When the CEO asks about the value of the HR initiative that cost $100 000.00, what will you say? And you will be asked! If not tomorrow, it will happen one day.
Here are responses the CEO would not be thrilled with:
Just because the CEO didn’t ask, it doesn’t mean it’s not important. In fact, your value increases when you take the lead for showing that the invested dollars in HR initiatives have a positive impact to the organization and how future programs can benefit from learnings of the study.
“First, you need to understand that people are not looking for reasons to justify your programs. They are looking for reasons to cut them. It’s always true, but it is particularly true in today’s environment. It is up to you to make your case; nobody else is going to do it for you. Second, realize that in lean times leadership tends to shift toward the CFO’s office. CFOs tend to make data-driven decisions and ROI is their gold standard. If others are providing it and you are not, then your training program is going to feel very soft and squishy to them and your position in the portfolio of initiatives is likely to sink like a rock.”
2. We had 5000 participants through training this year.
Jack Philips of the ROI Institute labels this as Level 0, which describes inputs and activity indicators. These figures do not show how the participants reacted (Level 1), what they learned (Level 2), how they applied their learning (Level 3), how their new skills and knowledge impacted the organization (Level 4), and the value that was generated (ROI).
The CEO will probably reply, “So what?”
3. I don’t have details on how the HR initiative is linked to business outcomes.
Sometimes we are so close to our projects that we forget that training and other HR initiatives need to be aligned to business objectives.
You have to show business alignment with business objectives to help you build the goals of the HR initiative; and then check for alignment throughout the whole process.
Your mission is to speak the language of business to provide benefits to the people you serve!
4. I’ll get right on it… (then ignore the request because you don’t know where to start).
While you didn’t take the initiative to start the ROI dialogue, you are ready now! This is the good news. Since you are new to ROI, the project moves to the bottom of your “To Do list”.
5. Everyone said they liked the training; and I am sure they are using their new skills and see the value in the program.
Did they like it enough to act on it? Are they using the learnings from the training? The issue is not if the training had value but how much value?
“Somewhere on someone’s desk sits a portfolio of organizational initiatives, which is continuously being evaluated and prioritized. Your programs are somewhere on that list, and whether you realize it or not your training budget is being discussed, challenged, and in times like these, attacked in the never-ending fight for resources. Your challenge is to fight your way to the top of the list, and ROI is your best weapon.”
How to Respond
Be proactive and plan for “showing the value” right into your learning programs… It’s worse to be asked when you have nothing and guess what, the time will come.
Using ROI as a forecasting tool will help you prioritize the HR initiatives that will have the biggest value. In using this tool, you will:
- Speak the language of business
- Have the information available to objectively show the value of all the projects on the table
- Build value and ROI into your processes
How do I get started in better understanding ROI
1) Get a copy of “Proving the Value of HR: How and Why to Measure ROI” by Jack J. Philips and Patricia Pulliam Philips.
2) Contact the Pillars at email@example.com in order to inquire about our next Executive Brief on December 4th entitled “Projecting ROI – A decision tool for Leaders”
Frequently Asked Questions:
Is it appropriate to do ROI for every program?
Only a few select programs should be subjected to evaluation all the way through to the fifth level of evaluation (ROI). Ideal targets include programs that are very expensive, strategic, operationally focused, and highly visible and those that involve large target audiences and have management attention in terms of their accountability. In most organizations using this methodology, only about 5-10% of the programs are selected for ROI analysis each year.
What types of applications are typical for ROI analysis?
The applications can vary, but usually include sales training, supervisory training, team building, executive development, communications, competency systems, software utilization, leadership development, diversity, orientation systems, compensation and benefits, reward systems, skill-based pay, career management, major projects, and wellness initiatives. These topics make excellent applications and have been documented with case studies in the literature.