Proving the ROI of Leadership Development
“Just getting started” is one of the biggest challenges leadership, learning, and talent development professionals face when implementing an ROI study, says Jim Irvine, global dean of leadership & professional development at Nissan.
“Most people assume they need to create a study as rigorous as one they’d put in an academic journal article, but that’s not always necessary,” says Irvine. “Senior leaders mostly want to know that the money being spent for development initiatives is having a positive impact on the bottom line. We’ve recently started doing ROI studies that are more manageable in scope, with maybe a hundred participants, that perfectly accomplish this objective.”
To help with the process, Irvine brought in ROI expert Dr. Paul Leone of MeasureUp Consulting.
“Paul suggested we scale back and focus on just one of our leadership development programs—Blanchard’s SLII® program—and measure how the training impacted participants’ job behavior, how the new behavior impacted performance, and how that performance impacted business metrics.
“The good news is that planning ahead made the process easier than we expected, especially because we were able to use existing business metrics,” says Irvine. “By starting with those measures and working backwards, we could more easily show the financial impact of the training.”
In Irvine’s case, the proposed ROI study looked at how the SLII® leadership training program impacted business metrics across three countries, five locations, and four functions—engineering, sales, marketing, and finance. The study was structured not only to measure self-reported data from the participants but also to include corroborating data from their bosses and direct reports.
“Paul helped us create a post-training survey that we sent to participants, their direct reports, and their bosses. The survey takes less than five minutes and asks each group if they observed changed behavior on the job, whether that changed behavior impacted their performance, and, if so, by how much.”
Irvine and Leone started with a standard five-level evaluation methodology that included traditional measurements such as:
- Did participants like the training?
- Did participants learn anything?
- Did they adopt new behaviors?
- Did the behaviors impact performance?
- Did the bottom-line impact exceed the costs of the training?
Irvine expected significant differences between participant reported data and the observations of the participants’ direct reports and the bosses—but that wasn’t the case.
“Going in, Paul told us that the difference would probably be within 10%, and that’s what we found. For example, in one metric, participants estimated they improved their performance by 64% versus the direct report’s estimate of 61%—only a three-point difference. That surprised me.”
The study also looked at a sixth level of measurement, which Leone created, and which helped one of his Verizon case studies win the 2019 Brandon Hall Gold Award for best advance in measuring the impact of leadership training. Level Six looks at climate factors that help or hinder the long-term impact or sustainability of training. The factor that had the most impact on results was manager support: participants whose managers actively supported their training generated the most financial impact.
“Paul showed us a simple way to run the data for employees who received high manager support separate from employees who received low manager support,” says Irvine. “From there, we looked at the impact of high manager support on behavior change and how that change affected performance metrics. Isolating these differences and monetizing their value told a compelling story.
“Overall, we achieved a 452% ROI on the SLII® training investment. When we looked at the Level Six climate factor, we found a 1.3 times magnification factor on that ROI for employees who had high manager support compared with employees that received low or fair manager support. That was more than a $3,000 difference in ROI alone. Those are the kinds of numbers senior executives are looking for when making budgeting decisions concerning training.”
For L&D professionals who might still be sitting on the fence about conducting their first study, Irvine has some encouragement.
“If you are new to ROI studies, the first lesson is to partner with an expert. We do that in so many other things—if you're not good at auto mechanics, you hire a mechanic. If you’re not good at information technology, you outsource it. Do the same with ROI.
“Here’s the second lesson: don’t wait to do an ROI study until the end of the year after you’ve run all of your workshops. Plan your study at the beginning so you can schedule your workshops around collecting your data. Identify existing performance metrics that your organization is already collecting on a regular basis. Then schedule your leadership training around those measurements, with those participants in mind.
“Finally, use short, five-minute surveys when conducting your post-training evaluations. Administer them to participants, their direct reports, and their bosses.”
From there, it’s a simple ROI calculation, says Irvine. “Take the benefits of the training, subtract the cost, and then divide by the cost. With a little help, you can do this. Plan your ROI study before you deliver the training and then follow the plan. Get a partner, plan early, and focus on existing metrics to start. This process will help so much with demonstrating the impact of leadership development to others. Don’t wait—start planning your first study today!”
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Would you like to learn more about conducting an ROI study in your organization? Join us for a free webinar!
Conducting Your First ROI Study: How to Get Started
Wednesday, November 20, 2019, 9:00 a.m. Pacific Time
When you are asked to provide justification for your training budget, are you excited to defend your request because you have the data to support it—or are you sick to your stomach because you don’t? In this webinar, Jim Irvine, global dean of leadership & professional development at Nissan, shares an easy-to-use process for calculating ROI to show the bottom-line impact leadership training has on organizational results.
Showcasing the Level Six approach created by Dr. Paul Leone of MeasureUp Consulting, participants will learn:
- The What and Why of ROI—making the business case for conducting an ROI evaluation and the key steps in conducting an ROI study—what it is and why it is important.
- ROI Myths and Realities—five common myths that stop many initiatives before they’ve even begun—and how to get past them.
- Identifying Key Success Factors—how to identify the climate factors that positively impact training effectiveness using a Level Six evaluation process and strategy
Participants will also explore a step-by-step case study of the ROI evaluation recently completed at Nissan, including a real-life example of an executive report done four months after the training.
Don’t miss this opportunity to learn how to measure the impact of your training initiatives. Leadership, learning, and talent development professionals instinctively know that training improves the performance of leaders in their organizations. Get started in planning your first ROI study so you can prove that return on investment to others in the organization.