Human Resources (HR) are considered among the most valued assets of organisations. In that regard, many executives realise that the value of such asset depends on the skills and the competencies it holds, and thus, consider learning as an organisational necessity (Phillips and Phillips, 2009). Providing learning opportunities to employees is a valuable initiative for both, the organisation and the employees. Nevertheless, learning and development initiatives can be seen from the same position as Information Technology (IT), i.e. many of companies integrate them in their business processes, with the majority not realising its potential. Analysing IT spending, in light of the fact that wasted investments make the headlines of news (Jeffery and Leliveld, 2004), it can be stated that learning and development can be approached from the same position. Such position implies that no initiative shall be implemented in an organisation just for its sake, or for its hypothetical value. In that regard, learning and development initiatives are known to be valuable for organisations, but they also a source of frustration, when there is a lack of evidence that such initiatives work.
It should be noted that the evaluation of a learning and development initiative is not all about return on investments, which is a common approach to investigate the contribution of a particular business process. In order to support learning and development it is not sufficient to show that the business benefitted form and activity or not (Mayo, 2004). Evaluation and audit might be seen as a process for outlining new opportunities for learning and development, which previous initiatives did not utilise (Phillips, 2010). Learning and development initiatives, in that matter, correlate with the changes in the external environment, for which such initiative should accordingly be adjusted. The latter can be seen through analysing the fact that investments in learning and development positively influence productivity and service improvements in organisations (Fitz-Enz, 2007). On the one hand, such fact support the statement that learning and development is beneficial to organisations, but on the other hand, it does not provide directions where the learning and development activities should be moving next, and how those activities are integrated into the strategic plans of an organisation. At the same time, the costs of learning and development continue to grow, causing concerns over the feasibility of such initiatives and whether such costs should be devoted to other projects (Phillips and Phillips, 2009, McGregor et al., 2009). The latter can be connected to the fact that intangible assets are connected to a complex chain of cause and effect, rather than influencing financial performance directly (Kaplan and Norton, 2004). Thus, when evaluating HR initiatives addressing learning and development there are several aspects to consider. In that regard, one example of such aspects is the integration and the alignment with the company’s corporate strategy, which is another common element between learning and development and IT investments (Kaplan and Norton, 2004).
In the light of the aforementioned overview, the present paper will attempt to outline the importance of evaluation of learning and development. The paper will provide an analysis of the aspects that should be focused on, when conducting an audit of the learning and development approaches implemented in an organisation.
The term learning and development is largely expansive, referring to several notions that were used interchangeably with learning and development in the past. In that regard, it can be stated that learning and development is connected to such notions as training and development, employee development, and human resource development (Harrison, 2005). The choice of learning and development over training and/or Human Resource Development (HRD) is mainly because the learning and development as a term is more expansive, covering all of the aforementioned and more. Thus, when referring to learning and development in this paper, all of those notions are implied, namely, all sharing a common purpose which is enhancing organisational effectiveness and sustainability, and aid collective progress (Harrison, 2005).
Key Audit Measures
Quantifiable Indicators –Cost Benefit
Being brought to investigate and audit the learning and development activities in an organisation, there are several aspects to focus on, each with its own purpose and justification. One of the first and the most generic aspect to investigate is the business case for leadership development (Gold et al., 2010). An explanation of the business case is a combination of the costs and benefits, the verdict on which will show the feasibility of the learning and development initiatives. The importance of such question to ask is that it contains several sub-questions that shall outline the overall success of learning and development initiative. In that regard, although learning and development is not linked directly to financial revenues, if the costs of training surpasses its benefits in a short- and long-term case, it is a clear answer to the question of whether learning and development in organisation is feasible. The enumeration of the development initiatives is a common aspect, where numbers should speak better than words. Thus, as a starting point quantitative measures for tracking effectiveness and contribution might be justified (Mayo, 2004). It should be noted that quantitative indicators might not be selected alone as an evaluation tool, as such indicators will be largely limited. However, if used complementary to other means, the business case might provide a fuller picture of the way learning and development is implemented in the organisation. One of the key aspects speaking in favour of using quantifiable and monetary measures is the fact that speaking in Dollars, Euros, or Pounds might have more emotional appeal to managers and find better support when costs and benefits are represented clearly (Brauchle and Schmidt, 2004). The questions regarding the costs of learning and development can be seen through Return on Investment (ROI) analysis (Mulvie, n.d.).
