INVESTORS IN PEOPLE AND ROI MEASUREMENT:
TWO SIDES OF THE SAME COIN?

By Marius Meyer & Rina Opperman   

The purpose of this article is to explore an integrated evaluation approach when aligning return on investment (ROI) in training measurement with the Investors in People Standard. It happens so often that we implement several well intended training interventions and strategies, but these plans seldom align to support one another and the overall business strategy. The end-result is that both systems collapse and we then start with a new one! 

Investors in People originated in the UK as an international benchmark for people development. The Investors in People standard is very popular among large companies in both the private and public sector. Several SETAs have also endorsed Investors in People as their philosophy to people development. ROI measurement provides tools to calculate the financial impact of training and has been practiced in the USA for nearly three decades. Moreover, the growth of ROI methodology has grown significantly in companies worldwide, so much so that it is currently used in 43 countries. 

An attempt will be made to identify areas of alignment and to indicate how an integrated ROI measurement system can assist companies to evaluate the impact of people development interventions.  

The article will cover the following four areas: 

  • A comparison of Investors in People and ROI methodology
  • The contribution of ROI to Investors in People
  • Guidelines for alignment
  • Conclusion

A COMPARISON OF INVESTORS IN PEOPLE AND ROI METHODOLOGY 

An analysis of the Investors in People Standard and standardised ROI methodology indicates several similarities and complementary differences. The outcome of the analysis reveals more similarities than differences as depicted in the table below. 

INVESTORS IN PEOPLE

ROI METHODOLOGY

Provides an international standard of good practice for people development linked to business goals.

Provides an international standard for calculating the contribution of training programmes to business goals.

Contributes to creating a culture conducive to people development.

Contributes to isolate non-training variables (some culture related) when determining business impact.

Emphasises the importance of measuring the impact of training.

Provides the tools and methodology to measure the impact of training.

Role of line management is essential to obtain commitment to people development.

Role of line management is essential to support training and to provide the necessary business performance data.

An excellent planning, implementation and evaluation tool.

An excellent planning and measurement tool.

Improves organisational performance.

Measures improvement in organisational performance.

Depends on a commitment to evaluation and review.

Depends on a commitment to evaluation and measurement.

Focuses on contribution of learning and development to business goals.

Measures the contribution of learning and development to business goals.

Receives recognition from Investors in People (UK).

Receives recognition from American Society for Training and Development (USA).

Role of management (and top manage-ment in particular) is well defined.

Role of the training manager is well defined in satisfying the needs of line management.

Quantifiable approach to measurement.

Quantifiable approach to measurement.

Can be used as a system for continuous improvement of training.

Can be used as a method for continuous improvement of training.

Needs to satisfy IIP criteria to achieve recognition.

No need to apply for recognition, it is voluntary and anyone can do it.

THE CONTRIBUTION OF ROI TO INVESTORS IN PEOPLE 

From the above table it is clear that ROI can play a major role to support the implementation of Investors in People in the workplace.  While Investors in People provides the institutional framework for people development, ROI methodology can be used to demonstrate the impact of learning and development on business performance.  The benefits of applying ROI methodology in support of Investors in People are therefore as follows: 

  • While Investors in People requires management to champion people development, the reality in most companies is that this will not happen automatically. However, if ROI measurement can be done and the benefits of training converted to financial terms, top management will be more inclined to support Investors in People.
  • ROI provides tangible and financial measures of the impact of training on business performance.
  • ROI results can be used to measure improvement (IIP indicators 9 and 10).
  • The application of ROI helps the organisation not only to conform to the Investors in People principles, but also to achieve the indicators and meet the evidence requirements.
  • The success of ROI measurements depends to a large extent on the support of line management, a principle that is also key to Investors in People.
  • While Investors in People obtains commitment to investment in people, ROI provides methodology to measure the return on that investment.
  • An integrated evaluation system is needed to enhance ROI measurement, exactly what Investors in People also needs to be able to complete the review cycle.
  • ROI can also be used for the planning phase of Investors in People and therefore promotes sound decision-making, because ROI can be applied as both a forecasting and evaluation tool.
  • ROI highlights the business impact of training and therefore supports the underlying philosophy of Investors in People.
  • Having achieved documented ROI results, it can be used as evidence in an Investors in People audit or any other internal or external quality management audit.
  • The achievement of ROI results depends on sound relationships between the learning function and management, and thus achieves the goal of Investors in People to make people development part of overall business strategy.
  • ROI helps skills development facilitators to measure training impact to add more value to their companies exactly what Investors in People want them to do as part of the learning and development teams of their organisations.
  • In view of all the quantifiable measures that ROI projects seek to produce, the application of ROI methodology could play a major role to help companies to achieve and maintain their Investors in People accreditation.

GUIDELINES FOR ALIGNMENT 

In the light of the above analysis and comparison of the Investors in People and ROI methodology and the value-added role of ROI, we would like to suggest some guidelines for alignment: 

  • Identify the areas of overlap and indicate opportunities for alignment so that both systems will support one another.
  • Use your ROI results as evidence for the evaluation and review criteria of IIP.
  • Use your IIP framework and system to build an integrated training evaluation system and will eventually produce the optimum ROI results.
  • Build sound relationships with senior management and show them the results of IIP and ROI measurement.
  • Merge your IIP and ROI committees they do the same work!
  • Both ROI and IIP results can be used as a continuous improvement tool and therefore infused into your training quality management system.

CONCLUSION 

This article clearly shows the link between Investors in People and ROI methodology. ROI and IIP thus appear to be two sides of the same coin. IIP provides the overall organisational framework and system, while ROI measurement produces the tangible bottom-line results expected from training. A table was constructed to clarify the similarities and differences between Investors and People and ROI measurement.  Important areas of overlap and congruence exist.  More importantly, ROI measurement can help companies to measure the business impact of skills development interventions and to integrate this information into their Investors in People reports. In essence, ROI measurement therefore fills an important gap regarding the collection of data and calculation of quantifiable results of training.  

Marius Meyer is a senior lecturer in HRD at UNISA and together with Rina Opperman consult for www.roionline.co.za.
They can be contacted on info@roionline.co.za