I guess that if I could calculate in a linear way wht the ROIs of my interventions as a business psychologist are, I would be rich. Still there are at least three main aspects we have to and can consider when thinking about the ROI of learning and development programs.
But let' s start from what ROI is: the acronym stands for Return Of Infestment and "on paper, ROI could not be simpler. To calculate it, you simply take the gain of an investment, subtract the cost of the investment, and divide the total by the cost of the investment. Or: ROI = (Gains – Cost)/Cost" (Investopedia)
For a more accurate review check this post by Dr Louise Suckley. Still, although there is a lot of litterature out there and also a wide range of complex and apparently accurate formulas, none seems to be the "Holy Grail" for ROI calculation.
So why not taking a more heuristic and intuitive approach? Here is my personal triad of fundamental criteria for ROI calculation:
- It's ROI not ROC: where you do write the numbers related to learning and development matters, do you use a budget for costs or for investments? Remeber a cost stys a cost, an investment may generate a return.
- Cheap training is cheap training: if you want quality you will have to pay for it; if you pay for a commodity, that's ok but you have to be aware that a commodity want change your business.
- Objectives are more importnat than expectations: if you do not have clear objectives you should not invest, as you will have no elements to determin your return: expectations about the training are focusing on the task and are poor predictors: HR, Consultant and Participants have to keep their focus constantly on the objective and goal; this alone is a strong predictor for effectiveness.
All in all, when it comes to ROI, intention matters!
Thanks for sharing and happy about your insights, add ons and comments, Paolo