The use of ROI is justified through the aim of providing a convincing argument that significant returns on investments can or were achieved. An analysis of 51 cases of learning and development in companies in Laird, Naquin, and Holton (2003) provides an overview of the financial benefits that can be achieved if training and development was conducted effectively. In that regard, the appropriateness of ROI can be seen through examples the findings those cases provided. The findings clearly showed a direct correlation between ROI and the effectiveness of training and development initiatives (Laird et al., 2003). Examples from the cases included sales training which ROI numbers ranged between 118 and 2307 percent, technical training with ROI from 7:1 to 159:1, and literacy training with ROI 741 percent (Laird et al., 2003). In that regard, such figures are indications of two aspects, which are complementary of each other. The first is that a good training will have relatively high ROI. Accordingly, the second conclusion that can be made is that a good ROI is an indication of a good and effective training. Such findings can support the appropriateness of ROI as an audit measure for the effectiveness of learning and development initiatives.
Conducting ROI analysis, the simplest measure that an auditor might use is contrasting the sum of quantified benefits from any learning and development initiative against its costs. The costs in that matter can be seen through the overall costs of HRD, including such aspects as the costs of training per employee in monetary terms (Mayo, 2004. The annualised costs of HRD are compared to the benefits, which include, but not limited to, values of revenues, changes in productivity, costs savings, and others (Mayo, 2004). The return on investment might take various forms, as it can be seen from the cases indicated in Laird, Naquin, and Holton (2003), e.g. 118 percent, although a good target is considered to be 300 percent. The target conclusion that can be reached form such analysis is whether a particular program was worthwhile the resources or not. It should be noted that when analyzing ROI, auditors should expect that not all benefits had a financial equivalent and that is why other auditing measured should be implemented as well (Cunningham, 2007). A typical example can be seen through analysing such aspect as the cost of a typical HR meeting. In that regard, meetings can be estimated as poor in ROI, but nevertheless, their significance cannot be overestimated for a company (Cunningham, 2007).
Another important measure for evaluation is the strategic orientation of the learning and development initiative. The need for such evaluation is obvious from the fact that focusing solely on operational level of analysis, the bigger picture might be overlooked during analysis. Thus, strategic orientation of learning and development shall examine the extent of the strategic impact of development activities and its alignment with other key processes in an organisation (Sadler-Smith, 2006).
Strategic and HR alignment of Learning and Development
One of the methods proposed for the evaluation of the strategic impact of learning and development can be seen through the Balanced Scorecard Approach (Sadler-Smith, 2006). Basically, auditors will be interested in identifying the strategic skills and knowledge acquired by a program that will support the strategy of a company (Sadler-Smith, 2006). Such approach takes four perspectives against which several elements of the strategy of the organisation are measured. Those perspectives are of the shareholders, the customers, the internal business processes, and learning and growth. Examples of those perspectives and the criteria they might touch upon might be seen through the following figure.
The questions that shall be answered in regard each of the perspectives can be taken and/or modified from an audit tool developed to assess the extent to which the learning and development of the organisation have a strategic orientation. Such tool takes the form of a questionnaire aimed for the HR practitioners in an organisation, which uses a Likert scale for assessing each answer (Sadler-Smith, 2006). The tool might be used as is, or the wording of the questionnaires might be modified taking only the concept upon which the tool touches. The concept includes, but not limited to, the following aspects:
- Commitment of employees
- Self-reflection activities
- Fragmentation of initiatives
- The integration of the initiatives with other HR activities
- Support of strategic intent of the business (Sadler-Smith, 2006).
In that regard, one of the most important questions from the aforementioned can be seen through the support to the strategic intent of the business. It is important that the learning and development activities performed by an organisation aim on the long term vision of the company. An example of the latter can be seen through a company that develops video games for mobile devices, while the strategic intent of the company is reaching a leading position in the market of online entertainment. The alignment of such the learning and development activities in the company should touch upon such directions, inquiring which might take different forms, outlined in the cases of companies who which to carry out an audits of their training systems (Simmonds, 2003). The importance of acknowledging the alignment of strategy with learning and development can be seen from other perspectives as well. One of the perspectives for which the alignment is important is the fact that each company’s case is individual and different from others. Accordingly, strategy formulation is situational in nature, and company specific, and thus, strategic HRD is a key process in that matter that will ensure that the strategy of the company and their HR learning and development initiatives work in tandem (Pattanayak, 2003). It should be mentioned that auditing learning and development in such aspect as strategic alignment implies a two-way process, where not only the learning development processes should be conducted in accordance with strategy, but also the strategy of the company should be formulated with consideration of the companies’ existing learning and development activities.
