From the HR world

The ROI methodology in HR projects

The ROI methodology was developed by Dr. Jack Phillips in the 1970s and has been continuously refined since then. The founders and owners of the ROI Institute, Dr. Jack J. Phillips and Dr. Patti P. Phillips, are experts in evaluating the effectiveness of various projects. The largest organizations on the Forbes list utilize the ROI methodology. Evaluation of effectiveness according to the Phillips approach is based on five levels.

 

Levels of effectiveness assessment What we examine at this level
1 Audience reaction Level of satisfaction of HR project recipients.
2 Learning Changes in knowledge level, skills, and attitudes.
3 Implementation Changes in behavior, outcomes, job actions.
4 Business indicators The impact of the program on key tangible and intangible Key Performance Indicators (KPIs).
5 Return on Investment (ROI) – profitability; Benefit-Cost Ratio (BCR) – ratio of benefits to costs. We determine the ratio of benefits to costs associated with the investment.

 

And a few questions that may arise when looking at this model:

 

  1. Do we evaluate every project on all levels?
  • Definitely not, only important projects from the organization’s perspective, usually large projects.
  1. Can we assess the fourth level immediately?
  • One of the ROI Institute’s standards states that to assess at a higher level, data must be collected from lower levels. It’s crucial to have insights into what skills were lacking at the implementation stage if there are no changes in KPIs (fourth level), to draw conclusions for future projects.
  1. What will happen if the return on investment is negative?
  • It can happen. And then it’s worth asking ourselves what the reasons were and implementing appropriate changes in subsequent projects. In such cases, piloting, especially for large projects, is beneficial to ensure everything works as planned.
  1. Who should be involved in evaluating effectiveness?
  • HR, training departments, and definitely the managerial staff – direct supervisors and higher-level managers.
  1. Will the effectiveness evaluation on all five levels always be reliable?
  • Unfortunately not. There may be studies where obtaining reliable results is challenging. And it doesn’t depend on whether they are development projects, coaching, leadership-related, or more tangible ones. The problem often lies in the timing of the decision to evaluate effectiveness on all five levels. The later we decide to do this, the harder it will be to obtain reliable information. It’s best to plan effectiveness evaluation at the start of the development process.

 

 

 






dr Małgorzata Mitoraj-Jaroszek

2024-03-06