Getting to the Bottom Line

Patti P. Phillips, Ph.D. is CEO of ROI Institute. Jack P. Phillips, Ph.D. is Chairman of ROI Institute. 

According to Transparency Market Research, the global soft skills training market will reach a value of US $38 billion by 2027. How well we communicate, collaborate, and cooperate depends on our malleable traits. While the definition of soft skills has evolved since first introduced into the talent development lexicon, the return on investment (ROI) in these skills still comes into question all too frequently.

ROI in Soft Skills

Investing in soft skills programs can improve output, quality, cost, time, customer satisfaction, employee satisfaction, work habits, and innovation. When converting improvement in these measures to money and comparing it to program costs, an evaluator can calculate an ROI.  For example:

Arbinger’s Outward Mindset enables leaders to develop deep personal responsibility in themselves and others.  The program claims to increase trust and collaboration between individuals and across teams. Outward Mindset has helped a group of police officers reduce the number of citizen complaints from an average 2.7 complaints per month to zero. The Commander of the police department attributed 90% of the improvement in complaints to the program (2.43 complaints). The cost of a complaint was $70,000 leading to an annual cost savings of $2,041,200. Implementing Outward Mindset cost the group $36,055. This simple, yet effective soft skills program resulted in an ROI of over 5500%1.

Dubai Electricity and Water Authority’s Emerging Leaders’ Development Program focused on equipping young leaders with skills such as planning and organizing, problem solving, decision making, team building, and people development. Because participants worked in different areas of the organization, each participant identified their own measure(s) of focus. As a result, the utility saw improvements in process time, productivity, error rates, rework, complaints, and direct operating costs due to the program. The ultimate savings to the organization over one year was AED 7,399,784. The program cost AED 2,163,048, resulting in an ROI of 242%2.

A global healthcare company recognized a critical need to implement a coaching solution to support sales representatives in improving the velocity of an opportunity, revenue, and overall sales performance. First-year results due to the program was an increase in gross profit of $109,272.24. The program cost $705,566. Comparing benefits to cost led to an ROI of -85% (yes, that is a negative ROI) 3.

Success with ROI

ROI is the ultimate measure of program success because it compares program benefits to program costs mathematically. This type of evaluation is not necessary for all soft skills programs and the actual ROI varies from program to program depending on

  • Cost of the problem or value of the opportunity
  • Cost of the solution
  • Effectiveness of solution implementation
  • Process and assumptions in the evaluation process4

ROI in comparison to another ROI indicates success based on economics. But reporting it at the exclusion of other measures of performance is insufficient in describing the complete story of program success. Therefore, is important to report ROI in the context of other measures such as reaction, learning, application, and other intangible benefits. It is the combination of financial, non-financial, qualitative, and quantitative data that most completely informs the answer to the question “In what specific soft skills programs should we invest?”

Demonstrating ROI of soft skills programs is not as difficult as some would suggest. But it does take effort. Success with ROI requires that you and your team be:

  • Attuned to the specific needs of the organization.
  • Curious enough to invest in research required to define the right solutions, given the organization’s needs.
  • Disciplined enough to design programs based on specific, measurable objectives rather than just using content out of the box.
  • Empathetic to participant needs for immediate relevancy.
  • Collaborative enough to ensure that others within the organization will support the use of newly developed skills, behaviors, and processes.
  • Obsessed with accountability and process improvement, enough to ensure credible program evaluation occurs.
  • Willing to share results, regardless of the outcome.
  • Motivated to make a change based on the data.
Endnotes
1 The cost of a complaint is a conservative value for investigating a complaint. It does not include litigation, settlement, and other costs. The actual case study will be published in the upcoming book, Proving the Value of Leadership Development (HRDQ, 2022).
2Alsuwaidi, Reem (2020). Measuring ROI for Emerging Leaders Development Program: Dubai Electricity and Water Authority. In Phillips, P. P. and Phillips, J. J. Proving the Value of Soft Skills: Measuring the Impact and Calculating ROI. Alexandria, VA: ATD Press
3Buckely, Kaycee (2020). Measuring ROI in Coaching for Sales Managers: Global Healthcare. In Phillips, P. P. and Phillips, J. J. Proving the Value of Soft Skills: Measuring the Impact and Calculating ROI. Alexandria, VA: ATD Press.
4The approached used in the case studies described in this post is the ROI Methodology, the most applied and documented approach to demonstrating ROI in soft skills programs.

This blog post was originally published May 12, 2021, on Performitiv.com