There is an anecdote that recounts a CFO asking a CEO, “What happens if we invest in developing our people and then they leave us?”. To which the CEO states, “OK. But what happens if we don’t …and they stay?” In Australia today, every medium to large organisation spends something on the learning and development (L&D) of its staff. However, it is also demonstrably true that most organisations do not optimally target this spending, nor meaningfully measure the effectiveness of the money invested in this area. There was either no ROI on learning and development spend or its measurement was inadequate.
A study published by the Australian Human Resources Institute (AHRI) in late 2013 showed that out of 561 respondents, 13.4% did not actually know how the return on investment for learning and development was measured. A further 19.9% testified that it wasn’t being measured at all. Importantly, 16.7% of respondents reported that their organisations measured the return through participant self-assessment. On this last finding, many studies have shown that participant evaluations have no validity as a general indicator of learning outcomes or of teacher effectiveness.[1]
Putting these numbers together exposes that an astonishingly high figure (50% of respondents) report either not knowing, not measuring, or ineffectively measuring the ROI on their L&D spending.
Given the current economic climate, to maintain competitive advantage and motivate their people, private sector organisations need to critically think about properly measuring, targeting and monitoring this spending; linking it to business objectives and meaningful individual development plans.
Although not specifically covered in the AHRI report, I believe the situation is direr in the Federal public sector. The situation here is that many agencies are downsizing. There is a current freeze on external recruitment, staff are experiencing fatigue from constant ‘machinery of government’ changes, and performance appraisal processes are implemented poorly and inconsistently. [2]
[1] See Galbraith, Merrill and Kline in Research in Higher Education, May 2012, Vol.53, Issue 3, pp. 353-374. [2] See specifically Chapter 8 of 2011-2012 State of the Service Report.