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ROI on Human Capital: From an Interview with Dr. Patti Phillips

How can return on investment in people be assessed? The ROI Institute helps organizations measure and show the value of human capital investments so all stakeholders have the information they need to make decisions. Dr. Patti P. Phillips, president and CEO of the ROI Institute, observes that ROI data can help make decisions about changing, expanding, reinvesting in, or killing a program. The ROI Institute methodology holds that to make the best decisions, it is essential to collect data about the success of the program from:

• Participant perspectives: people in the training class, involved with the project and, in some cases, consumers;
• System at large: the organization as a whole, including supervisors, or departments that support the implementation of the program; and
• Economics: costs and returns.

The data is categorized according to a five-level framework: reaction, learning, application, business impact, ROI. Phillips also considers intangible benefits that can not be assessed as a dollar amount. The ROI process tells a story using these interrelated types of data. While strictly speaking ROI refers to the ultimate measure of cost versus results, this calculation is only one measure of success.

The ROI methodology entails more than a one-time study. For real advantage to decision makers, it must be ongoing with proactive steps to put systems of accountability into place before a crisis. Some call on the ROI Institute when they are in dire straits and must make immediate decisions—only to find that they delayed too long. Dr Phillips points out that it is best not to wait until someone asks “why are we doing what we’re doing.” If you have’t been collecting data all along, you will be unable to provide compelling evidence that your people, your training, OD program, or human resources efforts are working.

For people who are preparing for professional careers in OD, HR, and/or management, Dr. Phillips has four suggestions. To succeed, develop your:

• Business acumen. Whether you are in HR, training, or OD, in a company or a nonprofit, you are part of the business and need to know how to manage and allocate resources.
• Oral and written communications skills: It is imperative that you have the skills necessary to communicate face-to-face and online with a variety of stakeholders, including supervisors or clients—in terms they will grasp. “If we can’t communicate, we can’t get the message across.”
• Number skills. In addition to being able to read and write words, you need to be able to understand what the quantitative data tells us—and what it can’t tell us. Numbers can be manipulated. You need to be able to read reports and look critically at the methodology and context behind the statistics.
• Mechanisms for personal and professional accountability. In small business or large, nonprofits, educational institutions, or governmental agencies, accountability is here to stay. Professionals need to be responsive, and attentive to documentation as needed.

The ROI methodology is about finding “simple solutions to extraordinary problems,” according to Dr. Phillips. To learn more about the ROI Institute, including certification opportunities, visit the ROI Institute Web site. Publications about the ROI methodology are available online. Learn about the latest book, Show me the Money.

Thanks to Dr. Phillips for this interview, conducted February 12, 2009.

This entry was posted on Monday, March 2nd, 2009 at 10:40 am and is filed under Current Topics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.