Return on investment (ROI) matters across the board – for finance and marketing teams, to human resources and more. However, unlike other areas of a business, there’s not a standardized industry framework for calculating the ROI for learning and development (L&D).
The result is that L&D leaders often struggle to quantify the benefits obtained from investing in their programs. Your organization may already have a performance tracking strategy in place for L&D, but is it one that will help you meet the demands of an ever-modernizing industry?
Let’s go over some possible answers to this question. We’ll do this by revealing how to overcome today’s challenges of measuring the impact of L&D initiatives, must-know metrics and tips for gaining C-level support for L&D programs that drive employee and company growth now and in the future.
Challenges of measuring ROI for learning and development
A persistent challenge of L&D ROI tracking is that many learning initiatives are viewed merely as employee benefits that check a box, rather than critical business strategies. When you employ programs without the right foundational work to track their progress, it’s challenging to tie these L&D activities back to real business outcomes.
Additionally, while organizations are beginning to leverage L&D for improved company performance, many of the traditional tactics employed are difficult to measure and provide underwhelming impact as a result.
For example, tuition assistance programs are notoriously challenging to track and rely on outdated technology that offers very little data or reporting insight into talent outcomes. Program administrators are rarely able to tell who is participating, what skills they are gaining, how those skills are applied and what impact this has on the bottom line.
From these challenges, there are two major requirements that come into focus
- A modern approach
There’s a clear need to design modern L&D initiatives that are strategic and ensure robust reporting capabilities and access to analytics.
- More clarity
It’s necessary to define ROI metrics that give real insight into the connection between employee learning and overall organizational performance.
Establishing the right L&D metrics to show ROI
When you begin to think about L&D as a business strategy, rather than a discrete employee benefit grouped with parental leave and health care, you’re better able to identify which metrics are the most important to track and report on.
A good place to start is by tracking individual L&D metrics that then feed into greater team objectives and company strategies.
Let’s review new ways to look at traditional metrics:
- Talent mobility
Talent mobility is the process of employees moving between roles, learning, improving and contributing to multiple aspects of your organization. Whether participating employees are taking on new positions and/or advancing within the company, mobility is typically a strong long-term indicator of how your L&D initiatives are performing.
Turnover refers to the loss of talent in the workforce over time. Look at turnover rates as well as the kinds of jobs and companies your employees may be leaving for. What reasons do employees provide for leaving the company? Did these employees participate in any L&D programs during their time at your company? Do these other companies offer stronger L&D initiatives?
- Employee productivity
Employee productivity is the amount of work an employee can do in a given amount of time. Strategic L&D will ideally align with your business goals to help your employees support the acceleration of your business. The rate and volume at which your employees are using their new skills and competencies will tell you whether your investment in L&D is paying off in a palpable way.
- Program engagement
This metric refers to the number of employees currently enrolled in an L&D program, as well as their level of progress. For a modern organization, this data should be readily available. Avoid data loss or reporting issues by making sure you’re looking for the latest technology available when selecting an employee education or learning solution.
- Employee feedback
Employee feedback entails the exchange of information related to performance, skills or other key aspects of work. This qualitative metric can give you critical insight into what aspects of your L&D initiatives are working or need improvement. And you don’t have to wait for an exit interview to ask for it. Work with your people managers to request frequent, candid employee feedback as part of regular check-ins.
A traditional metric you should consider retiring:
- Time to completion
While this is a straightforward way to evaluate L&D program progress, this metric doesn’t speak to the quality or effectiveness of the learning.
Additionally, employee development is most effective when it’s prioritized on a continuous basis — rather than a “one and done.” While it’s true that tracking the time spent on learning is important, it doesn’t paint a full picture when it comes to demonstrating ROI.
When reviewing these metrics, you can compare the results for employees who are enrolled in one (or multiple) L&D programs, versus those who are not taking advantage of them.
Getting buy-in for L&D from C-staff
To secure the resources it takes to create or maintain a robust L&D program, you have to have buy-in from leadership, including at the C-suite level. This means taking all of the metrics, data and reporting we’ve discussed and using it to tell a story that speaks directly to what executives care about the most – big picture business growth.
There are a few ways you can do this:
- Show how departmental performance was improved by team upskilling or reskilling initiatives.
- Demonstrate savings gained by promoting upskilled talent internally rather than sourcing external hires.
- Reverse-engineer business goals and show how they can be achieved through investment in employee education.
- Highlight the critical skills gap among your current workforce, the long-term cost to your business and the programs you have in place to address them.
- Showcase the increase in employee output and productivity that results from L&D program participation.
- Establish and quantify the connection between L&D and decreased employee turnover.
Above all, it’s important to set realistic timing expectations with your leadership team. Other business functions have more straightforward metrics, yet L&D is dealing directly with people, and their ability to learn and develop skills. This takes time.
No two employees start their learning journey in the same spot. Every employee has unique professional experiences and a varied educational background. Make it clear that L&D results can take months to come to fruition, and set short-term indicators you can report on in the interim.
The importance of L&D ROI metrics
Measuring and proving the ROI metrics for learning and development is a complex and multi-layered task. However, by taking a modern approach to learning and workforce education, you can gain a better understanding of how your programs are performing, and are enabled to build a strong business case for garnering crucial C-level support for investment in these programs.
Not all L&D programs have to be difficult to measure. Use this easy-to-follow ROI framework to learn how to measure the impact of a workforce education program.