Lane4 Research: Understanding the Return on Investment of People Development
This report presents the findings of a significant piece of customer research on return on investment (ROI) conducted by Lane4. Within the report, the implications for learning and development practitioners and business leaders are discussed.
Despite there being an expressed desire and need to evaluate ROI, our findings highlight several challenges that inhibit extensive and successful measurement. The report explores the way forward, including how HR can be better positioned within organisations so that ROI becomes an integral part of their remit. Specific measurement techniques and approaches to support this are discussed.
The research suggests that the greatest barrier to measuring ROI is that it is ‘too difficult to calculate ‘true’ financial ROI’. This is made even more difficult by inappropriate measures that do not link to business objectives and insufficient resources within L&D teams.
In the most extreme cases, HR teams can find themselves caught in a vicious circle where any attempt to demonstrate ROI is essentially an afterthought aimed at justifying L&D spend. This is further exacerbated where HR has a more transactional role in an organisation and is distant from the strategic business agenda.
This report presents the views of HR practitioners and business leaders on HR’s role in strategic initiatives, the factors we are and should be measuring in the future to assess value of people development initiatives and potential barriers to using ‘hard’ measures.
Sector and role differences are also discussed. The report explores the way forward, including how HR can be better positioned within organisations so that ROI becomes an integral part of their remit. Specific measurement techniques and approaches to support this are discussed.
In summary, our research concludes that:
- To fully understand the impact of people development, initiatives must be properly aligned with business strategy
- Financial ROI is not the only measure of value from people development initiatives
- Other measures include behavioural change and employee engagement
- Financial ROI can be calculated through the use of key performance indicators identified at the beginning of people development initiatives with relevant stakeholders
- Using a combination of outcome and process measures allows organisations to establish a chain of impact
- A variety of measurement techniques can be used including linkage analysis (e.g. structural equation modeling), longitudinal data collection (e.g. change scores from 360-degree feedback, post-programme ‘impact’ questionnaires), and qualitative methods such as focus groups and interviews
- Effective measurement of ROI focuses on understanding the impact of people development and adapting accordingly, rather than simply proving or disproving its worth
Kelly Walsh and Daisy Brooke | 2008-08-20
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