Learning and development professionals today are in a tight spot. C-suite leaders are funding learning functions differently than in past years, a shift you’ve likely noticed at your own organization. More and more executives are asking for proof of results before funding learning and development programs.
Unfortunately, many CHROs aren’t able to provide that proof, either because they don’t know how to, or because they don’t have the data to support a claim. One study conducted by the ROI Institute found that 74 percent of senior executives want to see ROI, yet only 4 percent actually see it up front. And 96 percent of Fortune 500 CEOs want to see the business connection, yet only 8 percent do.
To protect funding in the future, learning and talent development programs must directly connect to the business objectives of the companies they’re serving, and CHROs must learn how to show their value up front.
CHROs are expected to be value creators, not value capturers.
The learning and development focus has shifted from a focus on job training, scale (in terms of volume), and reporting on inputs to a new focus on talent development, speed, adaptability, and results. CHROs are now expected to be value creators, not value capturers. Learning is now considered an investment, which makes ROI measurements a necessity.
The key is to managing this change is to use design thinking—a concept popular in innovation—to create programs and reimagine the learning process. More specifically, L&D must design for success, which means including credible data connecting the learning directly to your business.
Participants engaging in learning programs will reach one of the following levels of outcome, based on 6 categories of data that follow a logical flow or chain of impact. They are:
- Level 0: Input
- Level 1: Participant reaction
- Level 2: Learning acquisition
- Level 3: Application of knowledge and skills
- Level 4: Impact on the organization
- Level 5: Economic contribution, or ROI
CHROs need Level 4 data, preferably Level 5, and these 8 steps can help you get there.
Step 1: Start with Why: Aligning Programs with the Business. Your end game shouldn’t be having great programs that participants see as valuable. Instead, the end is an important business measure for the organization—the “why” for the program. No matter what type of growth you’re trying to achieve, express it as a specific measure.
Step 2: Make It Feasible: Selecting the Right Solution. When you’ve clarified the business need, land on your solution to improve the business measure. In other words, what should employees do or stop doing that will appropriately influence the business measure?
Step 3: Expect Success: Designing for Results. Assessing your needs should define a clear set of objectives. Those objectives will define the success that’s required at each level. At the payoff level, the ROI objective is the minimum acceptable return on investment. At the business impact level, it’s the minimum amount of business improvement required to be successful. And so on. Specific objectives are important to the success of the program, and they define the expectations for everyone, from content designers and developers to facilitators, participants, and managers of the participants.
Step 4: Make It Matter: Designing for Input, Reaction, and Learning. You should develop a program with content that is relevant, meaningful, important to the individuals and the organization, action-oriented, and useful. This requires prospective participants to decide if this is the right program for them.
Step 5: Make it Stick: Designing for Application and Impact. The reality is that if a person doesn’t use what they’ve learned, then it has failed the organization. Sadly, research shows that much of what is learned in formal talent development programs is not used on the job. Yet, simple things can make an impact. Research shows that it takes only 30 to 60 seconds for a participant’s manager to make the transfer of learning, by having a brief discussion to set expectations with the participant prior to attending the program, and then another afterward to reinforce expectations.
Step 6: Make It Credible: Measuring Results and Calculating ROI. Simple techniques can help you sort out the effects of your learning program from other influences. Often you and others can clearly see the connection of the program to business measures. If evaluation is needed at the ROI level, the impact measures are converted to money, the costs are tabulated, and the ROI is calculated.
The traditional financial ROI is the comparison expressed as a percentage when the fractional values are multiplied by 100. In formula form, the ROI is:
ROI (%) =
Net Program Benefits
Net benefits are program benefits minus costs. This formula is essentially the same as the ROI for capital investments. For example, when a firm builds a new plant, the ROI is developed by dividing annual earnings by the investment. The annual earnings are comparable to net benefits (annual benefits minus the cost). The investment is comparable to fully loaded program costs, which represent the investment in the program.
Step 7: Tell the Story: Communicating Results to Key Stakeholders. There are many ways to communicate results to appropriate audiences, from detailed executive briefings to quick blog posts. The important point is to tell a story with results. The five levels of outcome data represent a compelling story with very credible, executive-friendly evidence and anecdotes.
Step 8: Optimize Results: Using Black Box Thinking to Increase Funding. Steps 4, 5, and 6 indicate your success or failure. And you can now correct disappointing results with black box thinking. In the airline industry, investigators analyze black boxes to indicate the cause of a crash, and prevent the accident from occurring again. Likewise, CHROs can evaluate your programs and use the data to improve them and enhance the ROI. This presents the best case for increasing funding.
In these ever-changing times, organizations need to invest more, not less, in learning. But you should stop asking for funding based on vague hopes and lofty promises, and start asking based on hard evidence that your programs work. If you can prove that the results will actually drive your business, funding is far more likely to happen, and you’ll create a better, richer, and more fulfilling work experience for the entire company.