3 key steps to establishing L&D ROI

A greater portion of overall learning and development (L&D) budgets is being allocated to leadership in order to prime the leadership pump and develop high potential leaders, according to a global online learning company.

Organisations are trending toward investments that sustain a journey of leadership development, and this shift is seeing a move from expensive one-and-done event-based programs to a more continuous learning approach that blends technology-enabled learning with live experiences, said Rosie Cairnes, regional director – Australia and New Zealand at Skillsoft.

Brandon Hall Group’s recent Leadership: The State of Development Programs report revealed that while the highest levels of L&D dollars are spent on senior executives, 75 per cent of leadership programs at all levels miss the mark in terms of effectiveness.

“Ensuring a strong leadership pipeline is imperative in today’s business environment with baby boomers heading into retirement. As millions of workers start leaving the labour force, succession planning has become a pressing challenge for many organisations,” said Cairnes.

“Traditional methods of leadership development don’t cut it in today’s ‘overextended, ever-changing work landscape: the world may be flat but it certainly is not devoid of a speed lane.

“Leading organisations are seeing the benefits of offering choice to employees, with greater flexibility and adaptability in learning styles. A one-size-fits-all approach does not work in today’s workplace”

“Leaders are under tremendous pressure from stakeholders, the board and shareholders to perform – and perform fast. They need to develop skills continually and in short micro-bursts of training experiences – discretionary time is a luxury that no leader has.”

HR leaders also need to ensure that what is learned is applied to the job so that it has a direct impact on business outcomes, according to Cairnes.

“The way leadership development was traditionally conducted often wasn’t accountable to illustrate results. Today’s L&D teams are being asked to account for their contributions to the business so we are seeing a greater focus on measuring the effect of learning outcomes.”

In today’s talent development environment, the trend in technology-enabled learning extends beyond the course to a full range of digital resources, and she said e-learning is a highly effective way to develop leaders, providing flexibility which lends itself to common work challenges.

The most popular business leader topics include: strategy development, financial acumen, managing change, agility/adaptability and developing talent.

“Over the last 12 months, more and more organisations and learners are demanding mobile learning tools,” Cairnes said.

“Learners of all levels need a range of resources, offered in varying and innovative formats to suit their individual needs. Leading organisations are seeing the benefits of offering choice to employees, with greater flexibility and adaptability in learning styles. A one-size-fits-all approach does not work in today’s workplace.”

Cairnes added that the key to successful leadership development training is marrying best-in-class external thinking with internal business knowledge through a rich set of development resources across a variety of modalities.

In order for HR professionals to prove effectiveness of L&D programs and demonstrate return on investment, she said they must establish a baseline to understand how efficient their operations are today.

3 key steps to establishing L&D ROI
Cairnes recommended HR use the most recent available metrics to establish the baseline, then set annual targets for improvement over the length of the program (months/years). L&D teams should measure the following three key efficiency metrics:

  1. Learning delivery mix: the proportion of how much classroom, virtual classroom, elearning/technology enabled and other types of training modalities
  2. Learner reach: what percentage of employees are participating in some form of the learning offerings, and
  3. Cost per learning hour: the average rate calculated when the annual budget is divided by the number of total learning hours