ROI & Training Analysis

Return on Investment in Trainig & Development. Is training paying it's way in your organisation? By Pat Collier

One of the challenging issues facing the HR and Training departments of organisations is to justify their investment in training and development.

• Management want confirmation that train- ing and development leads to improved business performance and that there is a good return on their investment
  
• Supervisors want to know what kind of pay-off they can expect from staff taking time away from productive work to par- ticipate in a programme.
  
• Trainees want to know what they will gain in terms of their current and future work if they take part in company sponsored training.
  
• Instructors and course designers want to know what impact their programmes are having on the organisation and individuals.
  
  The challenge is to develop usable systems that will 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, outlined in the steps below, seek to do this.
  
  Step 1 – Customer Satisfaction
  If you have participated in a training programme, you are most likely familiar with the questionnaires that ask you to rate your satisfaction with various aspects of the training, such as content, materials, style, trainer, facilities, administration etc. These question-naires provide valuable feedback to the trainer, the training manager and client who has paid for the training. They are particularly useful in terms of adapting new programmes, in the early stages of their delivery, and for the ongoing monitoring of trainer performance. The target number of completed satisfaction questionnaires should be 90 to 100%.
  
  Step 2 – Learning of Knowledge and Skills
  Some training courses will have mechanisms for testing what the participants have learned from the programme. These may be in the form of 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 be asked to appraise themselves as to what extent their knowledge, skills or attitudes have changed arising from their 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, unit or company to benefit from the learning, the participant must apply their new skills and knowledge within their current or new role. The application of the learning will depend both on the individual and also factors within their work environment. Someone willing to apply the new 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 not be motivated to apply their new skills and knowledge. To measure the return on investment in training, it is necessary to assess whether new knowledge and skills from the programme are being applied. This can be done 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. The views of the participants’ manager or supervisor would also be sought. The target number of completed questionnaires should be 30%.
  
  Step 4 – Impact on Business
  Business impact may be determined using a combination of surveys of managers and information on performance from company records. Managers are asked what impact training has had on various measures related to the purpose of the training. For example, if it were a sales training programme, sales would be a measurable indicator to show if the programme had any impact. Programmes with measurable indicators may also have other intangible benefits, such as increased confidence of participants. However, some other training and development programmes may not have such clear/tangible indicators and many of the benefits may be less measurable, for example, 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 also have affected the change in the performance of the participants. Therefore it is necessary to try to isolate the effects of the training. Wherever possible, it is best to compare performance of staff in the same job in similar context, who have not been trained, with those who have benefited from the training that is being measured. This method can be combined with an estimation, by supervisors or managers, of any impact that is 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 the participants’ estimate, their supervisor / managers’ estimate, previous studies on costs and savings or from 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 and 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)
  --------------------------------------------------
  Programme costs x 100
  
  Intangible Benefits
  As stated, there may be other benefits that are not measurable and these are known as intangible benefits. They should be recorded and, where possible, examples shown to illustrate the change arising from the training.
  
  Concluding Comments
  Calculating the return on investment in training is feasible. Data collection in relation to steps 1 to 4 above is achievable but nonetheless requires a degree of tenacity to ensure a good response rate, especially to the follow-up surveys (steps 3 and 4). There is a need for a high level of commitment from senior management to ensure that all of the data and resources required to generate ROI are made available. Higher levels of evaluation are most likely to be applied to programmes of 5 days duration or longer, expensive programmes and one where there is a strong management /business interest.

Pat Collier