Return on Investment (ROI) on training dollars has been one of the most elusive concepts for many organisations. It has come up in quite a few conferences where the concept has been squeezed between a talk on how to train millennials (or is it Gen Z?) and what are the new models of gamified learning.
In one of the conferences that I was sitting in, I did hear about how the world’s largest ecommerce giant created this interesting matrix that keeps on tracking people’s learning needs vis a vis their performance. It was interesting to hear, but let me very honest here — I have been to many of such conferences and it was probably the only time when I felt someone had a semblance of clarity in this matter. In most of them the answer was- ‘well, you know, we try to measure the financial impact of the problem and expect our training efforts to fill in a percentage of it. So if the financial magnitude of the problem is worth $5 Million, then training efforts contribute to saving about 5–7% of it. So essentially the ROI of training in this calculation is about $3,50,000.” I find something fundamentally wrong in this (and I am talking in general — as many organisations have looked at ROI differently and have yielded results of much higher magnitude.) If you think in a $50 Million opportunity the ROI is only of about $3,50,000 then you will ration your spends to ensure that you plug that gap with a maximum of $10,000, which in this case, is your training budget. There’s nothing wrong with rationing spends, but if the actual ROI is not reached then the rationed amount itself is wasted.
In a very simplistic example — let’s consider that you are a software engineering services firm with zero data engineers. But to address new areas of growth — you need to build an internal pool of data engineers to build predictive models with unstructured data, which, as your business team informs you, is something that your clients are looking for elsewhere. If you can serve them with this additional bit of support (which in current market terms is also a lucrative area driven by market demands and limited supply), then there’s a $500 million business potential that is waiting as per the calculations. So you start cross-training people, employ a mix of online training with offline handholding and incur costs of $500,000 in building up these capabilities, and for the skillsets that you cannot train people on, you get them as external hires. Now, you have a $500 Million opportunity at hand that you can tap with maybe 40% of your existing resources and you have just reduced insourcing as well. Would you still consider the ROI of training at 5 to 7%? If required, will you be interested to increase the training budgets beyond $500,000 considering the opportunity at hand?
Training is a major differentiator between organisations that thrive versus the ones that are still struggling. The reason is not only the efforts that go into training (whether high or low), but the way it is perceived inside the organisation. Also with major distributed workforces (more so where more than 50% of your team is working from home) it’s time that online training gets its due from the perspective of ROI. I have observed this in a few places, where when it comes to training, the first focus is on classroom (now, with Zoom you don’t even know if they are listening or did you actually catch them at a wrong time) and online learning is relegated to compliance topics such as POSH, Health and Safety and Code of Conduct which are made mandatory. However, in the age of LXPs and advanced analytics that they provide, online training can be looked at very differently.
First, let’s accept the fact that online training is not just the realm of HR. It’s not only their job to ensure that training helps your organisation fill in the gaps that exist between the market and you. It needs a CXO level focus with an eye on the market gaps that exist, identifying the unstated needs of it and training up your team to fill in the necessary vacuum so that you advance towards exponential growth and not just an incremental one. Since the need to skill up distributed workforces simultaneously reign paramount, online training becomes the only method of doing it within reasonable time.
This is also hard work because it means a much more detailed skillset mapping than the standard core competencies that are put as templates in appraisal documents. With tools powered with adaptive learning capabilities and content formats such as mobile learning and micro-learning in place, it can be a possibility to design and deliver content that leverages the learner’s current knowledge state and builds on that.
Second, it also means that you start connecting the dots between the type of content you create and the analytics that your LMS and LXPs provide. This can be in the form of having a talk with your LXP provider to offer you the right reporting features or studying their analytics in much more detail than your are currently doing. Again, this will include the CXOs looking at the training analytics in much more detail rather than just the HR as the task is not just to tick off a series of checkboxes but to actually analyse where your organisation is headed in the near future.
Third, it includes in-depth work as this is not a one time affair which suggests that since everyone is now trained on Code of Conduct, we can expect everyone to follow the same. It is meant to be a constant review of the training analytics against performance benchmarks not just of individuals but of the entire team and keeping your content efforts at par with the performance benchmarks that you have set, so that they are achieved in time.
So, how does all of it tie in together? Here are a few use cases that you can look at. In a typical scenario — the Training or HR manager sits down with a business or functional head to understand the type of training required for his team. The sales head might say that the team needs training on consultative selling practices just as the engineering head might want his team to be better trained on TensorFlow libraries. The traditional method will be to identify a training provider (can be a classroom trainer or even an online training solutions development firm) and create a module that is deployed over the Learning Management System or LXP with the analytics suggesting how many people have taken it; what is the best score, average score, lowest score; how have people rated it; and how many have got their certificates. (In an interesting case, I found that number of ‘excellent’ and 5 stars in the feedback document to be the key indicator of ROI being flaunted by a training head.) The other way to look at it is to ask the business head and sometimes both the business head and the engineering head together as to what is the total magnitude of the knowledge gap. For example, if you have just moved into providing turnkey digital transformation solutions rather than just software services then the magnitude of the knowledge gap is quite high as your entire future plan depends on it. That means one classroom training or a single 1 hour module with some gamification and branched scenarios built into it is not enough. You now need a learning path that is tracked over time and correlated with actual results in numbers. Does it look like something that needs a CXO level attention?
Now there are two steps you need to follow on a continuous cycle. First identify the ROI of the training. Maybe the reason your organisation turned to offering turnkey digital transformation solutions in the first place was to see a $100 M opportunity in the market. Therefore, the training needs to ensure that the desired ROI is at least $50M that comes from it. In Step 2, relook at your content and the analytics that you plan to track from it. When re-looking at the content it is now clear that a single 1 hour module is not going to cut it for sure since retention over a period of time is required. Instead you need to build something that is continuous in nature, provided in periodic intervals and tracked basis performance too. Whether it is a simulation, a series of branching scenarios, multiple games put together in a sequential manner, a series of stories that are periodically interspersed with online training — that entirely depends on the purpose. How you design your assessments and how periodic they are as intervention mechanisms also become critical components here. Next, look at what kind of analytics does your LXP provide. Most LXPs come with gamification capabilities — offering points, badges and leaderboards. Look at the high-scorers and see their field performance too. Is it matching? If yes, you can now add a blended mode to this learning over the next six months, creating trainers out of the high scorers with matching performance and giving them a bigger stage so that their best practices are shared in the rest of the team and their sales secrets do not just move on with them once they decide to move on themselves. Once they share, you can now take their best practices and transform them into online modules again — so that the quality of your content gets enriched. Once you have achieved Step 1 and 2 over a six month period, repeat it once more. In this manner — the data of your LXP as well as the effectiveness of your content gets improved over time.
(If you are an HR person reading this, it might increase your yearly training budgets too, if your CXO buys into it.)
Just as an endnote, one of the terms that we hear pretty often in organisations is ‘business as usual’. I think it’s a term that hides a lot of things. After all, there is nothing usual about business, as the market movements themselves are dynamic and businesses needs to adapt to these. So, if we recognise that business by nature is meant to be dynamic, the way we look at training and development needs to be different too.
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