Measuring ROI of your people development initiatives

EVALUATING EFFECTIVENESS

Measuring ROI of your people development initiatives

A study spanning seven geographical regions and 15 business sectors by Lane4 has revealed that six in ten human resources development departments within global companies believe that it is possible to measure the ROI of their employee development initiatives.

However, according to recent CIPD research only 18% look at the full return of investment of their people development.

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The report by Lane4, a global performance development consultancy, shows that although respondents acknowledged the importance of measuring ROI from people development initiatives, they stated that there were many barriers to helping them achieve this:

• A total of 68% said that it was difficult to calculate “true” financial ROI.
• Insufficient resources were available to 67% to allow them to evaluate the success of the training programme.

As one HR professional in media commented: “To be seen as a credible partner to the business and to work collaboratively, HR needs to be able to demonstrate a clearer return on investment that is widely understood rather than spurious measures that sound good but mean very little.”

Criteria used for measuring effectiveness

Some participants believed that other criteria for measuring ROI are more relevant than financial measures.

Important criteria for measuring the effectiveness of people development initiatives were also explored.

The report found that:

• Employee performance/behavioural change including leadership was important in the current (ranked in the top three criteria by 69%) with 62% ranking it in their top three criteria as being important in the future.
• 64% ranked employee performance (skills relating to their roles) in their top three criteria as being important now but less important in the future (50%).
• 53% ranked employee engagement in their top three criteria as being important both now and in the future (54%).

Sectoral differences

There were some notable sector differences:

• Unsurprisingly, customer service was a more important measurement criterion for the public sector and retail in the future.
• Sales uplift, generally ranked quite low on the priority list, but it is an important criteria for the retail sector.

Procedures

Some of the procedures which can lead to successful ROI include:

• Ensuring that HR initiatives are aligned with business strategy by involving relevant stakeholders as well as identifying the desired ROI (e.g. saving on recruitment cost by increased retention).
• Financial ROI can be calculated through the use of key performance indicators identified at the beginning of an initiative with relevant stakeholders.
• Using goal-setting techniques to design interventions through your KPIs to your desired return.

As Matt Rogan, head of commercial strategy at Lane4, explained: “Impact can also be made when there has been significant structural change within the organisation. Some HR teams are integrating into the main organisational structure whilst others are repositioning as 'business partners'. When this happens, HR is so integrated into the business that its purpose is to help business challenges, not react to them, and its impact is self evident.”

A final word

"ROI is something that businesses want and expect from their training programmes. Measurement of ROI has invaluable benefits beyond the bottom line including more bespoke people development for your organisation, goal-focussed interventions as well as the ability to predict effective investment.

Despite HRDs being fully aware of these advantages, few are measuring ROI due to a belief that it is too time consuming or difficult to calculate. Our new report explains how the many issues affecting ROI analysis can be overcome and the processes which can be followed to achieve successful ROI.” - Tom Smith, head of organisational development at Lane4.

Want to know more?

Title: Understanding the Return on Investment of People Development, Lane4.

Survey methodology: Professionals working in HR and senior management sponsors (typically commissioning HR/learning and development programmes) participated in this study. It covered seven geographical regions: Australia, Asia/Hong Kong, Asia/Singapore, Asia/Other, mainland Europe, UK and Republic of Ireland, North America, South America and Canada. A total of 15 business sectors were represented.

Availability: Contact Tim Hudson at Lane4 on tel: on 01628 533778 or email: tim.hudson@lane4.co.uk.

Lane4 was co-founded by Olympic gold medallist swimmer Adrian Moorhouse MBE and leading sport psychologist professor Graham Jones. Here’s how it describes itself: “Over the past 12 years, Lane4 has grown to become a leading global performance development consultancy. Our proposition is informed by a combination of rigorous performance psychology research and our consultants’ experience of performance at the highest levels. All of our work is underpinned by our conviction that people and teams have the potential to perform in extraordinary ways.”

To find out more visit www.lane4.co.uk