The most consistent challenge for L&D leaders throughout the past 20 years has been the need to prove the ROI of learning investments and thus prove their contribution to strategic business goals. BV: Academic proof for the value and business contributions of L&D has been found by the new CrossKnowledge powered research initiative the CrossKnowledge Learning Institute (CLI), in collaboration with the Maastricht University. This article aims to illustrate the real truth about ROI and share the developed Learning Performance Model (LPM).
Since the L&D profession has been established some 50 years ago, practitioners have tried to measure the added value of learning and have found this their toughest challenge. Most measurement initiatives were aimed at demonstrating a direct relationship between learning and business goals. Although L&D is involved in supporting change initiatives business representatives are in many cases still doubting that L&D creates measurable value for an organization. Even though L&D practitioners may claim differently, in reality it is hard to measure direct effects, and thus the ROI of Learning and Development (Pease, Beresford, & Walker, 2014). Next to the fact that there is only a limited number of valid measurement techniques, the distance between an L&D intervention and organizational & financial outcomes is large (Boselie, 2014). This means that it is hard to isolate the impact of L&D on for example profit from other factors, since a profit increase may have several other causes (Pease et al., 2014). Therefore, indicators and measures used to directly assess the impact of L&D on business outcomes generally have low validity, meaning that there is no academic evidence that supports this notion.
The context of the Learning Performance Model
In order to fully understand and further use the Learning Performance Model (LPM) in the most appropriate way, the reasoning of the model will be clarified and illustrated by the framework below in figure1. Due to today’s fast changing economy, the business goals organizations set need to be revised constantly. Business goals relate to a firm’s performance, and include for example profit, productivity, quality, innovation or customer satisfaction. Megatrends, such as globalization 2.0, the environmental downturn, demographic change, individualization, digitalization and technological convergence (Hay Group, 2015) play a big role in the changing economy.
Figure 1 – Contextual Framework
When the best-fitted L&D practices are selected and implemented, the impact of L&D on the business needs to be measured in order to show the value of L&D in supporting the achievement of business goals. This step can be seen on the bottom right side of figure1. The intervention assessment implies a two-step measurement of (1) the impact from L&D on employee performance and (2) eventually from employee performance on the business goals. The results of these measurements after the implementation of L&D should show the desired improvements in organizational and financial outcomes. This can consequently be compared to the status before the implementation in order to justify L&D within the organization. The circular model of figure 2 moves on when new mega trends or changes in the economy arise, and the business goals need to be revised again.
Figure 2 – The circular model
The aim of this article is to add value to the views on demonstrating L&D’s contribution to the achievement of desired business results. Therefore we focus on the bottom right side (number 2) of figure 2. In order to operationalize our views, the ‘Learning Performance Model’ has been developed, especially as we believe existing ROI evaluation models are not serving their purpose
The Learning Performance Model (LPM): what’s different and new?
The LPM provides a tool for showing the effects and tangible outcomes of learning and further legitimizing the strategic value of L&D. It has been by building on the concept of the HR value chain (Paauwe &Richardson, 1997), and the Kirkpatrick’s model (Kirkpatrick, 1998). Our recent academic research has resulted in the Learning Performance Model – a two-step model, which shows the potential value of L&D by linking it to financial and organizational performance by using employee performance as a bridge. The general idea behind the LPM is that L&D interventions such as digital and blended learning, face-to face training and formal and informal learning have an impact on employees’ performance, which in turn has an effect on the financial and organizational performance. In line with Boselie (2014) we identified three types of outcomes of HR interventions that are applicable to L&D, namely:
- HR outcomes: job satisfaction, commitment, engagement, willingness to stay
- Organizational outcomes: productivity, quality, innovation
- Financial outcomes: profit, sales, market value
Combining this with the HR value chain we argue that HR outcomes manifests the bridge between L&D and business goals. To avoid confusion with the HR department, and to clarify that the bridge is built by the performance of individual learners, we renamed ‘HR outcomes’ into ‘employee performance”.
The Learning Performance Model revealed
Figure 3 – Presentation of the Learning Performance Model
The impact of Learning and Development on competence aspects: the 1st step –
The LPM, as can been seen in figure3, refers to knowledge and skills, talent development, leadership and agility as important examples of competence aspects, which can be positively affected by L&D interventions. This selection is derived from insights we gained during the interviews with L&D practitioners and CLOs. In order to acquire certain competences employees need to be trained on knowledge and skills. The learning of knowledge and skills can occur in formal or informal settings and equip the employees with specific knowledge or skills (Bertram & Roe, 2008). (Berings, Poell, & Simons, 2008; Eraut, 2007; Van der Heijden, Boon, Van der Klink & Meijs, 2009). L&D plays an essential role in increasing employees’ competences. An induction program is a perfect example of an L&D intervention to equip new joiners with the knowledge and skills necessary to function in their new environment, team and role.
