CBA or ROI? That Is the Question

The answer may be moot, but smart decision making requires an up-front analysis of the impact of a learning initiative on business outcomes. Whether it’s cost-based analysis (CBA) or ROI, today’s learning leaders need to have the tools and methods to make informed decisions.

Meticulously planned and executed training and development programs can yield a harvest of tangible benefits for a corporation. One of the primary tasks of a learning executive, however, is to separate the wheat from the chaff and discern which learning initiatives have the potential to generate bottom-line impact and which ones don’t.

“One of the things CLOs strive for is to ensure that the services they provide their constituents within the organization have significantly more value than the perceived cost,” said Cushing Anderson, vice president for project-based services research at IDC, a provider of market intelligence, advisory services and events for the information technology, telecommunications and consumer technology markets.

Fortunately, learning executives have more resources at their disposal than a crystal ball. Cost-benefit analysis helps weigh the time and energy expended with the expected outcome and allows learning leaders to arrive at shrewd business decisions.
 
The ABCs of CBA
In its simplest form, cost-benefit analysis is literally what its name suggests — the process of weighing the benefits of an investment compared to its costs.

“Cost-benefit analysis is attempting to isolate the impact of a [particular] training initiative and its ultimate value to the organization,” Anderson said. “It includes calculating the cost to develop and deliver training, and subtract from that or add to that the business value impact — usually in dollars — of the change in behavior that the training results in.”

Whereas traditional financial analyses often are characterized almost exclusively in financial terms, cost-benefit analysis is sometimes characterized in nonfinancial terms and is therefore a broader approach to examining the return on a commitment of resources, said Michael Echols, executive director of strategic initiatives and director of the Human Capital Lab at Bellevue University.