Measuring The Return on Learning
Introduction
A recent report by Skilling Today found that 77% of Indian companies are investing heavily in upskilling their employees – far more than any other country (Mint, 2021). Despite this fact, it’s crucial to know how many learning officers and organizations are into evaluating return on investment (ROI) on learning and development (L&D) programs. McKinsey once reported that only 8 percent of companies are into evaluating the value of L&D programs (Palmer 2010).
Post pandemic, companies are investing huge rounds of money in L&D, but they are also keeping a close eye on how the training programs are benefiting them. This has put additional responsibility on L&D professionals. Tracking ROI with only participant feedback forms or smiley sheets is no longer enough. Upper management is asking for concrete evidence to justify the investment going into the learning programs.
And when the axe of cost-cutting is swayed, the budget of L&D programs is often slashed and sometimes they are even uprooted. This happens mostly with leadership development programs, where intangible skills such as developing a strong work ethic, having integrity, and being kind are focused. These development programs don’t give instant results, it takes time for the results to show up. And even if the company is satisfied with the result today, they might change their mind tomorrow.
No doubt L&D professionals are creating high-quality learning content that is helping companies to promote and retain their employees and even skyrocket the stock value, but evaluating ROI remains a continuous barrier.
To help L&D professionals to cross the barrier and measure the ROI of the learning and development program, this white paper:
- Briefs the Kirkpatrick model of evaluation Explains the Phillips ROI equation
- Discusses the challenges involved in evaluating the ROI of a learning program
- Provides solutions to challenges
- Shows how L&D professionals can apply the 80:20 rule to assess learning
Kirkpatrick Model of Evaluation
In the late 1950s, Dr. Donald Kirkpatrick designed a simple four-level model to evaluate L&D programs. The four levels are:
Level 1: Reaction
The first level of evaluation captures learners’ reaction to training programs, and to what extent they’ve actively participated in learning. Most companies record the satisfaction levels using feedback forms, smiley sheets, surveys, or through verbal testimonies. This level of assessment is quick, easy to execute, and inexpensive.
Level 2: Learning
This level uses simple assessments to conduct and compare the knowledge and skills of learners before the learning program and after the learning program. The goal is to find out whether knowledge transfer has occurred or not. Assessments are done through written tests, interviews, or observation. Like level 1, level 2 is also easy to execute and needs only fewer resources.
Level 3: Behavior
This level is to find out how the learners are applying the newly gained knowledge and skills to their jobs. The line managers assessed the learners via observation and interviews over a period to notice any positive behavior change.
Unlike level 1 and level 2, this level requires considerable participation from line managers.
Level 4: Results
This level is to analyze how the knowledge and skills gained by the learners are impacting the growth of the organization. Unlike the top 3 levels, this level needs a substantial investment of time and resources.
Companies all over the world use the Kirkpatrick model to evaluate their training programs. Some of them use all four levels, while some of them limit themselves to a single level. It all depends on the company’s requirements. But to get a meaningful evaluation, it’s necessary to evaluate the learning experience at each level. This has proven easier said than done. Most L&D professionals find it tough to assess beyond the first level to prove how learning is benefiting the company.
But the four levels prescribed by Kirkpatrick are not sufficient to determine the value of learning programs. There is one more level, a very important level added by Dr. Jack Phillips in the 1980s. And what’s that?
Dr. Jack Phillips added the 5th level on top of the Kirkpatrick four. The level to calculate ROI.
Level 5 : ROI
Companies that spend crores of rupees on training programs want to see the monetary benefit of training and development programs.
To find out the monetary benefit, the Phillips ROI model compares learning business impact outcomes to total training costs.
How to Calculate ROI of Training Programs with The Phillips Model
Firstly, gather the data by using the four levels of the Kirkpatrick model.
- Reaction to the training program (level 1)
- Knowledge transfer (gathering pre-learning and post-learning data level 2)
- How the newly gained knowledge and skills are applied (level 3)
- How the training is impacting the business (level 4)
- Once the above data is gathered, the next step is to calculate the training cost.