Training ROI

"Training doesn't cost ... it pays! HRD is an investment, not an expense."
Should all training programs be required to show a return on investment (ROI)? Not at all. However, courses of three days or more that are offered many times to reach a large number of trainees (say 100 or more) represent a significant expense. The professional trainer should justify this expense by calculating the return on this investment.

Here are some of the more common difficulties that are cited as reasons for not doing a ROI evaluation:

  • The costs of training are known and expressed in dollars, but the benefits are often soft, subjective, and difficult to quantify and convert to dollars.
  • We have enough trouble getting managers to send people to training without im-posing additional requirements to collect data to document the impact.
  • Costs are known up front, before training, but benefits may accrue slowly overtime. At what point after training do you attempt to measure impact?
  • As trainers, we lack the time and the needed accounting skills to do a cost/benefit analysis. Besides, our requests for data are disruptive of productivity.
  • We will probably continue to run most of our training programs that are popular even if costs exceed benefits. So why bother? We're not a profit center.
  • The outcomes could be damaging to the HRD staff and to budget support from top management. We may be better off in not knowing.
  • People at work perform the way they do for many reasons, only one of which relates to training. How can we take credit or blame for their performance?
  • The very act of collecting data on the dollar value of performance will tend to bias the information we get, making it hard for us to present a true picture.
Measuring the Results

Return on investment is determined by taking the actual cost of the training from the total value of the benefits. This sum is then divided by the cost of the training. The first step in measuring ROI is to itemize costs. Once costs are determined the various benefits can be counted. Typical tangible benefits include:

  • Time savings
  • Improved productivity
  • Labor savings
  • Improved quality
  • Improved health and safety
  • Better employee moral

Putting the financial aside, the most important questions to consider should be:

1. Was the learning relevant to the needs of the organization?

2. Did the learning achieve its goal?

3. Is the learning being used in an appropriate manner?

4. Is the learning making a difference to the way the business is working?

Calculating ROI

To determine training ROI you must measure it at the

results level. To achieve results measurable in ROI terms identify

(1) the results you want

(2) the way you will obtain data to determine cost and benefit.

Determine the desired results by talking with the managers of the people to be trained. To track results, choose indicators that are credible to management. This is an important point! Management must agree that the indicators you will track will prove ROI.

Learn more. . .

Visit the ROI Institute to learn more about the Phillip's methodology for calculating training ROI.