Importance of Return on Investment in Training

When economic times are hard or when cash flow looks precarious, the accounts will appear with their knives to cut out unnecessary spending.  All too often this is training, learning and development.  So often the Training function is seen as a cost centre and it needs a cultural shift to modify this attitude.  It’s accepted that organisations have to speculate to accumulate so in the economic good times, money will be spent on training.  There is a general understanding that effective training increases profit by improved productivity, reduced attrition rates, higher levels of engagement and reduced wastage and shrinkage.  The problem is, how do you show that it is training and not any other factors which have affected these measures?

So HR has to show that there is a Return on Investment (ROI) on any training interventions and that the Training function is not a cost centre but a long- and short-term investment.  Training has measurable outcomes to demonstrate ROI, it’s just that not many organisations bother to do the calculations and hence training is regarded as a ‘nice-to-have’ add-on because every organisation does it. We are thus is a closed circuit of spend-cutback-spend-cutback.

There have been many surveys on the use of evaluation in training and development. While surveys might initially appear heartening, suggesting that many trainers/organisations use training evaluation extensively, when more specific and penetrating questions are asked, it if often the case that many professional trainers and training departments are found to use only ‘reactionnaires’ (general vague feedback forms), including the invidious ‘Happy Sheet’ relying on questions such as ‘How good did you feel the trainer was?’, and ‘How enjoyable was the training course?’. As Kirkpatrick, among others, shows, even well-produced reactionnaires do not constitute proper validation or evaluation of training.

There are several ways of calculating ROI and many factors which have to be taken into consideration:

• Actual cost of the training programme – development and delivery
• Training facilities
• Cost of external trainer or internal
• Down time from the job/cost of replacement employees /overtime
• Travel and hotel costs
• Administration costs
• Line management time before and after training

These are all relatively easy to measure and establish what the direct and indirect costs of the programme are to give a final cost.  Now comes the less easy, but not impossible, part of the calculations.  What difference has the training made to the performance/behaviour of the individual(s)?  This where the establishment of training objectives is important:

• Why is there a need for this training?
• What outcomes can be expected?
• What impact will this have on costs and profit?

Once the objective is established then the results can be measured – often this may be a straightforward matter of increased sales in value after training sales people or reduced accidents after safety training – they key questions are:

• To what extent were the identified training objectives achieved by the programme?
• To what extent were the learners’ objectives achieved?
• What specifically did the learners learn or be usefully reminded of?
• What commitment have the learners made about the learning they are going to implement on their return to work?

It does happen that an initial review will reveal no measurable goals after training e.g. management training to enhance man management but dig dipper and consider what difference better management skills would make to the relationship with the team and the morale and engagement of the team.

Another approach is to use the four levels of Kirkpatrick’s evaluation model.  All these measures are recommended for full and meaningful evaluation of learning in organizations, although their application broadly increases in complexity, and usually cost, through the levels from level 1-4.

This grid illustrates the basic Kirkpatrick structure at a glance. The second grid, beneath this one, is the same thing with more detail.

level	Evaluation Type (what is measured)	Evaluation description and Characteristics	Examples of evaluation tools and Methods	Relevance and Practicability
1	Reaction	Reaction evaluation is how the delegates felt about the training or learning experience.	‘Happy sheets’, feedback forms. Verbal reaction, post-training surveys or questionnaires.	Quick and very easy to obtain. Not expensive to gather or to analyse.
2	Learning	Learning evaluation is the measurement of the increase in knowledge – before and after.	Typically assessments or tests before and after the training. Interview or observation can also be used.	Relatively simple to set up; clear-cut for quantifiable skills. Less easy for complex learning.
3	Behaviour	Behaviour evaluation is the extent of applied learning back on the job – implementation.	Observation and interview over time are required to assess change, relevance of change, and sustainability of change.	Measurement of behaviour change typically requires cooperation and skill of line-managers.
4	Results	Results evaluation is the effect on the business or environment by the trainee.	Measures are already in place via normal management systems and reporting – the challenge is to relate to the trainee.	Individually not difficult; unlike whole organisation. Process must attribute clear accountabilities.

 

For an in-depth study of Managing and Measuring Training, please click here

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