Many organizations close their year fiscally around this time, which means that budget season is around the corner. This means that many Learning and Development (L&D) professionals face the challenge of convincing upper-management that L&D activities are worthwhile and worth the requested budget. This means translating L&D activities into chosen Key Performance Indicators (KPI’s) for the business’ performance, such as revenue or number of targets met. While there is a consensus that L&D does provide a valuable service for organizations, it remains difficult to pinpoint the actual Return on Investment (ROI).
There are several inherent issues with measuring the effect of L&D on the organization’s performance, of which we will discuss three. First, L&D has an indirect relation with business goals. Second, L&D and its effect are difficult to measure. Finally, there are many factors that affect an organization’s performance besides L&D practices.
Indirect relation with business goals
To begin, it is important to understand that L&D does not have a direct effect on an organization’s performance. All types of training, be it classroom, blended, or e-learning have an effect on employees’ job-specific and general knowledge, engagement, motivation, job-related behavior, and more. This in turn has an effect on the business’ performance. In essence, L&D practices affect the business performance through employee performance. This inherent complexity makes it difficult to measure the effect of L&D on business performance.
L&D and its effect are difficult to measure
While it is possible to measure employee and organizational performance, it is very difficult to determine how much L&D is responsible for an increase. This is because employee performance is not solely influenced by L&D practices, but by a great many factors such as: individual skills, knowledge, mood, job satisfaction, engagement, motivation, and more. The same goes for the business performance, which is affected by productivity, quality, innovation, turnover, and more.
Factors that affect an organization’s performance
If you made a mental map about the effects of L&D on business’ performance, it may look at little like this:
The next blogpost about ROI will dive into measuring each individual factor and making checks and balances between each.