In high-performing organizations, training is viewed not only as necessary but extremely beneficial. Training is absolutely critical for getting new hires up to speed and for developing additional skill sets to manage new technology introductions in the workplace. Training can also be a vital risk management tool, ensuring organization-wide compliance with industry, safety, or government regulations.
Clearly, employee training and development are fundamental to employee effectiveness. Yet training dollars aren’t always subject to the same return on investment (ROI) scrutiny that other line items receive. How can an organization know whether its training investments are paying off?
Justifying training costs is becoming top of mind for many businesses. Conducting an ROI analysis – a comparison of benefits to costs indicated as a percentage of the original investment – can be painstaking and time-consuming. But there are some basic ways to determine whether training meets an organization’s goals and justifies its cost.
Basic training factors
To begin with, not every training program warrants scrutiny. Conducting an ROI isn’t worth the analysis on a low-cost stress reduction seminar conducted orver the lunch hour, for instance. Instead, zero in on programs that have long life cycles and are closely tied to organizational, operational, or strategic goals.
New employee orientation is one example. For some companies, intense cultural orientation plays a strategic role in sustaining their competitive advantage (think Disney). For smaller companies, the value of effective orientation in mitigating costly employee turnover might be even greater.
Likewise, when it comes to “soft skills” training programs, such as leadership development or customer service, expenses can be significant and outcomes harder to quantify. Benefits aren’t immediately recognizable and may take months or even years before they’re realized, if at all. Such programs are also good candidates for evaluation.
Determining value
Every training program should have clear objectives at the outset. From there, organizations can develop an evaluation plan.
- Measure participants’ reaction and satisfaction. Surprisingly, many companies fail to collect this most basic of data. They continue to train without the benefit of trainee feedback. A simple, post-training survey can assess the quality of the class, the relevance of the material, and the effectiveness of the trainer.
- