Measuring the ROI of Training Programs

“People are our greatest asset” is an oft repeated phrase in the corporate lexicon. If people are indeed the greatest assets, organizations should start looking at training programs as investments in human capital and not as expenses. Training programs can be categorized into two broad areas, viz. sales and technical training, which is tangible; and the more intangible workshops on leadership and team performance. The return on investment (ROI) should be a primary tool for measuring the return on individuals, evaluating the benefits of training and helping organizations to capture the full value of their human resource potential.

 

Why Evaluate Training?

Organizations should analyze their training programs for various reasons:

To validate training

Training is a critical tool for enhancing the performance and profitability of a company. When training is adequately evaluated, it can be compared to prevailing methods and be selected in preference to or in combination with other methods.

To justify training costs

The training budgets are among the first to be sacrificed in the event of financial constraints. A thorough analysis of the training programs can help training departments to identify training needs for the future and make a case to resist such budgetary cuts.

To improve training

Organizations should pursue a systematic and sustained improvement in training programs in order to harness better value and benefits in the long term. A formal evaluation of training can serve as the basis for future changes.

To select training methods

Many training programs and approaches are available in contemporary times, including classroom, on-job and self-study training methods. Organizations can make rational decisions about training choices by employing comparative evaluation strategies.

The ROI for training can be computed as ROI (percentage) = (Monetary benefits – Training Costs)/Training Costs) x 100. ROI can also be measured in terms of decreased per-item product cost and time, depending on the domain area. For example, ISMM sales qualifications can be measured by looking at the sales conversion ratio post training. Marketing Qualifications are also measurable by studying the lead generation and customer traffic figures. On the other hand, the benefits of leadership training are not immediate and tangible.

The Kirkpatrick model, created by Dr. Don Kirkpatrick in the 1950s, is a universal standard for evaluating the effectiveness of training. The model is applied before, during and after training to demonstrate the value of training to an organization. This model consists of 4 levels, starting from gauging the response of the participants to the training program, the amount of learning that has taken place, the application of learning to real-life situations and results as manifested in targeted outcomes.

Industry leaders that create a culture of learning at their organization succeed in attracting and retaining the best talent. A company that aims to improve the ROI of its training initiatives should make provisions for blended and experiential learning options. When classroom learning is blended with e-learning and webinars, there is heightened receptivity to and implementation of new ideas.

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