The document discusses how to build a strategic business case for learning and development (L&D) investments in organizations. It suggests starting with the potential impact of L&D programs rather than just costs. It provides a framework to calculate return on investment and benefit-cost ratios for L&D programs to prioritize investments. The framework includes estimating fixed costs, per-participant costs and benefits, and number of participants to calculate total costs and benefits. It also discusses using participant feedback and estimates shortly after training to predict longer-term impacts and communicate performance against plans.

1. Organisational contribution of Learning & Development BILD Connect Workshop 14 th January 2009 David Vachell MA, FBILD

2. In many organisations, learning is not seen as a key driver for success What they want... What we do... What they do...

3. Learning & Development is one of the most significantly leveraged investments any organisation can make

4. We have a sound process and some ideas about how to evaluate learning and development programmes

5. But L&D professionals are still struggling to be taken seriously by business leaders Board Room

6. In this workshop we will attempt to develop .... an understanding of the issues some ideas an action plan

7. WHAT ARE THE GOVERNING FACTORS DRIVING INVESTMENT CHOICES IN ORGANISATIONS?

8. L&D is in competition for investment.... ...and it’s not a level playing field Investment in L&D Investment in other things Perceived Value of L&D Perceived Value of Other things + - + - + +

9. This system creates a “feast & famine” cycle Investment Time “ Our people are our greatest asset” “ L&D spend is not getting results” “ We need to do something to train these people”

10. Three broad stakeholder groups – each have different perceptions of value Value criteria Will it contribute to our strategy? Will it help achieve my team objectives? Will it develop me and my earning potential? Horizon Multiple years < 1 Year Depends... Control (investment) Money Time Commitment

11. So what is on the mind of your executive stakeholders?

12. HOW CAN WE BUILD A STRATEGIC BUSINESS CASE FOR L&D?

13. We frequently start with costs... ... try starting with impact For each participant in a programme: What is the potential gain in terms of... Cost Output Quality Time Programme Business Case elements Per Participant Benefits Variable (per participant) costs Fixed costs Benefit:Cost Ratio = Total Benefit/Total Costs

14. Get answers to level 4 questions for every intervention before you start What would be the benefit if people did more/less of….? What is the cost of people doing too much/not enough of….? How much/often does this happen?

15. A worked example Fixed costs: £10,000 Per Participant Costs: £200 Per Participant Benefit: £300 No of Participants: 200 Total Cost: £50,000 Total Benefit: £60,000 Benefit/Cost Ratio: 60,000/50,000 = 1.2 Return on Investment = Net Benefit/Total Cost = (60K-50K)/50K = 10/50 = 20%

16. Work out the projected ROI for all proposed programmes and order by BCR/ROI

17. The graph can be used to make tough decisions on programme prioritisation Target BCR Budget

18. Worked example Programme Fixed cost Per participant cost Per participant benefit No of participants Total participant cost Total cost Total benefit BCR ROI Cumulative Cost Cumulative Benefit A 35,000 50 150 2,500 B 2,000 500 1,000 400 C 10,000 1,000 2,000 100 E 5,000 1,000 2,000 20 D 5,000 1,500 2,000 150

19. You should end up with a table like this.... Programme Fixed cost Per participant cost Per participant benefit No of participants Total participant cost Total cost Total benefit BCR ROI Cumulative Cost Cumulative Benefit A 35,000 50 150 2,500 125,000 160,000 375,000 2.34 134% 160,000 375,000 B 2,000 500 1,000 400 200,000 202,000 400,000 1.98 98% 362,000 775,000 C 10,000 1,000 2,000 100 100,000 110,000 200,000 1.82 82% 472,000 975,000 E 5,000 1,000 2,000 20 20,000 25,000 40,000 1.60 60% 497,000 1,015,000 D 5,000 1,500 2,000 150 225,000 230,000 300,000 1.30 30% 727,000 1,315,000

20. This information can be used to communicate strategic decisions about programmes Programme Fixed cost ROI Cumulative Cost Cumulative Benefit A 35,000 134% 160,000 375,000 B 2,000 98% 362,000 775,000 C 10,000 82% 472,000 975,000 E 5,000 60% 497,000 1,015,000 D 5,000 30% 727,000 1,315,000 Total 57,000

21. IT IS ESSENTIAL TO COMMUNICATE PERFORMANCE AGAINST PLAN

22. There is frequently a significant time lag between action and visible response Average size of opportunity in sales reps pipeline compared to average overall 0% 50% 100% 150% 200% Wave Start Start+6 Start+12

23. Participant judgement can be used to predict impact and accelerate reporting cycles What percent of your total work time requires the skills and knowledge presented in this training? Estimate the degree to which you feel you can improve your performance related to this course subject matter. How much of the improvement will be a direct result of this training? Productivity Improvement = X * Y * Z * Weighted Annual Salary Example: X = 20% Y = 25% Z = 10% Salary = £25K Productivity Improvement = 0.2 * 0.25 * 0.75 * £25K = £937.50 If cost of programme = £500 BCR = 937.5/500 = 1.875 ROI = 87.5%

24. Participant judgement can be used to predict impact across the system and accelerate reporting cycles J K L Good use of my time Good investment by company Relevant to my role

25. Create dashboards that can be readily accessed by all stakeholders

26. Using this three stage approach could change the way that people development is viewed in organisations Use participant estimates to create timely impact assessments Use ROI practice to project impact results and prioritize projects Evaluate Programmes to create reliable and credible impact statements

27. Breakout conversations To what extent can we develop the perception of strategic value of learning & development? What specific actions will you take in the next 3 months?