Features

Published August 2009

Measure Smart: Trade ROI for IOB

Timothy L. Hill

Tough times call for tough decisions. When it comes to slashing business expenses, CEOs are faced with the unenviable task of cutting programs that do not clearly improve the bottom line. And unfortunately, learning programs often are the first to go.

Just look at the statistics: Total corporate training spending fell 11 percent in 2008, due largely to the fact that the benefits of learning are one of the most unmeasurable areas of corporate spending, according to Bersin & Associates’ Corporate Learning Factbook 2009.

It is crucial for those in charge of learning and development to communicate the real worth of their corporate programs. But how exactly do they tie these programs to business metrics that matter: sales growth, lower costs, a boost in customer satisfaction or lower inventory levels?

The standard return on investment (ROI) model simply is not suited to measure the value of training and development programs in helping employees do their jobs better and improving business performance.

First Things First: Measuring What Matters
According to a recent study conducted by the ROI Institute (see Figure 1), nearly all CLOs measure their success by how many employees are trained. Three out of four CLOs measure the efficiency of training — how well it resonates with employees in terms of timing, content and other perceptive logistics. Half measure the reaction of the employees to the training. However, these elements are the ones that CLOs admit offer the least value in assessing the overall success of their programs.

Meanwhile, only 1 out of 10 CLOs measures the impact of training on the business — the metric that the overwhelming majority of survey respondents cited as the most important measurement to determine success of employee training programs.

These statistics lead us back to the basics: What is the purpose of learning in the first place? How do we know that employees are learning and retaining the skills and knowledge and applying it to their jobs? Where are the shortcomings that need to be addressed?

ROI vs. IOB
IOB — which stands for impact on business — directly aligns employee development to business goals.

With ROI, the company assesses the cost of the learning technology versus its direct monetary return. How many people were trained? How many courses were taught? Was there a reduction in travel costs?

ROI typically falls short when it comes to determining how engaged learners were, how much they retained or how job performance skyrocketed after learning. Further, the results of programs have to last long after the classroom or online program concludes. For instance, are employees using their new skills to improve customer service? Are sales on the upswing? Has customer repeat business improved? Have inventories declined? Are the improved results maintained for several quarters, or is it just an immediate spike?

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Prescription for Success

Timothy L. Hill

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