Employee learning and development (L&D) programs are essential investments for organizations that aim for sustained growth and success. When effectively implemented, they offer significant return on investment (ROI)—an average of $4.53 for every dollar spent.
The question, however, is not whether to invest in L&D, but how to determine the right approach and maximize its impact. As such, measuring your programs’ ROI is critical to verifying their effectiveness. To give you a better understanding, we’ll explore these topics:
- The measurable benefits of employee L&D
- How you can gauge your programs’ ROI
- Strategies for precisely quantifying your returns
From there, you’ll be able to make informed training decisions and establish a culture of continuous learning for your workforce.
What is employee learning and development?
To start, employee L&D refers to the systematic efforts organizations undertake to enhance their personnel’s skills, knowledge, and competencies. It encompasses various initiatives such as:
- Training programs: These are geared towards building skills in specific areas, whether they be competencies or technical proficiencies.
- Workshops and seminars: These interactive sessions provide opportunities to share knowledge or collaborate with people from similar industries.
- On-the-Job training: This is a more practical approach, where an employee’s hands-on experiences allow them to acquire and apply new concepts as they carry out their roles.
- E-learning: This involves using online platforms that enable self-paced education, often supplemented with virtual coaching or mentoring.
As a whole, L&D is not just about individual growth. It aligns employee capabilities with your company’s goals, ensuring a cohesive and productive workforce that’s equipped to meet current and future challenges.
The ROI of conducting learning and development
The returns of employee L&D go beyond the financial aspects of your business. Using your initiatives to cultivate an environment that emphasizes constant individual and collective development can, in fact, yield multiple advantages.
Better employee engagement
7 out of 10 employees say learning improves their sense of connection to their organization, while 8 in 10 say it adds purpose to their work.
Seeing how impactful L&D can be for workers’ affinity to their roles and your company, we can confidently say that it’s extremely beneficial to their engagement.
Retain top talent
Employee engagement plays a key role in retention, but L&D can further bolster it. 94% of workers, in fact, say they would stay longer with a company that invests in their professional development, strongly indicating how it secures their loyalty.
With 90% of organizations being concerned about how they can compel people to stay, it’s no surprise that providing L&D opportunities is their number-one strategy.
It helps you secure younger talent as well, with Gen Z valuing learning for career progress more than previous generations.
Increased productivity
It’s not only jobs that evolve, but also the skills and tools necessary to properly carry them out. Employees equipped with updated capabilities and knowledge, meanwhile, can uphold their responsibilities and meet your expectations more efficiently and effectively.
So, by regularly upskilling your workforce to keep pace with change, you can address specific skill gaps and introduce new technologies that boost overall productivity.
Competitive advantage
Organizations with strong L&D programs are better positioned to adapt to market changes and technological advancements. By cultivating a workforce skilled in emerging trends, your company gains an edge that allows it to stay ahead of its competitors.
Fuels innovation
Employees encouraged to continuously learn and grow bring fresh perspectives and creative solutions. As such, having an engaged and well-trained workforce lets you cultivate a breeding ground for innovation.
Through L&D initiatives, you not only create opportunities to achieve breakthroughs in processes, products, and services, but also drive organizational success.
How to measure learning and development ROI
Measuring your L&D initiatives’ ROI is critical to justifying how much you invest in them, as well as aligning them with your organization’s goals. The process, however, involves evaluating tangible and intangible benefits through various models and metrics.
Overview of different ROI measurement models
To paint you a clearer picture, we’ll first tackle some approaches to assessing L&D ROI.
Kirkpatrick Model
The Kirkpatrick Model is a globally recognized framework for evaluating the effectiveness of training programs. It rates training based on four levels, helping your organization track outcomes ranging from initial feedback to measurable impact:
- Reaction: Do your employees find their training engaging and relevant?
- Learning: Did your learners acquire the targeted knowledge and skills?
- Behavior: Can your personnel apply what they learned in real-world scenarios?
- Results: Have favorable outcomes stemmed from your L&D initiatives?
This approach is proven to facilitate the design, implementation, and assessment of training programs that deliver bottom-line value. As such, the Kirkpatrick Model is excellent for in-person and online learning efforts.
Phillips ROI Methodology
The Phillips ROI Methodology is a widely utilized approach to measuring L&D effectiveness that can be replicated by organizations. It adds an extra level to the Kirkpatrick Model by comparing your total training costs to their business outcomes or impact.
