Why Does 93% Of Learning & Development Have No ROI?
Why
If you and your team are responsible for Learning & development in your organisation, are marginalised or ignored, regularly have your budget cut or receive no budget at all then it's highly likely you have failed to demonstrate an ROI for the training you have arranged or delivered. CIPD & Forbes regularly publish articles and reports on the scale of this problem, which will give us a toe hold on why Learning & Development is typically not taken seriously as a strategic investment to advance an organisations cause.
What?
To better understand the lack of L&D strategic investment we will cover the approaches the majority of organisations take to assess the value of their learning and development programs as well as the level of follow up to ensure learning is embedded, leveraged and measurably contributes towards business outcomes.
How?
We will deconstruct what CIPD and Forbes have reported and put it in measurable practical terms by answering 2 key questions:
What are the typical metrics used to report L&D ROI? Revealing the correlation between cost & ROI.
What is the impact of L&D that’s not embedded? Revealing the correlation between accountability & cost.
ROI Reporting
This is a model I created based on information freely available from Forbes & CIPD. In February 2014 Forbes reported the USA alone spent $70Billion on Learning & Development annually, with the overall global spend around $130Billion. In 2019 Forbes reported this figure had risen to $166Billion in the US alone and $366Billion worldwide. In 2015 CIPD reported L&D evaluation trends in the UK, which Forbes reports as similar in the US has not changed in almost a decade since. As the USA and UK are culturally and economically similar I think it's fair to speculate we can apply both sets of data to both nations, probably even worldwide. When we do, this is what we find:
Source: Learning & Development Reporting Based on CIPD, Forbes & Kenny Wallace 2019
CIPD surveyed company’s in the UK to better understand what, if anything, company’s did to best ensure Learning & Development was aligned to business strategy. The results are eye-opening to say the least. I’ve expanded on the definitions in the model to provide context and clarity:
51% only ever asked if their participants had a nice time, not whether it was relevant or useful.
42% only ever asked if their participants learned anything, but did not enquire as to what.
7% believed they had aligned training to business need, but did not provide any evidence they had.
Even if we give the 7% the benefit of the doubt and assume they did in fact align learning & development strategically with business need the results demonstrate, at best, 93% had no idea if their learning & development program was of any benefit to the execution of their company strategy.
Due to the evidence suggesting that Learning & Development is typically not linked to business objectives it’s fair for any business leader to assume that L&D is a cost and not an investment, even though the opposite might well be true in some cases. I think it’s fair to say no L&D professional can defend this position if the best they can offer is the participants had a nice time. Your budget deserves to be cut until you can demonstrate a credible link to business strategy, but evidence of impact in practical terms, for example implementing line manager training for a leader with poor team member retention or failing to deliver objectives.
The training effect should manifest as improved employee retention or objectives delivered OTIF, both of which can demonstrate a financial benefit in terms of money saved or money made compared to before. If after the intervention the leader is still under performing you have evidence they should be removed from post and replaced with someone competent, which still provides a financial benefit as this still solves the original problem and demonstrably relates to business objectives, and therefore strategy.
With this in mind; What happens when we add employee personal responsibility to implement what they've learned and employer duty of care to hold participants to account via their line managers and management reporting performance metrics?
Reponsibility & Accountability
This is a model I created by combining the work of Hermann Ebbinghaus, a Psychologist who pioneered the experimental study of memory with the financial data provided by Forbes. Over a century ago Ebbinghaus discovered the information retention drop-off rate when someone is not held to account for putting immediately in to practise what has been learned, known as the forgetting curve. We can correlate the retention drop-off rate with the global annual Learning and Development budget. When we do, this is what we find:
Source: Based on Hermann Ebbinghaus Forgetting Curve, Forbes & Kenny Wallace 2019
To put these results in to context, lets imagine all learning taking place globally ends on the same day at the same time, say Friday at 17:00. By the time participants are 20mins in to their commute home $154 Billion has already vanished. By 17:00 on Monday the following week around $264 Billion of the original $366 Billion investment has been wiped out.
Its likely this forgetting curve plays a major role in why L&D is not taken seriously as a strategic component as the previous model demonstrated that not only do 93% of businesses fail to ensure the training being delivered is relevant or useful, this failure also suggests there is no follow up to hold participants to account for implementing what they learned.
When learning and development is done well, i.e. aligned to business strategy and embedded in company culture, a default part of a line managers role is to coach their direct reports to repeatedly leverage what they've learned until it becomes automatic and there for part of their daily routine. This data indicates reality is far from this scenario.
