ROI Methodology in HR Projects
The ROI methodology was developed by Dr. Jack Phillips in the 1970s and has been continuously refined to this day. The founders and owners of the ROI Institute, Dr. Jack J. Phillips and Dr. Patti P. Phillips, are experts in the field of evaluating the effectiveness of various projects. It’s also not a secret that the largest organizations on Forbes’ list utilize the ROI methodology.
The evaluation of effectiveness, according to Phillips’ approach, is based on five levels.
Levels of effectiveness evaluation What is examine at this level
1 Participant reaction Level of satisfaction of participants in aa HR project.
2 Learning Changes in knowledge, skills, and attitudes.
3 Implementation Changes in behaviour, results, and actions in the
4 Business indicators Impact of the program on key tangible and intangible
performance indicators (KPIs).
5 Return on investment (ROI) and Benefit-Cost Ratio (BCR)
We determine the ratio of benefits to costs associated with the investment.
And a few questions that may arise when looking at this model:
- Do we assess every project at all levels?
Definitely not, only important projects from the organization’s perspective, typically large projects.
- Can we evaluate the fourth level right away?
One of the ROI Institute’s standards states that in order to evaluate at a higher level, data should be collected from lower levels. It is crucial to have knowledge of what was lacking in terms of specific skills during the implementation stage, even if there are no changes in KPIs (fourth level), in order to draw conclusions for future projects.
- What happens if the return on investment is negative?
It can happen. In such cases, it is worth asking ourselves what the reasons were and making appropriate changes for future projects. Piloting, especially for large projects, can be helpful to ensure that everything is working as planned.
- Who should be involved in evaluating effectiveness?
HR, training departments, and definitely the management team – direct supervisors and higher-level managers.
- Will effectiveness evaluation at all five levels always be reliable?
Unfortunately, no. There may be cases where it is difficult to obtain reliable results, regardless whether it is about developmental projects, coaching, leadership, or more tangible outcomes. The problem often lies in the timing of the decision to evaluate effectiveness at all five levels. The later we decide to do it, the more challenging it will be to gather credible information. It is best to plan effectiveness evaluation at the start of the developmental process.
dr Małgorzata Mitoraj-Jaroszek