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ROI: The Most Difficult Metric!
February 5th, 2013
Do you know what the impact of your training efforts are on the organization? Are you measuring them? "Of course!" you say. "We have all kinds of data supporting what we do!" But, the real question is, can you truly make the connection between what you are providing to the business and how that has improved the bottom line?
Yes, you gather lots of data--course and classroom stats like percent completion, pass/fail rates, number of student days, and smile sheets. Nice stuff to know. But what we’re talking about is data that shows you're making a real, measurable business impact to the bottom line
Over the next month, we’re going to lead a discussion around the concept of "ROI" or return on investment. The traditional definition of ROI is it’s a measure of financial benefit by subtracting the costs of a particular effort from the financial gain as a result of that effort. This traditional definition has proven to be an elusive target for traditional Moments 1 and 2 formal training organizations.
But organizations embracing Performance Support can aggressively broaden this definition. In our view, ROI is a measure of the strategic and financial benefits our Learning and Performance Support efforts bring to an organization including reduced time to competency, increased productivity, and KPI achievement (that inherently drives profitability.)
We think these are the most important metrics you could ever prove.
We’re sure you have explored ways of proving the value of your training efforts. No doubt, you've heard about the Kirkpatrick model. Kirkpatrick's model measures four levels of the outcome of training: reaction, learning, behavior, and results. Our experience is that most of you are measuring levels one and two pretty well. The challenge is, you really can't measure ROI (with either definitions) until you can measure all four levels.
Because each level is dependent on the one below it, you really can't measure the level four "results" measure and get to a true ROI metric until you can measure behavior. When we talk about level three, the behavior level, we're talking about the application of knowledge, skills and/or attitudes on the job as a result of training and performance support. Is the worker able to actually apply what they've learned?
In order to get to a true ROI, we need to measure closer to the point of impact. For example, here are the types of things you might measure:
- Successful performance for business critical skills
- Reduced time to proficiency
- Completion of job-related tasks
- Reduced time away from job
- Reduced time to changed performance
- Increased user adoption
- Optimized business processes
- Customer/employee loyalty, morale, and/or retention
- Usage of business critical PS assets (policies, business rules)
- Work shift to less experienced employees or to customers
- Reduced implementation costs (for a system, product, new process, etc.)
- Reduced handoffs of work, calls, problems to others
- Decreasing the gap between less experienced and star performers
As we’ve said so many times before, this is the sweet spot for performance support--effective worker performance. This is where we, as learning professionals can really make a difference to the bottom line.
Speaking of bottom-line, the final level of the Kirkpatrick model is the results level. The metrics are typically cost-savings, such as costs associated with less re-work, less time spent searching. Now we're talking money and this is what will make your executives stand up and take notice.
So, in 2013, let's think bigger than just training metrics that only prove the value of Moments 1 and 2. Let's think about the metrics that prove we're making an impact to the organization--especially in terms of direct impact on Key Performance Indicators (KPIs). Stay with us as we explore ROI in more depth over the next couple blog posts. And, if you're not already, head to Miami March 6-8 for the Analytics Symposium where you'll learn lots more about measuring strategic programs for impact and value! We’d love to catch up with you there!
What do you think?? What does ROI mean to you? Do you feel you’re using Performance Support to achieve true ROI?