Does Your HR Solution Make "Cents"? - Measuring and Evaluating Your Organization's Return on Investment (ROI)
Increasingly, organizations, particularly those in the public sector, face intense pressures to demonstrate the value of training and other human resource (HR) solutions. To help organizations meet this critical need, HumRRO employs the ROI Methodology™, developed by Dr. Jack Phillips (ROI Institute). The ROI Methodology is a comprehensive, multiphased measurement and evaluation process designed to assess an HR solution's impact on an organization, in particular its return on investment (ROI). To date, HumRRO has worked with several government organizations, including the Government Accountability Office (GAO), National Aeronautics and Space Administration (NASA), and the Environmental Protection Agency (EPA), to help them apply this methodology -- each time working closely with the organization to design a strategy that fits its specific evaluation needs.
Implementing the ROI Methodology consists of four interrelated phases:
- Evaluation planning involves collaborating with key organizational stakeholders to (a) formulate and systematically review the objectives of the training or HR solution, and (b) develop evaluation plans and baseline data. Effective evaluation planning should establish the evaluation's objectives and produce well-defined data collection and ROI analysis plans that enable the organization to successfully meet these objectives.
- Data collection typically takes place before, during, and after implementation, and follows the data collection plan produced as part of the evaluation planning phase. To ensure that the solution's impact is fully and accurately assessed, it is best to collect data on a wide range of outcomes -- ranging from employees' reactions/satisfaction with solution to its bottom-line impact on unit (or organization) performance -- at the most appropriate time. For example, to understand the solution's impact on employees' on-the-job performance or its aggregate effects on the unit (or organization), data are most informatively collected sometime after the program or solution has been completed. The timing of this follow-up data collection should be scheduled when the solution's impact is expected to be realized, but within a timeframe that ensures that said impact can be meaningfully attributed and linked to the solution. Data can be gathered using a variety of methods, including questionnaires, written tests, simulations (or exercises), observations, and self or peer assessments, among others.
- Data analysis consists of analyzing data collected in the preceding phase. Two critical activities during this phase are (a) isolating the solution's impact and (b) converting impact data to monetary value. Isolating the solution's impact confirms to key stakeholders that performance enhancements are meaningfully and directly attributable to the HR solution and not other factors. Converting impact data to monetary value permits the HR solution's benefits to be effectively compared to its costs -- an essential step for calculating a solution's ROI. Frequently, some highly desirable benefits of a solution (e.g., increased job satisfaction) cannot be readily or easily converted to a monetary value. Nevertheless, an effective data analysis will identify and include these intangibles where feasible.
- Communicating results, the last phase, involves developing media (e.g., reports, presentations) and a strategy for informing key stakeholders of the evaluation process and its findings. At this phase, ensuring the credibility of both the evaluation process and the results is critical to ensuring that the evaluation's findings are well understood and acted upon post-evaluation.
In partnership with the ROI Institute, HumRRO hosted the ROI Certification Workshop scheduled for May 15 - 19, 2006, at our headquarters in Alexandria, Virginia. This workshop was open to the public and was facilitated by Dr. Jack Phillips, Dr. Patti Phillips, and Dr. Cathy Stawarski.
For more information, contact:
Dr. Cathy Stawarski or Research Notes