Organizations typically focus on measures of attendance, completion, and trainee satisfaction to determine the success of training initiatives. The problem is that these metrics fail to help the business understand if the training delivered the business impact that the training was intended to achieve. How do you determine if your investment in training is worthwhile?
Calculate your return on a training investment (or the ROI of training) using the following steps.
Define the business need
Whether it’s to orientate a new team member, to provide instruction on how to use a new computer system, or to support front-line leaders managing team performance, training is put in place to address a business need. Ask yourself:
What is the business issue or challenge that you want to address?
A Step-by-Step Example (Click to expand)
Determine if training is the right solution
Training is often a typical response to address issues occurring in an organization or on a team, but training isn’t always the right solution. In order to achieve a positive return on your training investment, make sure that training is the right solution to the issue or challenge you are facing. Ask yourself:
Define the outcomes for the training
Think back to the business issue or challenge that the training is intended to address. Identify the outcomes that the training should accomplish, and make sure they are directly related to the business need that you identified in Step 1. Ask yourself:
What will the training ultimately achieve? What will be the outcomes for attendees and for the business?
Design the training program
Whether you’re designing and delivering the training in-house, using consultants to develop the program, or sending an individual or group of employees to an existing online or in-person course, you need to understand what type of training is compatible with your target audience and the outcomes you need to achieve. Ask yourself:
What is the general scope/length of training required (one-time, ongoing, 2-hour, half-day, full-day, etc.)?
For example, basic operational training may require as little as a half-day training module; to address larger knowledge and/or competency gaps it may be a much longer timeframe.
Define your metrics
Look at the outcomes you identified in Step 3; determine how you will measure the success of the training program. For example, if hotel employees are consistently failing to correctly allocate loyalty points to customers because they don’t understand how to use the updated computer software, the hotel may provide training on this specific computer module. The intended outcome of the training would be to correctly allocate points through the loyalty system. The metrics to measure the success of the training could be:
Are there other metrics that you need to start measuring?
If so, take your first measure prior to training and use it as a benchmark.
Tips for Defining Your Metrics (Click to expand)
Conduct the training & measure your return on investment
After the training, track the metrics you have identified. Remember that change will likely not be immediate as people need time to apply their new knowledge and practice their new skills. In addition to taking a benchmark measure prior to training, it may be worthwhile to measure the metrics immediately following the training; but be sure to monitor the changes at regular intervals (e.g. monthly) thereafter to determine the success of the training over time. The return on your investment is measured by the difference in your metrics. If the metrics improve, and this improvement is worth more than the total cost of the training, then there is a positive return on your training investment. To put it in mathematical terms:
Return on Investment = Change in Cost of Activity/Total Cost of Training x 100%
If the ROI is above 100%, then the training is considered a success and has achieved the intended outcomes.
Consider the example used in Step 5. Three months following the training the total time spent on making point adjustments and dealing with customer complaints improves. Based on the average hourly wage, this time savings represent approximately $4,000. The total cost of the computer training, including the cost of hiring a trainer, training supplies, room rental, and staff time to complete the training, was $2,500.
Return on Investment = $4,000/$2,500 x 100% = 160%
Business leaders aren’t going to find attendance numbers and satisfaction scores sufficient reasons to continue investing in training. And while it would be much easier to say that for every $150 invested in training you will see a return of $200, there is no universal ratio. In order to give your training initiatives credibility in the organization, you must be able to demonstrate the business impact that your training has had. This will depend on your ability to:
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