This financial perspective, meanwhile, makes it easier to align learning programs with your company’s objectives. The Phillips ROI Model assesses L&D potency based on six criteria:
- Reaction
- Learning
- Behavior
- Results
- ROI
Note: The ROI % is calculated using this formula: (L&D program’s net benefits ÷ its total costs) x 100
Learning Transfer Evaluation Model (LTEM)
The Learning Transfer Evaluation Model (LTEM) measures how well your employees apply newly acquired skills in their roles, directly linking L&D outcomes to performance improvements. It hones in on eight levels or tiers, namely:
- Attendance/Completion
- Learner activity
- Learner perceptions
- Knowledge
- Decision-making
- Task performance
- Transfer to work performance
- Effects of transfer
They’re grouped into two major development stages as well, with the first 6 falling under “learning” and the last two belonging to “work”. Overall, LTEM helps with these key aspects:
- Recognizing gaps in your L&D evaluations
- Finding the right assessment methods for your organization
- Building better learning interventions
- Validating your programs’ results
Measuring training benefits
Now that you have an idea of what models can help gauge the value your L&D initiatives deliver, we’ll walk you through key metrics that can concretely convey their benefits.
Tangible metrics
These measure the more noticeable outcomes that stem from employee development:
- Productivity increases: An easy way to validate L&D effectiveness is to assess your employees’ output levels before and after the learning period. Doing so lets you pinpoint any gains.
- Reduced errors and defects: When evaluating technical or operational roles in particular, track changes in your workers’ error rates post-training.
- Sales revenue growth: To gauge the impact of programs for revenue-related roles, compare sales performance data before and after employee training.
- Cost savings: Upskilling can lead to improved workflows that reduce the time and labor you would spend on past redundancies. The positive impact L&D has on retention lets you avoid the added expenditures associated with recruitment as well.
Intangible metrics
On the other hand, these barometers aren’t immediately evident despite being strong contributors to organizational success:
- Improved engagement: Employee engagement indicates how invested employees are in their roles and organization. You can quantify this through surveys, interviews, etc.
- Enhanced job satisfaction: Pleased employees can stem from a myriad of factors, one of them being access to L&D opportunities. While retention rates are a strong indicator, feedback from your workforce helps as well.
- Increased innovation and creativity: Track new ideas or process improvements generated by trained employees. They serve as effective yardsticks.
- Stronger company culture: Certain assessment tools not only quantify skills, but also personalities and behaviors. Such instruments let you gauge how well your employees function in collaborative settings and align with organizational values.
Practical strategies for measuring ROI
At this point, you should have a grasp of how you can measure the ROI of your L&D initiatives. To ensure the success of your efforts, we’ll cover some helpful strategies you can employ.
Pre- and post-training assessments
An effective way of weighing the returns your L&D efforts yield involves evaluating your employees before and after learning. By doing so, you:
- Get a glimpse of your personnel’s baseline competencies
- Measure their acquired skills and knowledge
- Reveal the effectiveness of their training
People Dynamics Inc.’s (PDI) Holistic Training Programs provide such pre- and post-training assessments, as we aim to maximize their potency. This lets us go beyond traditional L&D and utilize a whole-person approach that nurtures technical proficiency, values, and behaviors.
Performance reviews
Performance reviews are also excellent tools for measuring the long-term impact of your employee learning initiatives. By incorporating training outcomes into your periodic evaluations, you easily get a glimpse of how L&D benefits individual, team, and organizational goals.
Surveys and feedback
One of the best ways to reveal your learning programs’ ROI is by gathering your employees’ first-hand insights. Since they undergo the training themselves, their feedback will help you understand their perceptions of training relevance, delivery, and application in the workplace.
Including questions about your L&D efforts in your employee engagement surveys, for example, can uncover how they affect workers’ level of investment in their roles and your organization.
Business impact analysis
Connecting training outcomes to your organization’s broader objectives lets you quantify ROI more comprehensively. For instance, post-learning, you can periodically compare your market share or customer satisfaction to how they were before training your employees.
Wrapping up—Measuring L&D ROI lets you maximize training impact
By investing in employee L&D, you fully buy into your organization’s future. The returns, whether they come in the form of increased productivity, retention, or innovation, far outweigh the costs when approached strategically.
By adopting reliable ROI measurement models and strategies, then aligning your training programs with organizational goals, you can easily validate the motivations behind your continued investment in workforce development.
If you want to learn more about how we can deliver impactful, holistic L&D programs that deliver measurable returns to your organization, simply reach out!
