22 May 2015

How to calculate and maximise ROI on training

In times of austerity, preserving your learning and development budget may well depend on showing that training has a tangible ROI. So how do you know – and prove – the value of training employees?




Receiving training is hugely valuable to employees and can help to retain them. Research has shown, for example, that training and mentoring are of a high degree of importance to young managers. So what can you do to assess how this perceived value translates into ROI? Here are a few ideas:

Calculating ROI

As a first step, you need to work out what training is worth.

Define objectives that align with overall business objectives
It’s important not to take a scattergun approach to training. Before you allocate your budget, you need to understand what you want the training to achieve and how this aligns with current and future business goals. Do you want it to help retain staff? Is there a particular task that staff need to be trained to do? Or do you need to improve performance or productivity in a particular area?

Once you have defined your objectives, you can get an idea of the monetary value they represent.

Decide the most effective way to train staff
Training shouldn’t be offered indiscriminately, but rather to those who need it and will use it to the benefit of the business. Decide who, how and where employees are to be trained. Things to consider include:

  • who needs to be trained?
  • should training take place in or outside the workplace?
  • should you choose online or face-to-face training, or a mixture of both?

Look at the direct cost benefit
Understand the actual costs of training, including the costs of:

  • having people taken out of the workplace
  • travel
  • the trainer
  • training materials
  • the training venue.

To get the benefit/cost ratio, divide the value of the training benefits by the cost. To get the ROI as a percentage, subtract the costs from the value of the benefits, then divide by the costs and multiply by 100.

Monitor achievement objectives in the long and short term
You will need solid data to prove the effectiveness of the training, so set up ways to measure it:

  • before the training, assess employees’ performance and question them about their own perception of their performance/skills
  • collect feedback immediately after the training
  • look at employees’ performance and get feedback from them after a period of time has elapsed

Have they put what they learned in the training into practice? Has customer satisfaction increased? Has staff turnover been reduced? What is this worth in monetary terms?

Look at softer benefits
Not all training outcomes are measurable in terms of immediate ROI. Softer benefits, like employee engagement and staff morale, need to be considered too. 

Maximising ROI


Align learning with business cycles

Experts suggest that to improve ROI and show its worth and impact on performance, training should be in tune with business strategy cycles.

Use training as a reward
Because employees value training and development highly, it can be offered as a non-monetary reward for exceptional performance. This in itself can help retain and engage staff.

Give staff control of their training and development
Encouraging staff to have an input into their training and development will make them feel empowered and can help ensure training is targeted effectively.



Sources

http://www.trainingzone.co.uk/topic/leadership/10-tips-measure-training-roi/179893

http://www.training-manager.co.uk/returnoninvestment.html

http://www.hrmagazine.co.uk/hro/news/1145716/align-learning-cycles-business-cycles-expert

http://www.businesstrainingexperts.com/white_papers/training_return_on_investment_roi/How%20to%20Determine%20ROI%20-%20Non%20Manufacturing%20Environment.pdf

https://hbr.org/2012/07/why-top-young-managers-are-in-a-nonstop-job-hunt/ar/1


 

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