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Ricky Kujawa 2007 1 ROI Introduction to Investors in People Return on Investment Ricky Kujawa

ROI on Learning and Development _long_dec_6_2007

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Return on Investment on Learning and Development Talk to Large Organisations in Scotland given at the request of Investors in People, Scotland.

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Page 1: ROI on Learning and Development _long_dec_6_2007

Ricky Kujawa 2007 1

ROI

Introduction to Investors in People Return on Investment

Ricky Kujawa

Page 2: ROI on Learning and Development _long_dec_6_2007

Ricky Kujawa 2007 2

Introduction• Investors in People• Return on Investment• Benefits of ROI • Kilpatrick Model of Evaluation• Phillips 5 Levels of Evaluation• Comparison of both models• Examples of evaluation targets• Examples of ROI figures obtained• Intangible benefits• Measuring intangible benefits• Levering advantage from intangible benefits• Example implementation plan• Reporting structure example• ROI Model• ROI Calculation• Tips• Summary• Next Steps

Page 3: ROI on Learning and Development _long_dec_6_2007

Ricky Kujawa 2007 3

Investors in People

• Effective Outcome Based Plans

• Effective Leadership Behaviours

• Line Manager Ownership and Evaluation

Page 4: ROI on Learning and Development _long_dec_6_2007

Ricky Kujawa 2007 4

Wages – Human Capital Mgt.

• Wages Department

• Welfare Department

• Personnel Department

• HR Department

• Human Capital Management

Page 5: ROI on Learning and Development _long_dec_6_2007

Ricky Kujawa 2007 5

Changing Management Styles

• Compliance With Rules

• Management by Objectives

• Millennial Management

Page 6: ROI on Learning and Development _long_dec_6_2007

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Return on Investment

• Commonly used management term.

• Mirrors a move towards Human Capital Management.

• Now used by 5% of organisations and growing quickly

• Enables and encourages accountability.

• Responsibility lies with the line manager.

• Effective evaluation Improves focus and forecasting.

Page 7: ROI on Learning and Development _long_dec_6_2007

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Benefits of ROI on Training and Development

• Ability to show the Contribution of Selected Programmes

• Earn the Respect of Senior Management

• Gain the confidence Clients.

• Improve Training and Development Processes

• Develop a Results – Based Approach

• Alter or Remove Ineffective Programmes

Page 8: ROI on Learning and Development _long_dec_6_2007

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Kilpatrick Model

4 Levels Brief Description

1 Reaction : Measures participant’s reaction

2 Learning: Measures change in attitudes, knowledge, skills

3 Behaviour: Measures individuals improvement in performance.

4 Results: Measures changes in business results team or Org.

Page 9: ROI on Learning and Development _long_dec_6_2007

Ricky Kujawa 2007 9

Phillips’ five levels of evaluation. 1 Reaction, Satisfaction and Planned Action Measures participants’ reaction to the programme and Stakeholder satisfaction with the programme and the planned implementation.

• 2 Learning

Measures Skills, Knowledge, or Attitude Changes related to the programme and implementation.

. 3 Application & Implementation

Measures changes in Behaviour On the Job and specific application and implementation of the programme.

• 4 Business Impact

Measures business impact changes related to the programme.

• 5 Return on Investment

Compares the monetary value of the business impact with the costs for the programme.

Page 10: ROI on Learning and Development _long_dec_6_2007

Ricky Kujawa 2007 10

Framework Comparisons• Kirkpatrick Phillips’ • 4 Levels 5 Levels

• Participant Reaction Yes Yes • Learning Yes Yes • Application/Behaviour Yes Yes • Impact/Results Yes Yes • Measure ROI No Yes • Isolate Effects of Prog. No Yes • Determine Costs No Yes • Convert / Monetary Value No Yes • Identify Intangible Benefits Yes Yes

Page 11: ROI on Learning and Development _long_dec_6_2007

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ROI MODELCosts Levels KPI’s Train Impact Value

Pre

collect 1 smart smart smart record

collect 2 smart smart smart record

collect 3 smart smart smart record

collect 4 smart smart smart record

total 5 smart smart smart ROI

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Example Implementation Plan• Period -------------------------------------------------------------- • 1 Review Programmes,Processes,Reports,Data• 2 Skill Development• 3 Finalise Evaluation Planning Documents• 4 Evaluation Data Collection• 5 Analysis of Data• 6 Development of Reports• 7 Presentation of Impact Study Results• 8 Develop Scorecard Framework• 9 Develop Guidelines• 10 Manager/Team Briefings

Page 13: ROI on Learning and Development _long_dec_6_2007

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Examples of ROI• Organisation Sector Programme ROI

• Edison Electrical Machine Operations. 57%

• Nassau Police Interpersonal Skills 144%

• FNB Banking Sales Training 555%

• Litton Avionics Self Directed Teams 650%

• MESC Electronics Literacy Training 741%

• Coca Cola Soft Drinks Supervisory 1,447%

Page 14: ROI on Learning and Development _long_dec_6_2007

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Reporting Structure Example• Programme Title: Leadership Skills• Target Audience: Managers, Team Leaders• Duration: 2 days – 2 sessions

• Results

• Level 1 Reaction e.g. Overall rating 4.4 out of 5 95% Provided Action Items

• Level 2 Learning e.g. 76% Increase post-test versus pre test, Skills in use Test/Observation

• Level 3 Application e.g. 95% conducted meetings and minutes, 72% Report action items done.

