For HR managers, return on learning is the "holy grail". It enables them to express the success of learning initiatives to decision-makers using a familiar metric: ROI. We explain why the search for this holy grail is all too often unsuccessful – and show how the ROI of learning can nevertheless be approached.
They are still rare, but they do exist: Examples of companies that have calculated the ROI of learning for themselves (German handbook). And that can lead to real competitive advantages.
After all, if you know the financial impact of training measures, you can systematically optimize your training landscape and use the data as a decision-making basis for further investments.
However, it is not without reason that many HR departments find it difficult to determine the monetary effects of further training measures and also to quantify them in monetary terms.
The challenges are manifold. First and foremost, the validity of such calculations always depends on the data basis of the respective company. And only if costs and benefits are documented in detail and this data can also be completely isolated for the ROI calculation will there be a valid value at the end.
And that is just the beginning.
5 Reasons Why HR Professionals Don’t (Can’t) Measure ROI of Learning
At the core, most companies face these five pitfalls when calculating ROI:
1. The Effort Required to Determine a Return on Learning Is High
In order to be able to draw conclusions about the success of further training, HR managers cannot avoid a certain amount of effort. A whole series of factors must be taken into account for the calculation.
On the one hand, the costs of the training must be compiled in as much detail as possible. This includes software and personnel costs for e-learning training, as well as additional expenses for materials, premises, travel and trainers.
On the other hand, the benefits of continuing education must be collected and, if necessary, converted into monetary values. These can be, for example, increases in production, reductions in error messages or time savings in terms of working hours. Depending on the benefits, however, HR managers may need to take several intermediate steps in order to link production increases to a specific monetary amount, for example.
2. There Is a Lack of Comprehensive Data on the Benefits and Costs of Further Training
"As a young company, we have been pursuing the topic of personnel development and further training in a structured manner for two years. We have little data from the past and most of it only in Excel tables. In addition, we have not yet focused on separately recording all costs related to learning, training and continuing education. Evaluations on this topic therefore do not yet provide a complete picture."
L&D manager of a retail company
The situation is similar for many companies in a wide variety of sectors. However, a basic prerequisite for calculating the benefits is a database that covers the key figures needed to measure the economic success of training measures.
In addition, an ROI calculation must include as much relevant data as possible before and after or without and through the introduction of the learning program.
For example, if an ROI calculation is based only on the cost savings of the learning program, the ROI may be negative, despite any productivity gains and organizational savings that may not have been considered, for example, due to lack of data – not to mention non-monetized factors!
The significance of the ROI must therefore always be critically questioned against this background!
3. The Costs and Benefits of Continuing Education Are Difficult to Isolate
In order to isolate the effect of learning offers, companies can measure corresponding key figures before and after the introduction of the offers. In practice, this is often difficult: most companies have already installed numerous learning offerings. And these internal learning concepts are usually in a constant state of flux. A clearly delineated "before" often does not exist.
Another option in this case is to define a control group that does not have access to the learning offerings. Understandably, most companies do not want to deny a large group of employees access to learning opportunities for an extended period of time.
The consulting firm Accenture did not use either of the two common methods in its ROI calculation, but distinguished between frequent and infrequent learners.
4. Externalities Are Difficult to Rule Out
Are performance increases and productivity gains of individual employees really due to a specific training measure? Salary increases or changes in the team may have provided additional motivation – not to mention changes in the personal circumstances of colleagues.
Other factors may also play a role, such as the economic situation or changes in the corporate and management culture. Such externalities are difficult to isolate from the effects of the learning offered and further limit the meaningfulness of an ROI value.
5. Qualitative Learning Effects Cannot Be Translated Into Monetary Value
Further training measures can have many positive cost effects. However, only direct monetary effects can be expressed with the ROI formula. Other learning effects, such as the acquisition of skills or an improved communication culture, can hardly or not at all be measured in monetary terms.
Learning effects that do not have a euro sign behind them are therefore excluded from the ROI calculation – a further limitation of the meaningfulness. However, with the Learning Transfer Evaluation Model, there are alternative concepts for determining learning effects that cannot be measured in monetary terms.
ROI of Learning: Challenging, but...
The reasons why HR managers find it difficult to calculate ROI are therefore quite justified. A high effort with limited meaningfulness may be a deterrent.
In order for the ROL according to the ROI formula to have a reliable significance, the following requirements must be met:
- Data regarding the benefits and costs of training can be collected before and after the introduction of a learning offer – or compared with a reference period.
- Other influencing factors can be calculated out.
- The ROI calculation only serves to estimate the influence of monetarily measurable factors.
And yet: approximations to the ROI of learning are possible and also useful – for the following three reasons:
- Calculating the ROI of learning provides HR professionals with a better assessment of the success of certain measures. They do not have to rely solely on their gut feeling or anecdotal statements from providers.
- In addition, the ROI creates a basis for discussion and argumentation with the management level. It can be used to express success in comprehensible language and to develop further training on controlling and management topics.
- In the e-learning sector in particular, it is becoming increasingly easy to record certain key figures on learning effects, be it course participation, the completion rate of lessons or the evaluation of courses on the basis of online surveys.
ROI of learning beats gut feeling
As the need for and supply of learning solutions grows, it will become increasingly important for organizations to populate their learning landscape with training initiatives that make business and strategic sense. It will be difficult and reluctant to rely on gut instinct alone.
A key figure such as the ROI of learning can simplify and improve decisions - even if its validity must always be critically questioned. In this respect, the ROI represents an critical step toward systematic education controlling.
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Manfred Rump
