Understanding the ROI of a corporate initiative or activity is a reasonable expectation in any business. Business leaders can more clearly see the long-term value of talent development initiatives when they understand how the investment in employee development aids organizational effectiveness.
While most would agree that employee development is worthwhile, measuring its ROI can be a challenge for learning and development departments. Different training can yield different effects over time, and some factors—for example, the quality of an employee’s decision-making capability—can be hard to quantify. However, by focusing on certain metrics and characteristics of employee behavior, you can successfully show a clear talent development ROI. Here’s how:
Track Metrics and KPIs
When looking at the ROI of talent management initiatives, it’s important to show how the investment in employee development impacts overall company performance. While it’s helpful to understand metrics such as the training spend per employee, the investment must ultimately link to results. That’s why performance-driven metrics and KPIs (key performance indicators) can be so effective in telling the real story of the value of training beyond just cost. For example, KPIs for customer service training might include the impact of training on average customer satisfaction ratings, the amount of time per customer interaction, or the rate of return business. When KPIs are measured both before and after training, it’s possible to more clearly see how training impacts performance levels across teams and departments.
Other useful metrics might include employee retention levels before and after training, or the number of training days per employee. You can also measure employee feedback gathered before, during, and after training, which can provide insights about learning progress and which topic areas resonate most (or least) with participants.
The whole point of introducing talent development initiatives is to change employee behavior and performance, and measuring changes in employee performance can help to complete the picture of training ROI. Here are a few ways to measure the impact of talent development on employee performance:
- Establish a baseline of performance before training and use this as the starting point against which you can compare employee performance after training.
- Track the performance of individuals against the metrics and KPIs you’ve already identified for training. Compare individuals and teams so that you can see the range of training impact across teams.
- Compare employee performance against what is possible. The closer employee performance gets to the goal can also show the effectiveness of talent development initiatives.
Look at the Leadership Pipeline
Talent development initiatives are often designed around the core competencies that are important within each organization. Training ROI can be teased out of observations of employees’ long-term success across a range of competencies. For example, the effectiveness of your talent development initiatives can be seen in the rate at which emerging leaders are ready to move into mid-level or senior-level leadership positions. You can better understand this by examining whether the organization has a strong leadership pipeline to implement its succession plan, or if you always need to hire senior leaders from the outside. If training initiatives are successfully preparing individuals for the future of the business, that can provide insights into the overall effectiveness of the company’s investment in talent development.
Every investment must show its value, and while showing the ROI of talent development may be challenging, it’s not impossible. The methods used to show ROI will vary depending on your chosen metrics. Some will be quantitative while others will be more qualitative. Changes in employee mindset and behavior can be measured. You can maximize training ROI over time by linking training with the metrics that make the most sense for your business.