ROI stands for return on investment. The formula for calculating ROI of Training is
ROI = (Net Program Benefit/ Program Cost) x 100%
Or more specifically
ROI = [(Program Benefit – Training cost)/ Training Cost] x 100%
There are some other method like payback period, the total investment divided by annual saving.
Payback period generally work in long term projects such as staff retention.
Below Diagram Represents steps to calculate ROI on training
Trainees reaction needs to be evaluated to the training program.
Did they like the program?
Did they like the facilitators?
Did they like the training facilities?
Below needs to be evaluated:
What knowledge was learnt?
What skills were developed?
What attitudes were changed?
Below needs to be evaluated
The frequency of applying new skills/ knowledge/ attitudes.
The effectiveness of new skills/ knowledge/ attitudes.
Below needs to be considered
Customer Response Time
ROI of Training Calculations
Level 5 is ROI of Training calculations.
Using ROI formula, ROI can be calculated.
During calculations, below needs to be considered:
- Importance of the program for meeting organization goal
- Cost of the program
- Target Audience
- Extent of Management interest
Here most important is training goal. If you have a goal, then it will be very easy to convert training outcome into figure. So, when you are planning for a training, don’t just set learning objectives. Plan out the kind of business impact you want to come out of the training. Plan for these outcomes in advance, and you’ll be able to deliver training that produces measurable results.
The goal needs to be specific. Goal can be categorize into two types:
- Primary Goal
- Secondary goal
Before designing a training, below 3 points needs to be taken into consideration:
- Who are the audience?
- Why is training required?
- What are the metrics that needs to be measured?
Let’s have below business case.
XYZ Company generally hire Territory Officer through Fresh Sales Leadership Program which is external hiring. Now they have decided to promote Sales Representative to Territory Officer as Lots of Sales Representative(s) are changing their job to other company and launched a new training program named Leadership Development for Sales Representative. However, initial goal of the training to promote 6 sales representative as Territory Officer and reduce sales representative turnover by 4%. The revenue volume of both will be $7000 & & 26950 respectively. However, in practical the company was able to promote 9 sales representative which was primary goal of the training and reduce turnover to 19% from 22%. Calculate the ROI of Training.
Solution on ROI of Training for above case
To do this exercise below matrix may be required
- Cost per Hire (Territory Officer)
- Cost per employee turnover (Sales Representative)
- Downtime duration
- Number of defective products
- Sales volume
- Production Unit
- Customer Satisfaction Index
- Number of accidents at workplace
- Response time
Soft Data Indicator
- Job Satisfaction
- Conductive working relationship
- Effective Communication
- Stress Rate