20/20 Roi - return on investment

Training & Development, July, 2000 by Amy Purcell

Here's how LensCrafters, Sears, and Apple prove a clear link between training and financial results.

It was 1992 and Dave Palm at LensCrafters picked up the phone. It turned out to be the ultimate wakeup call. Palm, then training director, got the message loud and clear: Show us the return-on-investment or....

A frantic regional manager had called to tell Palm that LensCrafters executives were looking to improve the bottom line and couldn't find enough evidence that training programs were providing a quantifiable return on the company's investment. Yes, the manager said, executives knew LensCrafters associates had to be trained well to craft eyewear. Yes, they knew associates were satisfied with the training. And, yes, they were aware of the qualitative evidence that performance improvements among 12,000 frontline associates could be attributed to training. But they wanted to know whether all of the bucks were giving the intended bang.

"So, Dave," the regional manager asked, "What are you going to do about this?" Click. Gulp.

Many training professionals have a love-hate relationship with ROI: They love to hate it. It's time-consuming and can be complex, and it requires identifying and using appropriate quantitative measures. Many trainers don't take evaluation to Kirkpatrick's level 4, results; even fewer take it to Jack J. Phillips's level 5, ROI-the monetary value of training results exceeding the cost of training.

Conducting ROI using level 5 or similar statistical equations can

* increase your credibility and involvement in strategic decision making

* help you talk the same financial language spoken by other members of the management team

* get you more human and financial resources

* measure your personal performance development based on business results.

Steve Kirns, vice president, innovation and organization development for the Sears Company, knows the excuses but says trainers need to "get better at measuring ROI or risk being cut out."

Says Kirns candidly, "Training isn't something we do because it's cool or the company thinks it's cool. We do it because it's a viable way to help the organization grow and make money. [We still seem to] measure our training function by the activities...rather than the results. That's fine up to a point, but there comes a time when you have to get down to business, and that means measuring ROI.

"Frankly, ROI is hard and people are busy trying to do what they do best, which is design and implement. Some of the ROI measures we've conducted at Sears have required a good understanding of multivariance statistics and complex modeling techniques."

Kirns, who has been with Sears for seven years and has a Ph.D. in clinical psychology, is no stranger to statistics. But how do other learning performance professionals get down to the business of measurement?

Determining the value of training within a company's overall business strategy is the first step to deciding where, when, and how to conduct ROI measurements. Then, you need to understand your organization's overall business goals and the pain associated with them.

To uncover the pain, ask

* What metrics and measures does the organization value?

* What are the future strategies?

* In which areas are key financials faltering?

* What quantifiable outcomes are you looking for? Improved customer service? Increased productivity? Higher profits? Less turnover? All of those?

Partner up

Identifying the root cause of organizational pain around some areas is easy when you partner with top management to analyze financial results, customer satisfaction ratings, and key business drivers. The organization may already capture many of those numbers, which just have to be collected and collated meaningfully by you.

"We found it was easier to uncover the pain when we talked with our operations teams," says Palm. "If you look at the operations side of your business, you may have a better time finding the numbers you need to create ROI calculations. Working with operations upfront sets the tone early on that the intervention you'll be designing will address its concerns."

Once the pain is out in the open, you can partner with management to design an intervention that will help change or treat the root cause. Often, that can mean teaming up with your worst enemies -- number-crunching employees skeptical of your ability to link training to profitability, higher-quality output, and increased sales and satisfaction.

When Palm received that wakeup call seven years ago, training at LensCrafters was decentralized into three independently operating geographic regions. With no time on his side, he turned to his top trainers for ideas and chose a less-traveled path: partnering with the operations branch of LensCrafters.

"All of our executives have had operations experience," says Palm. "Their mindsets are focused on how to improve operations to remain the industry leader. By aligning with operations, we're now seen as a key strategic partner that can deliver tangible results."