is perceived:

‘Impact is when learners apply new skills at work and when these applied skills contribute to business goals.’

For the collaborators, adopting this definition of learning impact marks a significant shift in approach. It involves understanding the key challenges business leaders face, identifying root causes, and addressing performance and behavioural gaps. This approach expands the scope of L&D and enhances its strategic value.

Shift To Business-Value

Laura Overton, the founder of Learning Changemakers, developed the L&D value spectrum, which highlights the difference between learning-value and business-value mindset. Learning-value highlighted four broad groupings including Activity, Efficiency, Engagement and Usefulness with metrics such as Attendance, Happy Sheets, Usage, Satisfaction, Ratings, NPS etc. Business-value covered Performance and Culture, which covered metrics such as Speed to Adoption, Business KPIs, Teams, Wider Organisational Value, Innovation, Agility, Talent, Leadership etc.

Overton highlights what those reporting business-value (called ‘high performing organisations’ in her studies) looked like:

- Uncovering business KPIs:85 percent discussed the business indicators that needed to shift up front with business leaders involved from the very start (vs. 25 percent on average)

- Understanding the complexity of the environmentthe problems were occurring in: 80 percent of L&D leaders spent time in operations (vs. 49 percent on average)

- Not just responding with content solutions:they were 3x as likely to leverage available support systems within the organisation as part of their recommendations

- Harnessing organisation wide support: learning initiatives, when used, were supported by steering groups of stakeholders (79 vs 35 percent)

Practical Impact Tool

Imperative as aligning Business-values is, the following Impact Framework (derived from research by Robert Brinkerhoff in his book -- Improving Performance Through Learning: A Practical Guide…) could help with dialogue amongst leaders and other relevant stakeholders.

1 We’re working towards [business goal]...

2 ...which concretely means [performance outcomes]...

3 ...being decided in [moments of truth]...

4 ...which means [target group] needs to [learning outcomes]

A well-known method for evaluating the impact/ effectiveness of learning is the Kirkpatrick model, which distinguishes between four evaluation levels: Reaction level, Learning level, Behaviour level and Result level. Engagement, apart from effectiveness, is a good gauge of what works and what doesn’t in learning programmes. Besides, a lack of opportunities for L&D is one of the most commonly cited reasons for employees leaving.

Strategic-Value Gives Me Wings

The Impact Labs insights continue with the submission that once L&D managers know the business goals they’re targeting, have understood their learner’s challenges, designed for learning transfer, and worked closely with the business stakeholders, it is time to set up a measurement plan. When it comes to measuring impact, L&D leaders should choose metrics at 3 levels of the learning programme:

* Operational metrics offer insights into how well the program ran and how the operational running of the program might be improved

* Learner goal metrics look at how learners are tackling their challenges and what they are doing differently after training

* Business metrics explore how the learning is helping the organisation and track improvement

The answer to the ROI question with a strategic roadmap could then well be the proverbial ‘Wind beneath my wings’ (recalling the popular song) for L&D leaders in taking back initiative – a ‘hero’ with tangible business outcomes to show.

Navin Tauro is a global leadership expert. Views are personal, and do not represent the stance of this publication.