The Key to ROI in Training

Dec 1 • Jamie Dixon Article, Management and Leadership, Trainer Articles • 4364 Views • 1 Comment on The Key to ROI in Training

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FOR MANY TRAINING DIRECTORS, the biggest headache that comes from measuring ROI, and also the biggest reason for not doing so, is not the gathering of data, nor is it actually calculating the ROI. It’s isolating the effects of training. 

The biggest reason for not (measuring ROI), is not the gathering of data, nor is it actually calculating the ROI. It’s isolating the effects of training.

In an ideal world, training will be designed, delivered and followed up according to the training cycle. The training cycle consists of five steps:

1. Business Need – What is the reason for conducting this training?
2. Course Design – What is the training solution to the business problem? How can training close the performance gap?
3. Delivery – How can the training be delivered to it’s target audience?
4. Application – After training how can these new skills be applied on the job?
5. Evaluation – How valuable is the training and how can it be improved?

Each step will consist of a plan that links onto the next step. Before training, SMART goals will be set for an improvement in business results, and these business goals will gradually cascade down until you have learning goals. The training will be tailored and delivered according to these learning goals. Following the training, there will be an action plan to ensure the new skills are applied. And after all of this, these goals will be measured during the evaluation period, to make sure that the training has actually reached it’s goals.

Following on with the ideal world situation; the ROI will then be measured by comparing a control and test group, combined with a before and after analysis. There will be no other factor influencing the business results other than training. Data will be readily available, and there will be one group that is willing to go without training whilst another group enjoys the interaction with their trainer.

But this is an ideal world scenario. Sometimes there just isn’t enough time or resources to plan things by the training cycle. So during the evaluation period, there are no SMART goals to measure, sometimes there isn’t even a reliable data source. Sometimes the course is compulsory, meaning everyone has to take it, so there can be no control and test group. Sometimes there are too many external factors (eg. economic fluctuations or marketing campaigns) influencing the results, meaning a before and after analysis is invalid. So what on earth can you do?

The answer lies in your training participants heads and can be described using one word – Estimation.

Yes, your ROI is achieved by guess work! But not just any guess work; the guesses need to be educated, justified and completely conservative. No measure of ROI is going to be 100% accurate, and that’s because there are so many factors involved.

Yes, your ROI is achieved by guess work!

But what you can do is get an overlap, that is to say, an estimation of the costs that is higher than the actual cost, and an estimation of the income attributed to the training that is lower than the actual income. By being conservative with your income, and fully loaded with our costs, you can rest assured that your ROI figure is as reliable as it comes.

But surely this can’t be reliable?

Well actually, the ASTD states that “determining the monetary benefits of a program using participant estimates is a method that is gaining widespread acceptance in organisations in the United States, Canada and Europe. When participant estimates are compared to data collected from a “control versus experimental group” design, the estimates actually come in lower, thus providing conservative figures.”

So how do you carry out this guess work? Well, it involves asking your trainees a lot of questions. And this can even be done after the training has been completed when you didn’t have an evaluation plan in the first place. You can follow these steps:

1. Get a group of staff who are experts on their business functions (preferably those who have experienced the training themselves) to guess which business measures the training is most likely to impact on (eg. employee satisfaction, customer complaints, cycle time of products, efficiency, etc.).

2. For each of these business results, work out the change in monetary value during the period of time in which the evaluation will be carried out post-training. For example, the training started at the beginning of January and finished at the end of January, and the evaluation period was to be three months post-training, so February-April. Let’s say one of the business results you are looking at is productivity, and after noticing an increase it was estimated that the monetary value of it’s increase was $25,000 during these 3 months. Do the same for each of the business functions. At this stage you do not need to think about how much of this increase was due to training, you simply need to look at the change in monetary value during this time.

3. This is the stage where you start to think about the impact of training. You ask the training participants to look at the monetary change in value of each of these business results, and for them to estimate what percentage was due to training. Let’s say for productivity, the 25 trainees who filled in the form said that this increase was on average 80% due to training. So you then take this monetary value of $25,000, and multiply it by 80% = $20,000.

4. Because you are being conservative, this is the most important part. You ask the trainees to say their level of confidence in their estimate. Let’s say there is an average of 90% confidence in their estimates, you then take the figure of $20,000 and multiply it by 90% = $18,000

There your have it. You can now say $18,000 made from an increase in productivity was due to training. You can then do the same for all of our business measures, get a total score and then finally combine it with our cost to get the final ROI figure. With this number, you can make educated decisions on your training and development spend and create the best training program for your dollar (or yuan).

 

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One Response to The Key to ROI in Training

  1. Hysan says:

    Thanks. Helpful.
    I can’t see, though, why I would ever want to entertain the idea of only counting 3 months of improvement? Isn’t that just introducing a false limit?

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