How does what we’ve uncovered affect individual and organisational performance?
High Performance
The model below is based on a matrix created by Dr Mihaly Csikszentmihalyi, Professor of Psychology at Claremont Graduate University, who was first to formally investigate the traits associated with high performance, which he collectively called Flow; A highly focused mental state conducive to productivity. I have modified it for a business context to correlate a leadership style with its individual and organisational impact by looking at the relationship between Challenge, defined as: Degree of difficulty to be overcome, and Support, defined as: Available resources. Four organisational states emerge. In the context of this case study we are only interested in the Flow quadrant.
Source: Based on Massimini, Csíkszentmihályi & Carli 1987 and Kenny Wallace 2019
These four cultural archetypes also correlate with specific behaviours that can be measured in any individual, team or organisation.
Anxiety: Missed deadlines, avoidance of interaction, negatively impacts employee sickness absence.
Apathy: Absence of enthusiasm or presence of indifference, negatively impacts employee retention.
Comfort: Lack of activity and accountability, negatively impacts employee productivity.
Flow: Pro-active, self-directed, emphasis on personal responsibility, positively impacts all of the above.
Any organisation that has aspirations of a high performance culture should understand that Training & Coaching is embedded at the core of this type of culture. By definition the SMART Objectives would intrinsically link Learning & Development to business strategy. The SMART Behaviours would be L&D practitioners offering a L&D Strategic Advisory Service that delivers targeted training, automatically supported by line managers coaching their self-directed direct-reports on an ongoing basis. If this is not how you operate then you have demonstrated to yourself you do not have a high performance culture, and nor will you ever.
Conclusion
So what?
Learning and Development is not taken seriously as it typically remains disconnected from business strategy, which essentially lays at the feet of the L&D practitioners. The practitioners are clearly not thinking strategically in order to ensure what they deliver and when they deliver it correlates with the skills development needed to achieve business outcomes.
Not only is Learning & Development not strategically targeting problems that need solved there is no evidence that any of what was delivered was in any way effective. L&D is obviously delivered by the majority of organisations as a one hit wonder then more or less forgotten within 7 days.
Without Learning & Development embedded in your culture as a strategic component you do not, and cannot have, a high performance culture. Any organisation with World Class aspirations considers training and coaching business as usual. Believing and claiming anything else is an act of deception.
Now what?
If you continually fail to demonstrate how your Learning & Development effort links to business strategy and the benefits it can generate then you will continually be pushed aside. It's up to you, as the L&D practitioner to build your business case and demonstrate the value add well enough to convince your stakeholders to spend their money on your endeavour.
One hit wonder training at scale is pointless, nothing more than a box checking exercise. Expecting one hour or day of training to stick and deliver a quick win or paradigm shift at scale is delusional. This is no different to crash dieting for a day, looking in the mirror after 24hrs and expecting to see a significant physiological change. Excellence in any endeavour requires purposeful practice to provide incremental performance improvements over time, especially at scale.
Its been proven time and time again that targeted training & coaching with accountability does work, in fact it’s extremely effective. We've each being doing it automatically since birth. Its how we learned to talk and walk, find friends, ride a bike, play a sport, drive a car, build furniture, decorate a home, find a job, the list goes on and on. There is no excuse for not being able to apply the very same principles to a business environment, perform well and achieve mission success.
What next?
Now that you have a better understanding of why Learning & Development is not taken seriously as an essential strategic business component:
Are you and your team, about to embarked on, or have already embarked on creating and delivering a Learning & Development Strategy? If so, what considerations are you now aware of that you hadn't previously thought of?
Given the demonstrable need to ensure Learning & Development intrinsically links to business strategy; What steps will you and your team take to establish this as fact?
With the knowledge that, when learning and Development is done well, training and coaching is demonstrably effective; What will you do mitigate the issues the data in this case study raises?
Take your learning one step further and complete my Case Study Review. Capture your learning from this case study and commit to changes you deem relevant for your situation. A copy of your completed review will be emailed to you instantly.
For further insight on the value of Learning & Development do read: How Much Does Incompetence Cost Your Organisation?, in which mathematical certainty puts a financial number on the cost of individual & organisation incompetence.
If you are in the process of creating or delivering an Learning & Development strategy for your organisation, are encountering resistance and hurdles and you relate to the issues raised in this case study then you do consider working with me.