Another important element of the audit can be seen through the alignment of learning and development activities with the HR initiatives. In that regard, although both aspects are largely related to the same sphere – human resources, the initiatives devoted to each aspect might be largely fragmented. The integration of HR and learning and development can be acknowledged through several elements which auditors shall investigate. One of such elements is the way both initiatives are employee-centred and the way the strategies of both activities are operational (Kirkland, 2007). For the employee-centred approach, the alignment can be seen through the way conflicts can be avoided over different programs. An assessment can be seen through identifying learning and development initiatives in an organisation along with common HR functions and investigating their successful and/or failed collaborative processes. The investigation of HR alignment can be seen through analysing one of the most known models of evaluation, which is Kirkpatrick model. Although Kirkpatrick might be analysed in conjunction with ROI analysis, it nevertheless can be seen suitable for the investigation of HR alignment (Barnett and Mattox Ii, 2010, Cunningham, 2007). The model is basically a framework with four levels for evaluation, which are reaction, learning, behaviour, and results (Barnett and Mattox Ii, 2010, Cunningham, 2007). While the fourth levels as quantifiable business results were discussed in the previous section, HR alignment can be apparent through the third level, which is behaviour. In that regard, such level can be seen in that both HR functions and learning and development initiatives might be related to such point. Performance measurement can be performed on a regular basis for motivation and reward purposes, while it can be a part of the needs’ assessment and/or training evaluation initiative. In such cases, auditors should look not only on areas in which conflicts occurred or avoided, but on successful collaboration, in which learning and departments benefitted from performance measurements conducted by HR departments and utilised their findings in designing the learning and development programs for employees. Learning and development, on the other hand, might use performance measurement to assess the transfer of knowledge into the workplace (Abdullah, 2009). Such collaboration is only a single example, while further investigation might touch upon alignment in such HR processes optimisation processes as recruitment, job transfer, and retention of employees (Sharkey and Eccher, 2010). In that regard, both HR and learning and development can be components of another framework aimed at talent optimisation in the company (Sharkey and Eccher, 2010).
The present paper provided an analysis of some of the measures used in auditing learning and development initiatives in an organisation along with a justification of such measures. The paper argued that two important areas should be focused on, the quantifiable benefits, and the alignment of and integration of the learning and development with key processes in the organisation. The key processes implied in this context are strategy formulation and HR practices. It can be concluded that relying on a single aspect whether on monetary equivalents of training or only on abstract goals is not sufficient for learning and development initiatives to be considered successful or failed. In that regard, both aspects are important, with their benefits specifically apparent when they are integrated together in a single audit. When the costs outweigh the benefits of a particular development program, it is not an indicator that program has failed. However, when such program additionally neither supports the strategy of the company, nor the program is considered when such strategy is formulated, then such training is a simply a waste of resources. The same can be seen in terms of alignment with HR. HR practices can be largely inefficient if they are not aligned with learning and development, and vice versa. Thus, it can be concluded that learning and development activities in a company are significant processes, which can be nevertheless, misused and not provided the expected outcomes. Accordingly, even if a program deemed successful, then an audit might be used to reveal opportunities for the company to move forward, and the adjustments that can be made to increase the effectiveness of learning and development initiatives.
Considering the measures analysed in this paper, it is recommended that such measures are integrated into a single framework that can be easily modi9fied according to the unique situation of the company. The arguments against and for each of the measures independently can avoided when a framework will be established in which the expected outcome will identified for each element. Accordingly, the analysis did not reveal the weight each measurement shall received during evaluation, and thus, it is recommended that the framework considers such aspect. An example of the significance of weighting each parameter can be seen through cases when there are financial benefits from a program, but there is only a partial support to the company’s strategy. Thus, what weight should be giving for each of the finding? As the verdict in the evaluation will be dependent on such differentiation, then it is important to assigned different values for each parameter used in the measurement.
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