As employees become more engaged, talent development leaders must monitor five levels of outcomes , including the return on investment (ROI). The first outcome from an engagement initiative is Level 1, Reaction to engagement, ensuring that employees see value in becoming engaged. The next outcome is Level 2, Learning, as employees learn how to work in an engaged way, how to take specific actions, and how to become an important member of the team.
At Level 3, Application, outcome involves tracking what individuals are doing as they are becoming more engaged. These are the actions taken, processes followed, and skills used to follow the principles of engagement. Level 4 is the Impact of these actions. For a group of individuals, specific impact measures (productivity, quality, cost, time, and so forth) are monitored to see if they have changed. At this point the effects of engagement are sorted out from other influences, so that the amount of impact is directly connected to the engagement initiative.
Level 5 is ROI. This step compares the monetary benefits of the impact to the cost of the engagement initiative for a sample of employees. This involves converting the impact data to monetary values, setting a particular benefit stream, calculating the fully loaded costs of the engagement initiative, and comparing the two numbers with the benefit-cost ratio and the financial ROI:
ROI = |
Monetary Benefits – Costs |
X 100
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|
Costs |
For executives, this is the ultimate level of accountability. It’s where they can clearly see that if they invest more money, there is a corresponding return on investment. For many practitioners of engagement, this seems like a daunting task. But it really is not difficult.
This is a logical flow of data with some very conservative analysis that has been practiced for years, beginning with the first book on training evaluation in the United States, Handbook of Training Evaluation and Measurement Methods, by Jack J. Phillips (Gulf Publishing, 1983). This book discussed how ROI can be applied to measure the effect of any type of program. The key is to see it in action with examples of how organizations have actually captured the ROI data for engagement projects.
In our next blog article, we will present an employee engagement case study briefly describe the setting and the results.
For more on the evaluating employee engagement, check out Measuring the Success of Employee Engagement, available now.
