ROI: How to measure L&D program value for organizational success
Reap skill development ROI with these assessment metrics and see the financial benefits of a learning and development program with targeted learning outcomes.
Jan 30, 2024 • 6 Minute Read
- Learning & Development
In the dynamic landscape of learning and development (L&D), leaders face an uphill battle articulating the true value of their initiatives. L&D programs create tangible outcomes but often elude straightforward measurement, making ROI calculations a challenge.
While organizations frequently employ metrics like time viewed, courses completed, licenses redeemed, and skills assessments, these metrics only scratch the surface and often leave the more profound impact of L&D programs uncharted.
In this blog post, I delve into the intricacies of this challenge, explore the hurdles faced by L&D leaders, and shed light on why measuring the impact of L&D programs is a cornerstone for organizational success.
Table of contents
- Align, achieve, assess: Organizational strategy for L&D programs
- 17 ROI metrics for L&D programs
- Tips to create an L&D sustainability plan
- Why the ROI of upskilling is more important than ever
Align, achieve, assess: Organizational strategy for L&D programs
Successfully demonstrating the value of your L&D program hinges on laying a solid foundation that aligns with overarching business objectives. A framework can help you lay that foundation. This one encompasses three vital elements: Align, achieve, and assess.
Align: Partner L&D with business objectives
The strategic alignment between L&D and business objectives ensures that L&D efforts become an integral part of the organizational strategy. When you align learning with business objectives, you illustrate how targeted learning and tailored programs directly contribute to business success.
Whether it's enhancing cybersecurity resilience or fostering leadership effectiveness, targeted learning becomes a powerful catalyst for achieving organizational milestones and creating a competitive advantage.
Achievements: Create learning metrics and KPIs
Your business objectives will inform your measures of success. Establish Key Performance Indicators (KPIs) to provide a structured approach to measuring and demonstrating success. In the next section, I provide a list of KPIs that correlate directly with organizational success and improvements to help you assess the impact of L&D initiatives.
Assess: Benchmark performance before and after
With alignment and KPIs as the bedrock, the next crucial phase involves benchmarking performance. Before implementing L&D programs, conduct baseline assessments to capture your organization's starting point.
My team employs an assessment tool that measures the strength of our workforce transformation strategy in six key areas. We tailor our assessment strategy based on the business objectives and KPIs we establish. Without a baseline up front, you will not be able to demonstrate progress or show the value of your L&D program.
17 ROI metrics for L&D programs
Let’s delve into the strategic intersection of skill development and financial benefits. How do enhanced skills impact your organization’s financial strength? Here are some KPIs you can use to calculate the ROI of your learning and development program.
Time tracking and task completion: Calculate the percentage reduction in time spent on routine or complex tasks
Quality of output: Compare error rates or quality metrics before and after the learning program
Efficiency metrics: Measure velocity or story points in your agile teams, output per hour, or project completion rates
Project timelines: Compare timelines for projects and specific tasks before and after newly acquired skills. Showcase tangible reductions in project completion times.
Operational cost: Analyze operational costs related to complex or repetitive tasks or processes that were improved by your targeted learning program. Showcase examples of how L&D initiatives streamlined processes and led to operational efficiency gains. Translate time-related gains into monetary values.
Qualitative data from surveys: Ask employees to self-assess improvements in their work speed and efficiency. Complement your quantitative data with these results.
Retention and internal mobility metrics
Employee turnover rate: Implement a targeted learning program for teams with high turnover. Your focus may be to enhance work through skill development, increase collaboration and ease workloads, or provide personal development opportunities to these teams.
Internal mobility: Create learning experiences tailored to employees’ career aspirations and measure the rate of internal hires. Compare the cost of recruiting for these roles with the cost of promoting from within.
Employee testimonials: Incorporate testimonials or quotes from employees who decided to stay with your company because of learning and development opportunities. Showcase real voices expressing the value they place on professional development within the organization.
