Assessing the ROI of training
As rightly said
If people really are your greatest asset, isn't it time to look at your
training programmes as investments in your organisation's human capital and not
just as an expense?
In this Lesson we are going to scan through the cost effectiveness of training or
the returns offered from training.
We will quickly review the arguement the case for return on investment (ROI) as a
primary tool for forecasting and evaluating the benefits of training and understand the
steps involved in conducting an ROI analysis
A NOTE ABOUT ROI (RETURN ON INVESTMENT)
Attempting financial ROI assessment of training is a controversial issue. It's a difficult
task to do in absolute terms due to the many aspects to be taken into account, some of
which are very difficult to quantify at all, let alone to define in precise financial terms.
Investment - the cost - in training may be easier to identify, but the benefits - the return -
are notoriously tricky to pin down. What value do you place on improved morale?
Reduced stress levels? Longer careers? Better qualified staff? Improved time
management? All of these can be benefits - returns - on training investment. Attaching a
value and relating this to a single cause, ie, training, is often impossible. At best
therefore, many training ROI assessments are necessarily 'best estimates'.
If ROI-type measures are required in areas where reliable financial assessment is not
possible, it's advisable to agree a 'best possible' approach, or a 'notional indicator'
then ensure this is used consistently from occasion to occasion
, year on year, course to
course, allowing at least a comparison of like with like to be made, and trends to be
spotted, even if financial data is not absolutely accurate.
In the absence of absolutely quantifiable data, find something that will provide a useful if
notional indication. For example, after training sales people, the
increased number and
value of new sales made
is an indicator of sorts. After motivational or team-building
reduced absentee rates
would be an expected output. After an extensive
management development programme, the
increase in internal management
would be a measurable return. Find something to measure, rather than say it
can't be done at all, but be pragmatic and limit the time and resource spent according to
the accuracy and reliability of the input and output data. Also, refer to the very original
Training Needs Analysis that prompted the training itself - what were the business