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The Human Capital Return On Investment

A paper from Global Learning Alliance and Knowledge Advisors

Part 1 - About this paper

The purpose of this paper is to explain the need for ROI in the training and measurement space and then articulate a methodology to obtain an ROI for training based on the increase in human capital that is realised through the training.

The ROI methodology is one that is replicable and scaleable so that it may be collected and reported in a cost efficient and timely manner and such that it is comparable and benchmarkable both within an organisation and external to the organisation.

Why the need for ROI in Training?

If one looks at any facet of business the concept of 'return on investment' (ROI) is always a relevant business topic. ROI can have many connotations depending upon the users perceptions and motivations. In reality, ROI is really a measure of perceived value. Value can be different for different stakeholders. Let's look at some examples:

• An organization provides training to a group of participants. This person wants to know the satisfaction levels of the participants.
• A course designer creates an e-learning module. This person wants to know if the module did its job in transferring new knowledge or skill to the learner.
• A business unit manager sends two employees to training. This person wants to know the impact the training has made on the job.
• A senior executive measures performance by the business objectives that drive the company. This person wants to know the degree to which training has helped drive key business results.
• The finance group manager views benefit relative to cost on every decision. This person would want to know the benefit to cost ratio, payback period and ROI percentage from training.

Value is inherent in each of the aforementioned examples. So the first question one should ask when contemplating an ROI solution is 'How does my user of this information define value?' Having said that, there is strong need to ensure that one has a balanced approach to learning measurement. A balanced approach should be able to accomplish all stakeholders' perceptions of return on investment.

The best approach to accomplish this balanced scorecard is the legendary and time-tested Kirkpatrick Model, with the additional fifth level added by Dr. Jack Phillips.

Back to Top > Part 2 - Learning Measurement Levels   

© 2004 Global Learning Alliance and Knowledge Advisors. Reproduced with permission. Any opinions or views contained in this article are solely those of the author and do not necessarily represent those of Training Reference.

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