Employee satisfaction: Use employee feedback surveys and engagement metrics to assess the impact of training on job satisfaction and, consequently, retention.
Cost reduction metrics
Case studies: Provide case studies or real-world examples of organizations that have successfully reduced costs through strategic L&D programs. Highlight specific cost-saving measures and efficiencies as a result of enhanced skills.
Reliance on third-party contractors: Choose a skill set for which your organization relies on third party contractors and implement a targeted learning program to shift reliance to in-house expertise.
Errors, security threats, and concerns around quality: Measure the number of errors before and after your learning program. You could also measure the amount of rework, number of customer complaints, number of security incidents, or any other quality measure your teams use.
New hire metrics
Time to proficiency for newly hired workers: Choose a focus group that’s struggling to get new team members up and running efficiently. Develop a targeted learning program and measure time to proficiency before and after implementation. Translate time savings to dollars that impact the bottom line. (One of my past targeted learning programs reduced time to proficiency from 6 months to 6 weeks!)
New hire retention rates: Measure the retention of new hires before your learning program and after
New hire engagement and confidence rates: Employ survey data from new hires, mentors, trainers, and managers to measure engagement confidence pre- and post-learning program.
Training cost for new hires: Measure the reduction in training hours for new hires and those conducting the training. Use interactive and tech-driven onboarding experiences to contribute to faster skill acquisition and create scalable new hire processes.
Tips to create an L&D sustainability plan
This discussion would not be complete without addressing sustainability. Here are a few tips to ensure your program thrives, evolves, and sustains impact (and ROI) over time.
Highlight stories to humanize learning outcomes
Remember success is not just measured in data; it’s woven into the stories of individuals and teams whose professional journeys have been transformed. A huge piece of your sustainability strategy should be humanizing the impact of learning initiatives by sharing real stories of triumph and growth.
Focus on stories about how learning initiatives have propelled careers forward, enabled breakthrough innovations, or fostered cultures of continuous improvement. These stories not only celebrate achievements but also serve as powerful illustrations of the far-reaching effects of learning on individual and collective success.
Choose a variety of stories that resonate with your initiative and strategically share them with the relevant audiences. For example, I had a client who was struggling with AI adoption and facing fear and anxiety among workers. To overcome this hurdle, we compiled a curated collection of stories from their own workforce, showcasing how individuals across various roles were reaping tangible benefits from AI.
By circulating these narratives, the client witnessed a remarkable uptick in the adoption rate of AI. This approach aligns with the Diffusion of Innovations theory, which explains how ideas or products spread through a market. The crucial principle is that the majority must perceive the benefits gained by the early adopters to deem the change worthwhile.
Only when the early majority embraces the new approach does the late majority follow suit. Stories are a crucial component of improving your learning program’s engagement and sustainability.
Employ continuous feedback and improvement strategies
As leaders struggle to keep up with the pace of change in technology, the sustainability of your program hinges on your commitment to continuous improvement. Adaptability and perpetual evaluation are necessities!
This means staying in tune with changing organizational needs and actively seeking feedback from participants and stakeholders. Continually measure and adjust using quantitative and qualitative data to remain agile and relevant.
Design a leadership development program
Leadership development should take center stage in your sustainability plan. Without buy-in from your leaders, you will struggle to drive long-term success.
Design your leadership development program to instill essential leadership skills and equip leaders with the capacity to mentor and sustain ongoing learning within their teams. This approach fosters a sustainable learning culture where leaders become torchbearers of knowledge and growth.
Why the ROI of upskilling is more important than ever
As we face economic challenges and organizational budgets contract, the need to monetize learning and development outcomes will only increase. Every learning ecosystem is unique and comes with a variety of microcultures. The strategies that work for one organization may fall flat in another. Keep best practices in mind and be open to trying new strategies to quantify your L&D impact!
Want to measure the impact of your organization’s skill development plan? Learn more about Pluralsight's workforce transformation services or speak to your Account Executive for more information. Connect with me on LinkedIn for more tips.