The impact of competence aspects on business goals: the 2nd step –
Employees’ competences are an important key to organizational success (Salas et al., 2012). It is an established fact that organizations’ competence pool has a significant impact on organizational as well as on financial outcomes (Nagendra, Shyamsundar & Naidu, 2013). Furthermore, resources that are valuable, rare, difficult to imitate and supported by the organization, contribute to a competitive advantage (Boselie, 2014; Nordhaug & Gronhaug, 1994). This view implies that L&D can also contribute to competitive advantage in case they are trained in such a way that their knowledge and skills make them valuable, rare and difficult to imitate. Hence, the more and better an organization trains its employees the more likely this organization will achieve a competitive advantage on the market. Literature provides evidence that highly skilled employees will have a positive impact on organizations’ financial and organizational performance. More specifically, they can increase customer satisfaction, profit, market growth, productivity and innovation. In the case of an induction program new joiners who are onboarded in a structured way and have acquired the relevant competences will be productive faster in their new role with higher expected achievements.
The impact of Learning and Development on motivational aspects: the 1st step –
Nowadays attitudinal and behavioral concepts such as work engagement, job commitment, job satisfaction and employee motivation belong to the most popular and desired HR outcomes (Boselie, 2014). Organizations increasingly realize that putting effort in building a bond to their employees and investing in increasing employee well-being and satisfaction pays back in multiple ways (e.g. in terms of decreased turnover rates or higher productivity) and hence contributes to the achievement of business goals (e.g. Hay Group, 2015; Harter et al., 2002; Saks, 2006). In the LPM we cluster engagement, commitment, motivation and satisfaction under the headline ‘motivational aspects’, since all constructs are strongly related to both the motivation to stay within one’s organization and to contribute to its business goal. The idea to cluster it in that way is derived from insights gained during the interviews with practitioners and CLOs. Besides this practical foundation this way of clustering can also be inferred from academic literature (e.g. Koys, 2001; Saks 2006; Tett & Meyer, 1993). Various academic studies found a positive relationship between employee commitment and access to training (Bartlett, 2001) as well as the perceived extensiveness training and development opportunities offered by one’s firm (Erhard et al., 2001). Also Rose et al. (2009) found a positive relationship between learning in organizations and job satisfaction. Furthermore, they detected that job satisfaction is bridging the relationship between learning activities within the organization and an employee’s work performance.
In summary: there is plenty of evidence available to justify the positive, direct effect of L&D on desirable outcomes such as employee commitment, job satisfaction, employee engagement and motivation. These outcomes provide L&D a great stage to argue for the relevance of their activities for the business and reinforce our case for the Learning Performance Model. In the case of an induction program new joiners are expected to be far more motivated and engaged if they are onboarded in a structured and well guided way.
The impact of motivational aspects on business goals: the 2nd step –
There is a lot of evidence available that employee commitment, job satisfaction as well as employee engagement and motivation can contribute to the achievement of business goals in several ways. Employee commitment has shown to have an impact on many desirable business outcomes. For example, in their meta-analysis Meyer et al. (2002) revealed that significant negative correlations exist between commitment and turnover and voluntary absenteeism as well as a positive correlation with employee job performance and extra-role behaviour- all aspects that are relevant for the organization’s financial outcomes and general performance. Wilson and Frimpong (2004) found a strong correlation between employees’ job satisfaction and provided service quality to the customers. Promoting the positive feeling of job satisfaction within an organization also pays back in terms of higher innovation rates, hence increasing the organization’s chance for growth and long-term survival (Shipton, West, Parkes, Dawson, Patterson, 2006). Employee motivation has shown to be an outcome that has a positive effect on the achievement of business goals. For example Koys (2001) detected in a longitudinal study it is positively related to profitability in the hospitality industry. The above illustrates that the motivational aspects can have a remarkable impact on the achievement of business goals. As such, employee commitment and employee engagement can have a negative effect on employee turnover. In the case of an induction program new joiners who are onboarded well and are engaged and committed are expected to deliver a high degree of service quality and stay longer, thus reducing the organization’s cost of recruiting and onboarding (Meyer et al., 2002) and thereby improving its financial performance.
Measurements and the Learning Performance Model
We recognize that to make the LPM fully operational and serve as an enabler to CLOs it needs to be further complemented with measurements. Therefore, in order to answer the question of whether learning objectives were achieved and whether the accomplishment of those objectives resulted in enhanced financial and organizational performance, the effects of L&D need to be measured. Since L&D can have an impact on different levels, multiple measures of the different outcomes, such as the motivational and competence aspects as well as the financial and organizational performance, are required. In our upcoming White paper on the Learning Performance Model we will provide a selection of common measurements referring to the different components of the LPM: competence aspects; motivational aspects; organizational performance; financial performance.
The CrossKnowledgeLearning Institute (CLI) has conducted research, developed the Learning Performance Model (LPM) and supported the relationships within the model with evidence, thus uncovering the real truth of ROI. It became clear that L&D not only enhances employees’ skills and knowledge but also affects employees’ attitudes and behaviors. In a second step, these outcomes further contribute to a variety of aspects of organizational and financial performance. This way, the presented selection of research findings in this report can provide L&D professionals with convincing arguments about the indirect effects of L&D activities on business outcomes. This makes the Learning Performance Model not only academically relevant, but also practically useful. The LPM can serve as a basis for follow-up research with academic institutions, especially in the areas of measurement and how to adapt the model to each specific organization to ensure the right fit between L&D and business to make it even more practical for the L&D community.
The CrossKnowledge Learning Institute (CLI) enables CrossKnowledge clients to tackle strategic L&D challenges by providing expertise, partnership, insights & solutions.
By: Anja Emonds, Boy Wijenbergh & Jan Rijken