• Level 4 Impact e.g. R Costs reduction, R Complaints Reduced, R Total Improvements

• Level 5 ROI e.g. 1,245%

• Intangible Benefits e.g. Job Satisfaction, Alignment, Reduced Absences, Staff Satisfaction Up

• Notes of methodology used

• Date Due: Date Sent: Name:

Page 15: ROI on Learning and Development _long_dec_6_2007

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Tangible Benefits

• S

• M

• A

• R

• T

Page 16: ROI on Learning and Development _long_dec_6_2007

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Intangible Benefits 1

• Employee Satisfaction• Organisational Commitment (Alignment)• Climate Survey Data• Employee Complaints• Grievances• Discrimination Complaints• Stress Reduction• Employee Retention• Employee Absenteeism• Employee Tardiness• Employee Transfers

Page 17: ROI on Learning and Development _long_dec_6_2007

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Intangible Benefits 2

• Innovation and Creativity• Competencies• Leadership• Customer Satisfaction• Customer Complaints• Customer Loyalty• Customer Responses/Response Time• Teamwork• Cooperation• Conflict • Decisiveness• Communications

Page 18: ROI on Learning and Development _long_dec_6_2007

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Tests for Converting Intangibles to Monetary Values

• 1 Does an acceptable, standard money value exist for the measure. Yes – Use it; Not – go to next step.

• 2 Is there a method that can be used to convert the measure to money? If Yes –Use it; Not – list as intangible.

• 3 Can the conversion be done with existing resources. If yes – Use it; Not – list as intangible.

• 4 Can the conversion process pass the Guinness Test for Senior Management. If so – Use it; if not list as intangible.

Page 19: ROI on Learning and Development _long_dec_6_2007

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Changing Management Behaviours

• Old Style - Rules

• Telling, fault finding.

• Results: Minimum Acceptable Employee Effort, lack of ideas from staff, staff fail to accept responsibility.

• New Style – Change Orientated

• Listening, encouraging, recognising

• Results: Releases Discretionary Effort, Ideas, Innovation, Staff accept responsibility.

Page 20: ROI on Learning and Development _long_dec_6_2007

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Levering Advantage• 1 More Meaningful Meetings – Teams and One to One• Global Survey – South Africa tops world league table – 83% feel that meetings are a

waste of time

• Changed Management Behaviours

• Managers Practice Active Learning• Staff Alignment Grows• Ideas are Created• Staff Innovate and Accept Responsibility

• 2 Global Survey 650,000 staff in 50 Global Cos.

• Staff Aligned + 5 % Performance• Staff Not Aligned – 15% Performance• Difference to an organisation – 20-30% Performance / same or lower cost

• Can only be released through improved Mgt. behaviours

Page 21: ROI on Learning and Development _long_dec_6_2007

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Fortune 500 survey.

• 4th World Quality Conference

• Paper Tracked Fortune 500 Share Prices

• Only 2 Metrics followed price changes

• Customer Satisfaction

• Staff Satisfaction

Page 22: ROI on Learning and Development _long_dec_6_2007

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Popular Methods

• Benefits Cost Ratio

. BCR = Programme Benefits e.g. Ratio of 2:1

Programme Costs

. Return on Investment

. ROI (%)=Net Programme Benefits x 100 e.g. 250%

Programme Costs

Page 23: ROI on Learning and Development _long_dec_6_2007

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Tips• Golden Rule - Never Exaggerate Impact

• Build evaluation into the performance improvement process.

• Develop criteria for selecting appropriate programme measurement levels.

• Plan for evaluation at the inception.

• Require participants to conduct main steps

• Use short cut methods for main stages

• Use Estimates

• Develop internal capability.

• Streamline reporting processes.

• Use technology

Page 24: ROI on Learning and Development _long_dec_6_2007

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ROI Summary• ROI is of growing importance in T&D• It is becoming a key management skill.• Using ROI as a forecasting skill makes follow up valuable.

• You have now seen the basics.• You have now seen some of the benefits.• You now know some things to avoid.• You have seen an overview of how to draw up an implementation plan.• You have seen an overview of how to draw up a report

• Golden Rule – Never exaggerate benefits.

The use of information from the works of Patricia Pulliam Phillips and Jack J. Phillips is acknowledged