What is the Return on Investment (ROI) from Executive Education?

Santiago Iñiguez de Onzoño. President. IE University

1 June 2017

There is still no magic formula to gauge the exact cause and effect relationship between investment in training and its impact on bottom line results. But we can get quite close. 

“Technology can help us do something that’s very important in education, which is measure progress,” said Sheryl Sandberg in 2015. But does this also apply to executive education?  

Certainly, intuition, experience, and multiple surveys show that developing talent is directly related to how much companies invest in training their managers and directors. However, conclusively demonstrating that a specific investment in a training program has produced measurable results in terms of a company’s performance is another matter.[i]

A survey carried out among a large number of companies by UNICON, the global consortium of executive education providers, showed that 88% of the human resource (HR) managers agreed that “HR professionals will have to get better at proving the worth of executive education in the future,” in much the same way that other departments have shown that other intangible resources can be measured in some way.[ii] The survey also showed that 43% of HR professionals think that in most cases it is not possible to objectively calculate the ROI of executive education initiatives, and concluded that finding a way to do so was akin to the search for the Holy Grail.

Chief Learning Officers (CLOs) have long sought ways to best measure the impact of their companies’ investment in training and development programs for executives, and whether or not they increase profitability. Sadly, the results of their efforts have not always been entirely satisfactory. Perhaps there simply is no model as yet that establishes a cause and effect between better-trained executives and a bigger number on the bottom line.It’s pretty much the same

story with corporate social responsibility (CSR) - are companies more profitable because they have invested in CSR, or do they invest in CSR because they are already more profitable than those that don’t? The fact that there is a relationship between one and another doesn’t mean that there is necessarily causality. It’s basically a chicken and egg situation.

I understand the pressure CLOs are under to justify the return on investment in training. As with any other aspect to do with assigning resources in companies, an economic explanation goes beyond the qualitative arguments about education boosting talent. CLOs like to keep things simple and talk in the same language as CFOs.

Nevertheless, the search for the magic formula that connects investment in training with the bottom line continues without success. Until new methods are found that can establish that connection in the future, perhaps in tandem with analytical accounting that links the quantitative with the qualitative, the only hope for now is to try to connect an investment with the individual development of the executives involved, by measuring how education can bring about a transformation in terms of his or her knowledge or management skills.

In a series of posts here in LinkedIn Pulse, I will discuss assessing the impact of training on a business organization’s performance and value creation, both from the individual and corporate perspectives. With regard to the individual, I will look at the most commonly used methods for measuring how successfully the objectives of training have been met. From the corporate point of view, I will examine the best-known systems used to accredit or validate in-company training, as well as the overall structure dedicated to developing talent in a business, as is the case with corporate universities. As said earlier, mine is essentially a qualitative analysis, although its impact on the company’s results is hard to question.

Evaluating the impact of training can be done in two main ways. The first focuses on the improvement experienced by the individual or participant, measuring his or her progress in terms of knowledge acquisition or the development of new management or interpersonal skills. The second is based on evaluating the quality of the activities of the human resources department or the corporate university by carrying out an assessment as to whether they are aligned with the company’s strategy, its contribution to growth, and in general, to its dynamism as a corporate learning organization.

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