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Return On Investment for L&D – a tough nut to crack

Posted by Steve Read on April 5, 2012

Bill Parsons, Executive VP for HR at Arm Holdings (one of Cambridge’s finest) writes a great piece in this month’s People Management magazine in his capacity of CIPD Vice President.  In ‘Learning To Leap’ Bill describes the problems of searching for ROI of a learning intervention or initiative. 

 

Attributing financial benefits to L&D activity is notoriously difficult.  Making the correlation between the L&D activity and the bottom line will probably yield a low statistical result.  However, if you know what you want to achieve (outside of the financials) then you are more likely to detect results. This is often referred to as Return On Expectation or ROE.  Kirkpatrick Partners talk of ROE as being ‘the ultimate indicator of value’. This measure forms the basis of the widely used Kirkpatrick model comprising  four levels of evaluation. Return on expectation works for me.

 

Bill Parsons suggests that if we focus instead on ‘L&D’s capacity to provide opportunities to build human capital’, the economic results will be easier to find.  Our good colleague Anthony Stanton makes a similar point.  In his forthcoming book People Power: how great people management drives the bottom line he describes two organisations. One is good at developing social capital, where people are encouraged to forge positive relationships, to support and give feedback to each other, to work together within their teams and between departments. They are a community. The second organisation does none of this. It is parochial in nature; teams work in isolation, there is little interaction, and people operate with little understanding of what other staff and teams are doing. The results are as you might expect, and it translates to financial results. Anthony’s book is backed up by all the research data you could hope for.  At a recent meeting, an NHS Trust described the positive results gained from running Action Centred Leadership programmes across the organisation. The trust has indeed been very successful at realising efficiencies without detriment to service delivery. Indeed an assessment by IIP revealed notable improvements in leadership capability, and cross-functional interactions.  The direct correlation between leadership development and efficiency is hard to make, but you can make a link between improved leadership behaviour and the economic results.

 

At Helix, we work hard to help forge the social and psychological relationships within our client organisations, and the behaviours that build social capital.  From this, the financial benefits will flow.  Not in isolation I hasten to add.  Other mechanisms like performance management and appraisal systems need to be aligned, and must deliver appropriate consequences for the teams and individuals concerned. Therein lies another blog.

 

Now, when Anthony publishes his book, you can all buy it, and you’ll know what I am talking about.  Over to you Mr Stanton…
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