Indian organizations are spending more than ever on learning interventions to enrich their human capital. The Indian L&D industry stood at $1 billion in FY 2018. That is a far cry from its potential when we compare it to the L&D spends of some of the developed nations of the world. American companies alone spend around $100 billion on learning and development. The global L&D market stood at $240 billion in FY 2019.
Indian organizations certainly do understand and appreciate the need for updating their workforce but they become reluctant when it comes to finding out the return on investment or ROI of such programs. L&D expenditure then becomes a discretionary spend. And very few have a good answer to address the elephant in the room ie ROI of learning programs. Neither I am trying to offer any perfect answer for that question here. So don’t be disappointed. But I will give a powerful analogy to get a different perspective on the matter. Read on.
For a change, just question the question. Why you really need to attach a cost-benefit logic for learning? but most of you will quickly refute saying that why not? learning has a cost which clearly reflects on the P&L sheet. Who pays for the trainers and venues?. Alright, but what about the benefits?
So instead of asking why you really need to attach a cost-benefit logic for learning? , a better and more profound question would be: why accounting doesn’t really account the benefits of a learning program? That’s because no one has taught the accounting function to do so.
But here is a more logical way around this puzzle. If you are not able to figure out the quantum of monetary benefits of doing learning or training intervention then simply find out the cost of not doing it.
I will describe an analogy here. I was thinking of joining a gym a few days back. Now going to the gym is above and beyond what I usually do for staying fit. I have a very regular running routine. I at least run 3-4 times a week. Running is almost free. Spending on a gym for me is a discretionary spend.
Gym is a cost. But before I went on to rationalize the fee I am going to pay for the gym, I pondered upon the simple question of the cost of not going to the gym. For me the cost of not going to the gym was pretty straight forward:
- Missing out on strength training exercises which would eventually make me run better and longer without injuries.
- Missing out on the motivation and drive which comes from watching your peers working out.
- Missing out on proper training from experts.
- Missing out on a more robust routine.
and the list went on.
Now coming to the justification of ROI costs for organizations which are indecisive and reluctant about their spending on learning. Managers should find the cost of not spending on learning interventions first. Think of what would happen if your senior leadership doesn’t develop the necessary coaching skills to groom and develop the next line of leadership? Well, your cost for searching talent pool from outside would increase sharply. Now considering that reality, think of how much would you like to spend on learning program for your senior leadership which would help them develop coaching skills.
For me, the cost of not going to a gym outweighed the cost of buying a gym membership. And hence I bought a 1-year membership. I will realize the benefits of this expense at the end of the year. So next time you are indecisive about spending on learning intervention for your team, ask one question: what is the cost of not spending on learning?