Training Metrics: Calculating Training ROI

Dr. Pratyush Banerjee

HRM & Soft Skills

ABC Incorporated, an MNC headquartered at Bengaluru, has hired 50 new management

trainees in November 2015 from few premier business schools of India. The HR Head, leading a

team of four HR executives, decided to conduct a 5 day long training program for the new

joiners to better facilitate the orientation process. The team identified the training needs of the

participants. They came to the conclusion that the training can be best imparted by an external

training consultancy possessing the requisite skills. The in-house HR team communicated the

proposal to the training firm XYZ Ltd., a professional company in the business of imparting

professional training workshops located in Mumbai and asked quotation for their charges. XYZ

officials replied back that their charges will comprise of a one-time Rs. 30000/- payment for the

external resource person provided by XYZ Ltd. Additionally XYZ will rent a hotel for

conducting the program which will cost Rs. 10000/ day for 8 hours/day. Furthermore, XYZ has

given a requisition for a one-time stationery cost of Rs. 30,000 in lieu of providing the training

kit materials (licensed software, copyrighted measurement tools, notepad, brochure, pen etc).

XYZ also communicated that the food and lodging cost of the program will have to be

borne by ABC Incorporated. Their HR staff estimated that to cover the food cost of 50

participants in the training, an approximate daily expenditure of Rs. 15,000 will have to be

incurred. Accommodation of the participants in a hotel will cost Rs. 1500 per participant per

night and to and fro AC 3 T railway fare for each participant from Bengaluru to Mumbai and

back will be Rs. 2500. The management also insisted that one internal trainer will also

accompany the trainees to monitor the process. This would mean that for the five days of the

training the HR personnel will not be productive for ABC Incorporated. The average salary of an
executive (including HR executive) at ABC is Rs. 100/hour per day. Typical working hours of

ABC is from 9:00 am- 6:00 pm. Similarly it is to be considered that the 50 participants will also

not be contributing to ABC’s productivity for the five days of training. Add the travel time, it

will be seven days of on-duty leave for the participants and the HR executive. ABC’s HR head

also pointed out that they would have to consider other overhead costs such as local conveyance

and food consumed during travel as well plus some other amenities. The team allocated an

additional Rs. 20000 as overhead cost.

XYZ has promised a guaranteed savings in terms of the following factors as an output of their

well-tested training module. The benefits may be listed as: a) Expected Labor savings = Rs. 1000

per participant per month (in terms of efficiency, project completion rate etc.), b) Productivity

increase = Rs. 2000 per participant per month (in terms of new product development, new

customer acquisition etc.), c) Other cost savings = Rs. 500 per participant per month (in terms of

punctuality, deadline) and d) Other income generation = Rs. 500 per participant per month

(through innovation, patents etc.).

ABC HR team sat down together to analyze the proposition. Would there be sufficient

gain from this initiative? What will ABC benefit out of this? What will be the approximate

period for the benefits to be appreciated? The team decided to crunch some numbers to

understand how long it will take to get return on this training investment considering 12 months

from training completion as a time frame.

Qs. Calculate training ROI and pay-back period for the firm and suggest whether they should

pursue the training program for its new joiners.