Yes, linking performance indicators (improved by training) to business results (revenue) is possible, but that’s not all you should focus on. It is necessary to understand that ROI in L&D has to do with value, in addition to money.
Of course, when we talk about any corporate investment, and the Learning & Development area is no different, it is necessary to elaborate on basic parameters to calculate the level of effort versus the projected return for that action. Thus, it is not advisable to embrace learning actions that are not directly related to improving the performance of work teams and, consequently, offer projections and perspectives of positive returns for the health of the business in terms of image, service, culture, and, yes, revenue.
But this is not exactly what the C-Level of organizations is concerned with when they give the green light for an L&D project. “A survey of hundreds of CFOs at large companies across the United States, and presented by a Ph.D. academic at an event I attended, showed that these executives did not want to see the spreadsheets that training professionals normally draw up, with information such as volume of content and learning paths, which employees would access such content or even the KPIs that would be measured to increase the company’s revenue. None of that. They don’t even believe in this type of calculation. What they want to see has nothing to do with money but value. Something like: what will this investment in L&D bring in added value to the business?”, says Renato Gangoni, ReFrame Learning CEO.
From this perspective, it is possible to say that any analysis of the success (or failure) of a training program must be directed towards finding, more broadly and systemically, how it is strategically contributing to the growth and evolution of the business (something measured by KPIs, naturally).
And this is done through correlations between business KPIs, processes, tasks, and skills – we detail how ReFrame does this analysis in the following articles:
So how to do this analysis?
The great challenge that arises when we seek to relate training activities to business KPIs lies in how we can do this in order to isolate the many variables that could influence the analysis (seasonality, geographic location of teams, among others). Simply put: how do you know that last quarter’s sales success has to do with training and not with the new sales-marketing campaign that was in place? And this is just a simple example. There are many other scenarios that make the process of isolating variables difficult.
The control-group methodology is certainly one of the most efficient when measuring the impact of a given action without being influenced by imponderable variables. Therefore, it has to be done with the group that had access to training (and, of course, also with the group that did not) in the same region, at the same time, with the same scenarios.
With the groups inserted in the same conditions, then it is time to analyze the performance of each of the groups in the specified period and assess the percentages of improvement. The delta between these two classes (if such a delta exists, of course) can be attributed to training.
For instance, if that measurement is related to sales performance, the increment in both classes is analyzed. Assuming that both showed an increase of around 5%, it appears that training did not have an impact on the business KPIs. On the other hand, if the group that trained has an index of 5% and the one that did not train has an index of 2%, then 3% is attributed to the success of the training and 2% to the market flow.
Simple and objective.
It is for this reason that the control-group method is so important throughout this process of monitoring training results.