Calculating ROI For Talent Development

In sales, trainees are taught that to sell something to a business, their offering has to lead to either increased revenues or decreased costs.  Human Resource departments - including my fellow talent development colleagues - should be able to do the same thing, tying skill development activities to an increase in revenue or a decrease in cost in just a few steps.  

This works best when tied to an actual business goal, such as “lowering turnover” in the example above.  Collaborate with the business on the front end to understand their goals before determining which skills and behaviors are needed to achieve them. Below is a general formula that you could use.  

One thing to note is that your development program has to change actual behavior - not just expand “capability” - for it to move the needle on business goals.  That is why we specifically called out behavior change in this formula instead of skills, competencies or capabilities.  Skills, competencies and capabilities are simply ways to organize and define desired behaviors.  Actual human behaviors are where the rubber meets the road.

You will be surprised how often business leaders have not calculated the ROI of their own goals, but don’t be afraid to push them a little bit on it.  The more specific the target is defined, the better chance you have to influence it in a credible way.  

When you collaborate effectively, you become a true partner to the business and your resource conversations will get much easier.  Just telling the business that your development program is having a positive impact is not enough, however, you need to track behavior change over time and thereby prove its impact on business goals.  See our articles on how to use assessments and reviews to measure skill development for more on how to tackle this.