Measured Response

Despite fervent debate about whether companies should measure the ROI of their training-and-development programs, most proceed (or not) on gut instinct.

Missed Opportunity?

But there are vocal critics of such a mind-set. While most of Bassi’s research has focused on stock price rather than financial performance overall, she supports a scientific approach to finding good financial metrics for training. “It’s a learning officer’s professional obligation to optimize the resources devoted to the function,” she says. “There is no excuse for suboptimizing, which is almost certainly what you’ll be doing in the absence of measurement.”

And, indeed, there is a cottage industry devoted to helping companies identify the return on investment (ROI) for training. For example, Knowledge Advisors applies the “wisdom of crowds” to estimate the future impact of just-completed courses. If you ask a large-enough number of participants whether they’re going to be more productive after having received training, the results will be a good predictor of future performance, says Kent Barnett, the firm’s founder and CEO. But such measurements are rarely taken, and he believes that half of all training spending is wasted.

Bellevue University in Omaha’s Human Capital Lab helps organizations measure the impact of learning on salespeople and call-center staff. The approach is similar to drug trials: give a class to some people and not to others, then measure the difference in the groups’ subsequent performance.

IBM has taken a similar tack. It analyzed the performance of new salespeople who were given “robust training” compared with others who were not, and concluded that the ROI was 480%. “We’re very satisfied that there is a relationship between skill proficiency and performance variables that have economic impact,” says Michael Bazigos, strategy and change executive at IBM’s Center for Learning and Development.

But in most enterprises, “learning is the only operation that isn’t accountable for demonstrating the impact of the expenditure,” says Mike Echols, a former General Electric executive who runs the Bellevue lab. He points to accounting rules that keep human-capital “assets” off balance sheets as the root cause of that anomaly.

Another academic, John Boudreau, at the University of California’s Marshall School of Business, agrees that measurements like those done by Bellevue and IBM are valid. But he takes issue with Echols’s reasoning as to why companies don’t value finance-based training metrics, saying it mischaracterizes business leaders’ level of sophistication about training.

Most believe implicitly that training pays off, says Boudreau, and they would rather not spend capital on measuring the impact. “We certainly have no evidence that they would invest more in training if they knew the dollar value of it,” he says.

The rare CFO who is inclined to dabble in the ROI of learning investments generally looks only for directional data rather than precise calculations, says Ed Boswell, the former CEO of a training consultancy and now leader of the People and Change practice at PricewaterhouseCoopers. And while firms often resolve to test for ROI as they prepare to invest in training, most of the time they don’t follow through.

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