What Causes a Positive ROI

Patti P. Phillips, Ph.D., and Jack J. Phillips, Ph.D. 

Many of our clients ask, “What causes a positive ROI? What factors make the difference in delivering a negative ROI or a positive ROI?” Fortunately for them, we know something about this issue because we've tackled it for the last 30 years. 

Our database of approximately 10,000 ROI studies is the largest in the world. About 7,000 of those studies are from individuals who have become Certified ROI Professionals because they must conduct an ROI study as part of the certification process. Additionally, ROI Institute has conducted about 2,000 ROI studies for clients and reviewed another 1,000 or so studies for clients to provide feedback. Although these studies are not our property, they are available for research. 

In almost all the studies, data has been collected on what made the program successful (enablers) and what kept the program from being successful (barriers). From these enablers and barriers, we have seen what works and what doesn't. We have our opinions on this too, but we need to focus on what the research can show. 

During the pandemic, Warwick Conferences in the United Kingdom sponsored a major research project for the ROI Institute to identify more precisely what causes a positive ROI and create an estimator (or predictor). With this tool, someone planning a new learning and development program could forecast the ROI based on the presence or absence of the factors that cause a positive ROI. 

At first, our team identified what we thought were the top factors that would make a difference. For this project, we limited our analysis to programs in the training, L&D, education and organization development functions. We estimated that roughly 3,000 studies are in these targeted areas. These studies have been collected over a period of years and stored in different databases. Our goal was to include about 2,000 studies of the most complete and comprehensive studies in the analysis. We met that goal. 

From the initial list, our team identified if those factors were present or absent in particular studies. Then, for control, the team identified studies that were absent a factor compared to those that had the factor so we could see the strength of the particular factor. From this research, we identified the factors and their varying levels of strength as some are stronger than others. We reduced this to a smaller, more manageable set of the eight most important factors. Figure 1 shows the eight most important factors.

Figure 1. The Eight Most Important Factors

From this list, we created an estimator based on the presence or absence of these factors using a five-point scale for different options. We added a multiplier to indicate the strength of the factor so that the estimator would produce a reliable result. The estimator forecasts the ROI based on the presence or absence of these factors for someone planning an L&D program. This estimator is housed on the Warwick Conferences’ website and is accessible here. 

The Warwick Conference Center team uses the estimator to show individuals the potential ROI and to help them understand what generates the ROI. It’s a great teaching tool because if the program is not connected to the business in the beginning, they can see the ROI will probably diminish quickly. Or if there are no clear impact objectives set for the program, it is more than likely there will not be a positive ROI. This approach helps all organizations see what they need to do to ensure the programs deliver ROI. 

We are excited that our research has produced a great teaching aid, process improvement framework and value proposition validation tool. We encourage you to try it with your next L&D program.

This article was originally published on February 16, 2023 at ChiefLearningOfficer.com.