How to Calculate + Measure the ROI of Your L&D Programs

November 30, 2021

Measure ROI of L&D

While there are many significant benefits to workplace learning, measuring the return on investment is nothing short of a challenge in most organizations.

The problem is, leadership teams want a clear understanding of the ROI of L&D, in order to ensure that both time and money is being invested wisely.

So, what’s the solution? How can you effectively quantify the impact that learning and development initiatives are having on your organization?

In short, by looking at the metrics beyond ROI.

Better yet, by periodically examining a combination of them.

Throughout this article, we’ll detail some of the qualitative and quantitative metrics that you should be monitoring in order to gain an understanding of how well your L&D programs are performing.

Measuring the ROI of L&D

Five L&D metrics to monitor to determine ROI

1. Technology utilization

Whether you’re using a standalone learning management system (LMS), or something more advanced that makes use of machine learning to support on-the-job learning, the platform’s utilisation metrics will give you a clear idea of how it’s being used at both an individual level and team level.

As an example, you should be able to see exactly which managers are engaging with your content and completing development courses, as well as the teams that are taking part in interactive exercises.

While this data alone won’t tell you the return on investment of your learning and development initiatives, it will paint a picture of the managers that are using your resources to develop the traits and habits of a great leader, which can be used alongside performance metrics to identify trends.

2. Team outcomes

High-performing teams drive high-performing businesses, so if you’re investing in developing these teams, it makes sense to monitor their outcomes.

It is, however, important that you’re not just solely focusing on team performance (even though this is of course a crucial metric), but that you’re also looking at the overall engagement of the team and whether they have good levels of psychological safety.

Below, we’ve covered these three team outcomes in greater detail:

Team performance

While a team’s performance cannot solely be used to determine the success of an L&D program, it is certainly an indicator of how well a manager has (or hasn’t) done with developing their team.

After all, not only is team performance ultimately the responsibility of the manager, but research suggests that employees who are coached at work by their managers tend to perform better.

While there are tons of metrics you can measure to determine how well a team performs, it’s probably worth starting with their goals and objectives. More specifically, you’ll want to see if teams are being more productive and achieving—or better yet, exceeding—their goals and objectives since the rollout of your L&D program.

With this in mind, you should also be considering your approach to managing team performance. 

Employee engagement

According to Bob Nelson, an employee’s motivation is a direct result of the sum of interactions with his or her manager, which means that employee engagement can provide fantastic insight into how well they’re being supported by their managers.

But how exactly do you measure employee engagement?

Well, one way is by analyzing the results of your team surveys, or alternatively by seeking to understand your Employee Net Promoter Score (eNPS).

Like with performance, you should monitor team engagement alongside your learning and development initiatives, and more specifically alongside each manager’s utilization of your LMS and/or leadership coaching program.

Psychological safety

A vast amount of research shows that psychological safety is a critical factor for team performance.

It’s therefore important that you have a clear understanding of whether the managers across your organization are doing a good enough job of creating an inclusive culture where all team members feel empowered to speak up without fear of negative consequences.

One of the best ways to monitor this is by running periodic team health checks.

Want to improve the ROI of your training programs? Have a read of this.

3. Qualitative feedback

While you should be monitoring user engagement, consider also obtaining qualitative feedback from managers themselves. Open text questions used effectively can provide complementary insight to questions collected in surveys. 

4. Ability to retain talent within your organization

While it may not seem like an obvious metric to measure, your organization’s employee retention rate can in fact be an indicator of how successful your organization is at supporting the personal and professional development of their employees.

In other words, it can be an indicator of how successful your managers are at coaching and developing their teams.

After all, it’s often said that employees leave managers rather than companies, and given that so many employees now want to be coached in order to develop, lack of leadership coaching may result in employee resignations.  

We’d therefore recommend that you monitor employee retention rates in teams that are being coached, compared to those that aren’t. 

5. Habit formation

Almost every decision we make is habit-based, from the way we communicate and interact, to the way we work. They’re quite simply the product of actions we repeat over and over again.

It should therefore come as no surprise that the highest-performing teams are those that have been developed with a strong foundation of habits.

Habits such as regularly setting and reviewing goals, collectively reflecting on what is and isn’t working, and having team health checks every now and then.

So, given the role that these habits play in driving team performance, it’s crucial that you’re measuring just how successful your managers and their teams are at adopting them. A habit tracking tool will not only enable you to do this, but it will also enable you to easily pinpoint the teams in your organization that are developing the right habits, and those that are not. What’s more, it will also give you an understanding of how issues can be resolved.  

How to measure the ROI of L&D

Final thoughts

If you’re truly wanting to understand the ROI of your learning and development programs, no one metric should be measured in isolation.

Ideally, you should be looking at how well your teams and the managers that lead them are performing, in terms of results, productivity, and even psychological safety, comparing this data with technology adoption and utilization – for instance how often they’re consuming learning content, completing development courses, or taking part in team exercises.

Furthermore, you should be looking at whether or not they’re adopting the right habits for success.  

A common mistake that many L&D leaders make when measuring the impact of their programs is that they look solely at individual performance and completely disregard team performance.

This is a mistake not only because it is often the collective performance of a team that drives business success, but also because when you’re training managers, you’re doing so with the intention of making them better leaders.

Leaders of teams.

The question is, just how focused is your organization on teamwork? And are you equipping your managers with the right tools, knowledge, and support to lead high-performing teams?

While we’re always available to talk to you about how we might be able to help, we really would recommend that your teams are adopting these seven habits. In fact, by doing so, we’re confident that you’ll see an increase in psychological safety, employee engagement, productivity, and overall performance.

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