Is training paying its way in your organisation? Pat Collier looks at the thorny issue of return-on-investment – ROI – for training programmes.
The need to justify the cost of training
One of the challenging issues facing the HR and training departments of organisations is to justify their investment in training and development.
Firstly, management want confirmation that training leads to improved business performance.
In addition, supervisors want to know what kind of pay-off they can expect from staff taking time away from work to participate in a programme.
Trainees want to know what they will gain in their current or future work if they take part in company training.
Finally, instructors and course designers want to know what impact their programmes have on the organisation and individuals.
The challenge is to develop usable systems that enable companies to relate their investment in training and development to the achievement of business goals and increased competitiveness.
The Kirkpatrick and Philips Evaluation models seek to do this. We’ll look at this now.
Step 1 – Customer Satisfaction
If you have participated in a training programme, you are probably familiar with the questionnaires that ask you to rate your satisfaction with aspects of the training. This includes content, materials, style and trainer as well as facilities, administration and so forth.
These questionnaires provide valuable feedback to the trainer, the training manager and client. They are particularly useful in terms of adapting new programmes in the early stages of their delivery. In addition they assist with ongoing monitoring of trainer performance. Therefore, the target number of completed satisfaction questionnaires should be 90 to 100%.
Step 2 – Learning of Knowledge and Skills
Some training courses have mechanisms to test what the participants have learned from the programme. These may be an exercise to demonstrate skills they have acquired, a quiz in relation to knowledge they have learnt, or a project which requires a demonstration of the use of newly acquired skills and knowledge.
Alternatively, participants may appraise themselves. They will consider to what extent their knowledge and skills as well as attitudes have changed from participation in the programme. The target number of completed questionnaires to establish learning should be 40 to 60%.
Step 3 – Applying the Learning
For an individual or company to benefit from training, the participant must be able to apply their new skills and knowledge. The application of the learning will depend both on the individual as well as on factors within their work environment.
Someone willing to apply the learning may not receive the necessary resources or support from the unit or company where they work. Conversely, where a company is supportive, an individual may simply not apply their new skills and knowledge.
To measure the return on investment in training, you need to assess if staff are applying new knowledge and skills. You can do this by following up with the participants on a programme 3 to 6 months after completing the training and seeking their views on application of the learning. You can also seek opinions from managers or supervisors. The target number of completed questionnaires should be 30%.
Step 4 – Impact on Business
You can determine business impact by surveying managers as well as sourcing information on performance from company records. Ask managers about the impact of training on various measures. For example, if it were a sales training programme, sales is a measurable indicator to show if the programme had any impact.
Programmes with measurable indicators may also have intangible benefits. For example, increased confidence of participants. However, some training and development programmes may not have such clear indicators. In addition, many of the benefits may be less measurable, such as increased job satisfaction. The target number of completed questionnaires in relation to business impact should be 10% to 20%.
Isolating the Effects
Other factors may affect participants’ performance. Therefore, it is necessary to try to isolate the effects of the training. Ideally, you should compare like with like. This means looking at difference in performance of staff members in the same job, comparing those who received training with those who did not. You can also combine this with an estimation, by supervisors or managers, of any impact attributable to the programme.
Step 5 – Converting Data to Monetary Value
In order to calculate the cost-benefit and return on investment, it is necessary to assign a monetary value to the benefits from participating in the programme.
Sources of data for assigning monetary value may come from:
- Participants’ estimates
- Supervisor or managers’ estimates
- Previous studies on costs and savings
- Expert input
These are calculated for a one-year period. As a general principle, the most conservative estimate from the most reliable sources should be used to calculate the benefit.
Benefits from the first year should be used to calculate cost-benefit and ROI. On the other side of the equation, all of the costs of the training should be included.
These include:
- The cost of research
- Programme design
- Training materials
- Trainer fees
- Facilities costs
- Travel and subsistence
- Participants’ salaries while attending the training
- General administration and evaluation costs
Having compiled the data on costs and benefits, the net programme benefits are the benefits less the costs.
Calculating the return on Investment
The return on investment is the ratio of the net programme benefits to the programme costs expressed as a percentage (see below).
Return on Investment =
(Programme benefits – programme costs)
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Programme costs x 100
Intangible Benefits
As stated, there may be other benefits that are not measurable. These are the intangible benefits. They should be recorded. Where possible, include examples to illustrate the change arising from the training.
Concluding Comments
Calculating the return on investment in training is feasible. Data collection as shown above is achievable but requires a degree of tenacity to ensure a good response rate. This is especially true for follow-up surveys (steps 3 and 4).
There needs to be a high level of commitment from senior management to ensure that of the data and resources required to generate ROI are made available.
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