Introduction
In today’s challenging economic ecosystem, maximizing ROI for every expenditure is top of mind. Simultaneous with the challenges of financial uncertainty is the reality of skills gaps and employee turnover, primarily due to the lack of growth opportunities within the organization’s structure.
- 94% percent of workers would stay at their jobs longer if they had been given a chance to learn.
- 70% of workers say they don’t have the skill sets required to perform their tasks well.
- Hiring from the outside can cost up to 6 times more than building from the inside.
Creating a culture of learning allows for mobility within the organization and enables professional development and satisfaction. It also empowers businesses to be ready to pivot to meet new market challenges and competition.
Upskilling and reskilling programs are powerful tools on many levels. However, maximizing ROI when designing learning and development programs is critical for C-Suite buy-in and support.
Closing the Skills Gap
Addressing skills gaps is more important than ever, especially in today’s hyper-digitized post-COVID world. McKinsey’s Global Survey found a clear recipe for success when companies implement intensive and sustainable skill-building programs. Such a commitment to reskilling and upskilling enables employees to adapt to the fundamentally changing requirements of their current role or move into new ones.
Why Demonstrating ROI of Upskilling and Reskilling Programs Is Critical
Justifies The Cost
Demonstrating the real ROI of an upskilling or reskilling program helps the C-Suite understand the costs and justify the investment to other stakeholders, such as board members and investors. Furthermore, it provides vital information about the program’s value and how it integrates into the business’s overall goals.
While the potential financial benefits of employee training programs are significant, it’s critical to demonstrate the actual ROI and effectiveness. However, L&D programs are more likely to use metrics such as completion scores and satisfaction rather than hard data on the organization’s ROI. (LinkedIn Learning’s 5th annual “Workplace Learning Report”)
Ensures Ongoing Support
Ongoing support from leadership is critical to the success of your upskilling and reskilling programs. Demonstrating the ROI helps keep leadership committed to the program. They’ll also understand the downsides if the program is suspended.
Builds Credibility
Demonstrating the ROI of upskilling and reskilling programs builds credibility for the L&D and HR departments. This can strengthen the long-term trust and cooperation between you and the C-Suite.
Methodologies to Demonstrate the ROI of Upskilling and Reskilling Programs
Let’s look at a few methodologies that have been used to demonstrate ROI.
Pre-Post Analysis
This methodology involves measuring key performance indicators (KPIs) before and after implementing your upskilling and reskilling programs. Set the KPIs according to the organization’s goals, as well as those of the program.
Cost-Benefit Analysis
This is one of the most straightforward methodologies for demonstrating the ROI of upskilling and reskilling programs. First, compare the total costs of implementing the program (staff, training materials, technology) to the benefits gained from the program (reduced employee turnover, increased productivity and innovation,and improved employee satisfaction). Once you’ve quantified the costs and benefits of the program, you’ll be able to calculate an ROI ratio to help to justify the program’s value.
Kirkpatrick’s Four-Level Model
The Kirkpatrick methodology involves measuring the ROI of the program by looking at four different levels:
1. How participants feel about the program
2. What participants have learned
3. How participants apply what they’ve learned
4. Impact of the upskilling and reskilling program on business or organizational performance
The Harvard Business Review provides a similar matrix for measuring the ROI of upskilling and reskilling programs.
People metrics:
- Employee satisfaction
- Employee retention
- Skills development
- Leadership development pipeline
Productivity metrics:
- Improved efficiency
- Improved innovation
- Progress of digital transformation
Organizational Culture metrics:
- Level of team collaboration
- Changed mindsets
- Establishment of an agile culture
Profitability metrics
- Revenue growth
- Market share
- Profit margin
- Customer satisfaction
Social Network Analysis
This methodology measures the ROI by examining how relationships and cooperation among staff have changed post-implementation of the upskilling or reskilling program. Has there been quantifying improvement in communication patterns, how knowledge is shared, and increased collaborations between employees and teams?
The methodology you choose depends on the data collection resources available to you and your organization’s overall goals.
Some Proofs of the ROI of Upskilling and Reskilling Programs
Companies with strong, sustainable upskilling and reskilling programs have a 1.5% higher market capitalization rate than their peers. (McKinsey & Company)
Companies that invest in employee training and development have a 24% higher profit margin than those that don’t. (Association for Talent Development)
Upskilling and Reskilling improve productivity and performance. Employees who participate in training programs are 17% more productive than those who don’t. (Society for Human Resources)
Employees participating in upskilling and reskilling programs are 10% less likely to leave their job. (IBM)
Upskilling and reskilling programs help companies adapt to changing technological and economic conditions. (World Economic Forum)
Maximizing ROI When Designing Upskilling and Reskilling Programs
Reaffirm Your Business Goals
What are the specific business goals the training program will address? You’ll maximize ROI if you align the training program to address the particular skills and knowledge gaps that are a priority for the organization.
Conduct A Needs Assessment to Identify Skills Gaps
What skills and knowledge are missing and impacting the company’s performance?
Use surveys or interviews with employees, analyze employee performance data, and consult with managers and team leaders.
Create Targeted, Useful Content
Align your content with the skills and knowledge gaps that you’ve identified. Then, create targeted and relevant content to ensure participants acquire the necessary knowledge and skills.
Stagger Delivery Methods
To maximize the impact and ROI, create a delivery structure that makes it engaging and accessible to all employees. You might offer in-office, online, on-the-job mentoring and digital enhancements that make the learning experience more enjoyable and something employees want to complete. As a result, you’ll reduce drop-out rates or lackluster performance and avoid dragging down the ROI and hurting leadership buy-in.
Measure And Evaluate
Maximizing ROI when designing upskilling and reskilling programs requires ongoing measuring and evaluation. For example, measure performance data before and after the program, get employee feedback before, during, and after the program, and use analytics to track participation and completion rates.
Conclusion
Maximizing ROI when designing upskilling and reskilling programs is critical to leadership buy-in. But focusing on ROI also optimizes outcomes for your employees.
Preparing employees for tomorrow’s challenges is not easy. The World Economic Forum has issued a call to action to address what it sees as an emerging global skills-gap crisis. “Businesses [must] anchor upskilling and workforce investment as a core business principle.”
So, the record is clear—upskilling and reskilling are critical, and on some level, C-Suite executives understand this. However, you still need to design your program with ROI in mind.
- Reaffirm your business goals
- Conduct a needs assessment to identify skills gaps
- Create content targeted to the skills gaps you’ve identified
- Design a delivery structure that meets the needs and learning styles of all employees
- Constantly measure and evaluate
