Return on Investment: Cost and Benefits of Trainings Training and :ROI and Evaluation Development

ROI Contents
Purpose of ROI, and Value of training What is ROI Why ROI Methodology Toolkit

Models

Benefit/Cost Ratio
Program Benefits BCR Program Costs

Benefit Cost ROI (%) x100 Cost ROI (%)

The Value of Human Capital

We all know Human Capital (and its development) is vital Human Capital is often much undervalued as an investment opportunity ROI can be very high

Phillips

refers to 800% being achievable regularly Tennessee Valley authority claim 1000%+ A world-class corporate university claimed

Why ROI?
Pressure on training functions to show demonstrable return
Value for money from training activity Value of HRD to the business; e.g. Financial benefits Staff productivity Staff retention Clear alignment with corporate goals In-house vs outsourced training

ROI analysis is a tool to support the contention that training is valuable; demonstrate benefits vs cost Pressure to reduce costs must be balanced by visibility of benefit
Warm and fuzzy is no longer any good! (in most cases) Jay Cross alternative view

ROI as Process
Use evaluation techniques to acquire performance data Use Training Needs Analysis to direct the project to the right data Use analytical techniques to calculate ROI from the data Use ROI results to review training effectiveness Use the reviews to inform future decisions

ROI as Perception

Which of these perceptions indicate your clients view of ROI (which you need to address)?
The

Board may see a big picture of how the training affects the companys ability to achieve its corporate goals The finance department may be looking to see how training stacks up financially against other ways to invest the companys money, and whether the training, as carried out, was financially more effective than alternative forms of development

What is ROI?

Elements of Total ROI

Reducing

costs Increasing benefits/performance/capability

Use of ROI
ROI

of a training projects contribution to business or project ROI of one delivery method vs. another (e.g. ILT vs. e-learning)

Role of ROI
Pre-training

assessment and expectation

The Process Model

1: Measure reaction &identify planned actions 2: Cognitive learning and retention

Immediate reaction and response Skills, knowledge, attitude changes

3: Assessing application Actual change in of learning to the job behaviour 4: Identifying business results Quantify business value of change

5: Calculating ROI

Compare monetary

Getting Started
Select your project to measure
Select a significant project; align with significant goals Start with a project that has clearly definable metrics

ROI measurement Plan

Data Collection Plan Identify the returns Identify the investment factors Select the survey audiences and sources of data Select your data collection methods Analysis Plan

Investment Factors

Costs incurred
Payments

to suppliers and service providers Time and attention to create and deliver the training Opportunity cost Time and costs involved in the ROI measurement exercise Other Internal costs

Process Summary Data Collection Plan

Data collected at different times to provide:

Pre-training

baseline Post-training change analysis Post-experience change analysis

Data Collection Plan

State

the objectives of the training / learning State the objectives of each phase of data collection at each evaluation Level Identify any previously used metrics, values or methodologies used by the client, and determine suitability for the current exercise Select the appropriate evaluation methods

Process Summary ROI Analysis Plan

Continuation of the Data Collection Plan, capturing information on the key items needed to develop the actual ROI calculation.

List Significant Data items (usually Level 4 or 3) to be collected

Benefit Factors Cost Factors

Methods to isolate effects of the learning/training from other influences Methods to convert data to numerical values

Process Summary Data Collection Identify the purposes of the evaluation.

State clearly what the evaluations are to measure and what the goals of the training are intended to be. Be as specific as possible about the goals of the training Ensure goals address the performance enhancement, business improvement or cost savings expectations.

Select the evaluation instruments and methodology. Establish the timing for the data

Process Summary Sources of Data

Organisational Performance Records, showing outputs and measurements taken as part of the business normal reporting process Testing and certification assessment records Participant feedback Instructor feedback Feedback from participants supervisors/managers Feedback from participants subordinates Team/group peer feedback

Process Summary Evaluation Methods

Identify how the data will be collected and analysed Surveys On the job Observation Interviews Focus groups Action plans (or Performance contracts) and Program assignments

Separate training (personal productivity) component of performance change, from new software/systems/processes Essential for credibility Potential methods Use control groups Impact assessments and estimates by participants, managers, peers Trend lines

Process Summary Isolate effects of training

Process Summary Convert to money

Convert

data to monetary value

Specific

costs and time incurred Costs and time saved Quality increase, reduced waste Improved customer service and satisfaction Intangible benefits (retention, commitment, fewer complaints, reduced conflicts etc)

Process Summary - ROI

Calculate

ROI
Program Benefits
Program Costs

Benefit-cost ratio=

ROI

%=

Net Program Benefits Program Costs x 100 time = Benefit Investment x Period in

Break-even

Evaluation Levels
1. Reaction and Planned Action 2. Learning 3. Application and Implementation 4. Business Impact 5. Return on Investment

Writing Objectives
Easy as A, B, C, D
Audience: Who? Behavior: What do they do? Condition: What is the setting and method of evaluation? Degree: Measurement to be met.

Example Objectives

Increasing Scope

Course objective: Learners will be able to make 15 entries in a customer database in 15 minutes with no more than 1 error. Application objective: Learners will be able to reduce the data entry error rate by 50 percent over the

Costs, Budgets, Accounting

Quantifying

ROI means accounting for all the costs of the program. Fixed costs: independent of the number of participants. Variable costs: Dependent on the number of participants. There are costs at every step make sure to account for them all.

Benefits and Soft Skills

Change

in: Attitude, work climate, leadership, teamwork. We desire these changes because they ultimately effect productivity. Allow time for change in attitude or behavior, then measure these changes and report qualitatively.

Create a Data Collection Plan

What?
New

information that needs to be recorded? Who? When? How?

Trend Line Example

Trend Line 35 Y axis: Number of Customer Complaints Projected Value Before Training Training Intervention 10 New Projected Value After Training 30 25 20 15

X axis: Months

Stakeholders: Review
Customer
Employee Supervisor Subordinate President Board

of Directors Stockholders

Thank You..