Most modern businesses are well aware of the need to invest considerable sums in learning and development. But it remains an unfortunate fact that many bosses are still reluctant to put their money where their mouth is when it comes to staff training.
As a result, employee training and development budgets can often be first on the chopping block when it comes to cutting costs, despite the considerable body of evidence showing that a well-supported approach to training can deliver a significant return on investment (ROI).
HR, compliance and training managers, therefore, need to be well-versed in how to make a strong business case for why spending on training solutions needs to be considered an essential expense, rather than an expendable luxury. This can be a challenge, given that learning isn’t traditionally seen as a quantifiable metric, but there are several ways in which the impact of a properly funded learning strategy can be made clear to senior teams.
In this article, we explain why investing in your organisation’s L&D can be so impactful, how best to calculate the results of this investment, and offer practical advice on some of the best ways to make the case for improving learning and development in your business.
What Kind of ROI Can Staff Training Deliver?
One of the easiest ways to demonstrate the potential gains of employee personal development can be to point to the numerous industry-wide studies offering clear evidence that investment in training can deliver the kind of ROI that would turn the head of even the most money-minded CEO.
For example, a US study by Accenture suggested that for every dollar invested in training, companies received $4.53 in return – an ROI of 353% – while another study by IBM suggested that businesses can receive $30 worth of productivity for every dollar spent on e-learning tools.
Despite this, LinkedIn’s 2017 Workplace Learning Report suggests that only 60% of companies provide Learning and Development leaders with a seat at the C-suite table, while only 27% of training departments expected a budget increase this year. This shows that many firms are still not realising the full benefits of proper investment in this area – as well as hinting at the potential competitive gains available to those that do.
How Can the ROI of Learning and Development be Calculated?
If you’re going to make the case for investment in learning and development, you’ll need to know how best to calculate the financial benefits that this investment has.
The reason why ROI for training investments can be hard to calculate is that many of the gains associated with learning and development are so-called ‘soft’ benefits, such as increased staff satisfaction or engagement, which are difficult to specifically quantify.
However, there are also many measurable metrics that can provide clear insights into the success of your training efforts. For example, many firms might measure the impact that customer service-specific training has on feedback ratings and complaints data before and after the sessions. Meanwhile, other organisations may look at the number of leaders they are able to promote internally as a result of development efforts, and calculate the amount of money saved on external recruitment.
In all cases, it’s important to collate detailed data on your staff’s training performance and their professional attainment levels, before isolating any changes that can be attributed to the training and calculating how this translates into profit contributions or cost savings. By deducting the overall programme costs from the resulting total, you’ll be able to produce an ROI figure that gives you at least a ballpark estimate of the kind of gains you’re making.
Making the Case for Training
With LinkedIn’s Workplace Learning Report suggesting that only 8% of company leaders see the impact of learning and development and only 4% see the ROI, it’s clear that more needs to be done to make a more persuasive case for training investment. After all, every business accepts that onboarding, refresher and compliance courses are going to be vital at various points, so by doing the legwork and collating the data to provide hard evidence of the benefits they offer, it will become much easier to convince bosses to invest the necessary resources.
Moreover, the benefits of this kind of data collection are ongoing, as it will allow the organisation in question to get a detailed insight into which of their interventions are delivering the expected value, and to refine their methodology accordingly. This way, they can maximise the already significant gains that learning and development can provide, putting them a few more crucial steps ahead of their more reluctant rivals.
Here are some practical tips and strategies for demonstrating the value of learning and development to help promote this kind of training and hopefully develop what your organisation can offer its employees.
Outline Intentions and Metrics
If you’re proposing expanding or implementing a learning and development program in your place of work, the best thing that will support your argument is strategic plans and intentions. Whether you’re putting together an official proposal or just having conversations with your colleagues, make sure that you’ve outlined precisely what you want to achieve through investment in learning and development.
Common L&D goals include improving employee efficiency, improving the performance of your workforce, helping to create more opportunities for internal promotion and reducing the need for unnecessary hiring by upskilling the existing workforce. You may also be aiming to increase employee satisfaction with your company or improve your reputation as an employer by offering learning and development opportunities, both of which are generally good for business.
Along with these goals, ensure that you have metrics that you can present as ways to measure how effective learning and development has been at helping to achieve the intentions of your proposal. We’ve talked about measuring ROI above, but other metrics you may measure include:
- Staff turnover
- Staff performance
- Staff retention
- Product or service innovation
- Customer or client satisfaction
Align With Business Goals
Leading on from that last suggestion, you will also have more luck proving the value of learning and development if you can align the intentions and benefits of it with overall company goals. Not only will this make your case more persuasive, but it will also have a greater impact on overall business performance and success, which everyone will benefit from.
Identify the values and goals of the business and then decide how L&D efforts will help to impact one or some of these. For example, if your company has a goal for increasing the workforce with 10 new employees by the end of the year, highlight how offering a rewarding learning and development program will improve your image as an employer and help to attract more candidates for new roles.
Get Current Employee Input
There’s no point investing in and developing learning and development efforts if they’re not actually serving a need in the company. In order to ensure that what you’re proposing will be well received by everyone and make a tangible difference, speak to current employees about their thoughts on any current L&D efforts and what else they feel would be beneficial.
If you can back up a request for more personal development support and employee training with suggestions and interest from current employees, it demonstrates a clear need that will hopefully have more of an impact. By including and developing suggestions from within the organisation, you also end up with an L&D program that is directly helping employees in areas they feel they are struggling in, which will have more of an immediate impact.
Analyse Competitor Efforts
Another good way to demonstrate the need for effective learning and development is to research and analyse what your competitors are offering. This is important from both a business and a recruitment perspective, as we’ll explain below.
From a business perspective, if competitor organisations are investing in staff training and development, they’re going to end up with a workforce that is more talented and which works more efficiently. In order to compete, you need to be offering at least the same, if not better, levels of learning and development support so that your staff and business offering is up to the challenge of being the best in your industry sector.
When considering recruitment, if you’re hoping to hire the most qualified and talented candidates in your industry sector, you also need to ensure that the benefits you’re offering are better than competitor employers if you want potential employees to choose you. Learning and development, internal training and career support are all part of the benefits you offer new hires, so you need to make sure that your program stands out from the rest.
Run a Trial Program
Finally, one of the best ways to demonstrate the impact that a proper learning and development program could have on your organisation is to run a trial program with a small number of employees and measure the results of this. Instead of just supporting your proposal with general statistics, this way you’ll have plenty of data and reference points for the impact that L&D can have, as well as a system that you can easily scale up when you get the green light.
Consider all the points we have previously discussed if you run a trial L&D program; set out clear goals, make sure it aligns with business objectives, and identify the metrics you will use to measure success and ROI. It might not be entirely successful, but then you can use the experience to develop your program and ensure that a larger-scale effort avoids any of the setbacks or issues that the trial encountered, which saves money and time in the long run.
Investing in learning and development is essential for any company – which is why those responsible for training must be able to make a business case for how these kinds of investments offer value for money. We hope this article has given you some inspiration for how to go about proving the value that L&D can have on a business, and that you take these ideas forward to start developing a successful program in your place of work.