Everywhere you look, return on investment seems to pop up. Sometimes it’s a buzzword to reflect any type of value. At other times, it’s a calculation using standard financial principles. We are often asked if top executives really want to see ROI from learning — they do.
Technology experts tell us ROI is the holy grail to implement a new system, as tech suppliers have to demonstrate value with a forecasted ROI before purchase. In some cases, these suppliers are asked to guarantee ROI; otherwise, clients won’t pay.
In marketing, IBM’s annual survey of chief marketing officers indicated the No. 1 metric for 2015 is ROI, followed by brand awareness and customer satisfaction. This is the first time ROI has come out on top. Successful Meetingsmagazine indicated showing the ROI of a meeting or event is the No. 1 issue for meeting planners.
Closer to home, in a recent survey of leadership development directors, 88 percent indicated there is now an emphasis on return on investment. In that same survey, directors indicated that 11 percent of their leadership programs are evaluated at the ROI level. In the 2015 survey on measurement and metrics from Chief Learning Officer, chief learning officers were asked how they justify learning and development with the executives. Thirty-six percent said they use business impact and 22 percent used ROI.
Attempting to do the impossible, we conducted a CEO survey in 2010 for ASTD, now ATD, to obtain direct feedback from a number of CEOs in large organizations about the success of learning and development. Significant data from this particular group has been elusive. A total of 96 CEOs of Fortune500 companies responded to the Learning Investment Survey. Learning investments in their companies ranged from $10 million to $640 million, with an average of $138 million.
Regarding the rationale for setting investment levels, CEOs selected strategies from a list of possibilities. As expected, benchmarking was the highest rated at 39 percent. Only 18 percent invest in learning and development when they see some type of benefit for investing, essentially investing when there is a pay-off.
Next, we provided categories of results, mapped into the levels of evaluation, and asked CEOs three things:
- What metrics are being reported to you now?
- What should be reported that isn’t being reported now?
- How would rank these in terms of value to you?
The least valuable metric was reaction: 53 percent reported that they see this measure now but only 22 percent want it. The No. 1 most valuable metric was business impact; 96 percent of CEOs want to see this from learning and development, while only 8 percent see this now. The second most valuable metric was return on investment; 74 percent of CEOs want to see this from learning and development, while only 4 percent have it now. These are huge gaps.
We asked about learning and development scorecards, and discovered only 22 percent of the CEOs said they have one. This is surprising, given the time traditionally spent developing balanced scorecards in large organizations.
We also explored the extent of CEO involvement in learning and development. Most would argue that CEOs who take a more active role likely will expect more results. Given a list of possibilities, CEOs checked all roles that apply. The top role was “personally approves the learning and development budget with input from others,” indicated by 78 percent.
So, there is a definite emphasis on return on investment, and most top executives want to see the ROI for learning and development. Almost all CEOs surveyed would like to see the business connection to learning and development. Almost 1 in 5 CEOs sets the strategy for investment based on a measurement system that shows them the benefits of L&D. All of this is important because 78 percent of them approve the budget with input from others.
Maybe it’s time to consider return on investment. It’s best to be proactive and drive the discussion,instead of being asked to deliver it, and reactively assuming a defensive posture.Filed under: Leadership Development, Learning Delivery