By Ajay M. Pangarkar, CTDP, CPA, CMA, and Teresa Kirkwood, CTDP
A lot of rhetoric is swirling about how to effectively validate “learning” effectiveness…and we believe much of it is misleading advice. No one is disputing that learning must be effective and accountable. However, don’t confuse these two distinctive requirements. To communicate learning effectiveness to business leaders, you must clearly define your initiative’s “validity” relative to how it aligns with Kirkpatrick’s Level 3 and 4 expectations.
Here’s how business leaders define “validity”: Validity begins with how business leaders allocate available resources for proposed initiatives. Managers are under tremendous pressure to achieve specific business objectives by leveraging scarce financial and human resources. They base decisions on how well each initiative utilizes available resources to achieve these objectives. Simply put, leaders validate each initiative’s effectiveness in relation to how well it achieves business objectives.
The first myth about learning effectiveness is that learning professionals must financially prove the results for their initiatives. Business leaders generally view training in one of three ways:
- A necessary requirement. For the majority of training, leaders treat it as an expense and don’t usually measure its effectiveness (e.g., onboarding).
- As part of a major effort. In this instance, leaders view training as a component of a major business initiative (e.g., a new product launch).
- As a tangible capital investment. When there is a significant tangible learning investment for the long-term return it presents (e.g., a learning management system or e-learning technology).
With this in mind, those responsible for learning activities must present a clear business case addressing why a business leader should accept, let alone implement, the initiative. Business leaders recognize the relevance for employee development. However, it emphasizes the critical choices leaders make when allocating financial resources. So it is critical that the learning initiative differentiates between learning effectiveness and accountability.
This is where it gets a little messy. Learning professionals are inundated with the financial management term, “return on investment.” The “training ROI” methodology is applied inappropriately, according to accounting and financial guidelines. In short, ROI falls short to properly evaluate training.
First, building an effective business case for any learning initiative requires management support. Delineate between what business leaders refer to as training “expense” and a learning “initiative.” Don’t waste your time attempting to validate typical training expenses. Validate only when training is a component of a major business initiative or is a significant tangible investment.
Next, identify performance expectations. For learning professionals, this is Level 3 and 4 where business leaders refer to performance management. Business leaders don’t care how you improve employee performance (L3), only that performance improves to achieve specific business objectives (L4).
Finally, building a credible business case for learning initiatives requires understanding how your leadership measures the initiative’s financial accountability. Here’s a hint: They don’t use ROI. Business leaders clearly differentiate between investments and expenses, and training is an expense, not an investment. Leaders conduct ROI only on tangible investments contributing to long-term growth. Many learning experts argue that learning is an investment because it contributes to long-term growth. According to accounting guidelines, this statement is false since “learning” outcomes are intangible, and it is difficult to prove learning’s long-term contribution to growth.
Here’s a typical example of how business leaders financially measure training. You propose a multi-year blended learning initiative involving an e-learning component. Business leaders measure the tangible components (e-learning technology, LMS) as the investment, measuring the long-term return through a financial calculation (e.g., net present value, payback, etc.). But they financially measure the actual training activity only as business expenses.
Before quickly using any type of evaluation methodology, think about how business leaders will perceive your proposal. Business leaders are regularly “pitched” many business initiatives and must make well-supported decisions that provide the best opportunity to achieve organizational objectives. Incorrectly applying management accounting measures without a proper business case reduces your chances of success.
Ajay M. Pangarkar, CTDP, CPA, CMA, and Teresa Kirkwood, CTDP, are founders of CentralKnowledge.com and LearningSourceonline.com. They are employee performance management experts and three-time authors, most recently publishing “The Trainer’s Balanced Scorecard: A Complete Resource for Linking Learning to Organizational Strategy” (Wiley 2009). Help them start a “Workplace Revolution” at blog.centralknowledge.com or contact ajayp@centralknowledge.com.
