Why Should You Measure the ROI of Your Program?

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There are five reasons why you should consider measuring the impact and ROI of your programs. However, there are situations where maybe you shouldn’t measure the ROI, but we will come back to that. First, let’s review what is involved when calculating ROI.

Essentially, an ROI evaluation requires evaluating the success of a learning program on five levels of outcomes. The first level is the reaction to the program in terms of relevance, importance, and intent to use. The second level is learning the knowledge and skills required to make the program successful. The third level, application, is tracking how the content has been used and how much success participants have had with its use, along with any barriers and enablers. The fourth level is impact – the connection of the program to key business measures. At this outcome level, steps must be taken to isolate the effects of the program on those measures and then convert the business measure to money and calculate the ROI. The fifth level, ROI, is the comparison of the monetary benefits of the program to the costs of the program.

Now that you know what’s involved in an ROI study, let’s discuss why you should be calculating the ROI of your programs.

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Why You Should Measure ROI

  1. To make the programs better. This has always been our preferred reason for pursuing the impact and ROI analysis. In the past, most of our efforts have been aimed at evaluating level 1 (reaction) and level 2 (learning). However, executives who provide the support and funds would prefer to see the impact of the program. Of course, impact won’t develop unless there is application. The challenge is to improve level 3 (application) and level 4 (impact) results. Calculating the ROI will indicate if a program is successful or not. If it’s not, the evaluation will show what should be done to make the program better. If it is working, the analysis will give insight for how to make the program even more successful.
  2. To satisfy key stakeholders. Programs have many stakeholders, but no one is more important than those who sponsor, support, or provide the budget for programs. These individuals want to see the business connections. Even in governments or nonprofits, alignment to business measures is still something stakeholders want to see. Dozens of studies have shown this is needed, and it is not debatable. Just ask your top executives.
  3. To please your team. When we first used this methodology many years ago, we were involved in managing learning and development teams. We wanted to know that our work was connected to the business. There is a sense of satisfaction in knowing that you are making a difference and the difference is not just having people attend programs and provide good ratings. It is the realization that the participants are using what they have learned on the job and are having an impact in their work and in the organization. That’s a great feeling.
  4. To maintain or enhance your budget. This is the number one reason we see ROI implemented now. Globally, economies are in a state of uncertainty. When that happens, organizations must be lean and agile to sustain what is next to come. To do so, budgets are trimmed – eliminating anything perceived as a cost or otherwise not absolutely necessary. Unfortunately, this almost always affects the L&D budget. One of the best ways to convince an executive that your program is not a cost that should be cut but rather an investment, is to determine the return on investment using the same calculation that a chief financial officer would use.
  5. To change the perception of the L&D function. Sometimes, learning and talent development programs are considered a “necessary evil” or compulsory. Many executives agree with this comment: “We know we have to fund training for compliance and to teach people how to do their jobs, but beyond that, we don’t like to provide courses unless there’s extra money.” This is not a positive statement. We have hundreds of studies that show that the highest ROIs come from soft-skill programs, such as team building and leadership development, and it is now the time to invest heavily in these areas. But, it’s difficult to invest more unless executives see the value. Having consistency within your L&D function routinely – showing the value and the connection to the business for major programs – is the best way to change the perception from a necessary process to a business driver. This will lead to more support, better partnerships, and yes, a seat at the table.

Summing It Up

So, there you have it, five reasons to calculate ROI. But, as we stated in the beginning, maybe you shouldn’t measure your program. This process is not intended for every program – only programs that are important to the organization, expensive, strategic, or those that attract the interest of top executives should be evaluated at this level.

Our benchmarking studies show that this should not be more than 5-10% of programs each year. Consider the advantages of and reasons to evaluate a program, and then decide if it’s worth it. For more information, email Info@roiinstitute.net.

Update headshot of Patti Phillips smiling
Patti P. Phillips, Ph.D.

Patti P. Phillips, Ph.D., CEO of ROI Institute, Inc., is a renowned leader in measurement and evaluation. Patti helps organizations implement the ROI Methodology®️ in more than 70 countries around the world.

Since 1997, Patti has been a driving force in the global adoption of the ROI Methodology and the use of measurement and evaluation to drive organizational change. Her work as an educator, researcher, consultant, and coach supports practitioners as they develop their own expertise in an effort to help organizations and communities thrive. Her work spans private sector, public sector, nonprofit, and nongovernmental organizations.

Patti serves as a member of the Board of Trustees of the United Nations Institute for Training and Research (UNITAR). She serves as chair of the Institute for Corporate Productivity (i4cp), People Analytics Board, Principal Research Fellow for The Conference Board, board chair of the Center for Talent Reporting (CTR), and is an Association for Talent Development (ATD) Certification Institute Fellow. She also serves on the faculty of the UN System Staff College in Turin, Italy.

Patti has authored or edited more than 75 books on the subject of measurement, evaluation, analytics, and ROI. Her work has been featured on CNBC, Euronews, and in more than a dozen business journals.

Connect with Patti on LinkedIn, FacebookTwitter, and at www.roiinstitute.net.

Headshot of Jack Phillips
Jack J. Phillips, Ph.D.

Dr. Jack J. Phillips, Ph.D., chairman of ROI Institute, Inc., is a world-renowned expert on accountability, measurement, and evaluation. He provides consulting services for Fortune 500 companies, nonprofit entities, and government and non-governmental organizations globally. He is the author or editor of more than 100 booksconducts workshops, and presents at conferences worldwide.

Jack has received several awards for his books and work. The American Society for Training and Development gave him its highest honor, Distinguished Contribution to Workplace Learning and Development. The International Society for Performance Improvement presented Jack with its highest award, the Thomas F. Gilbert Award, for his contribution to human performance technology. On three occasions, Meeting News named him one of the 25 Most Powerful People in the Meetings and Events Industry, based on his work on ROI. The Society for Human Resource Management presented him with an award for one of his books and honored a Phillips ROI study with its highest award for creativity. In 2019, Jack, along with his wife, Patti P. Phillips, received the Distinguished Contributor Award from the Center for Talent Reporting for their contribution to the measurement and management of human capital.

His work has been featured in the Wall Street Journal, BusinessWeek, and Fortune. He has been interviewed by several television programs, including CNN. Jack regularly consults with clients in manufacturing, service, and government organizations in 70 countries around the world.

Connect with Jack on LinkedIn, FacebookTwitter, and at www.roiinstitute.net.

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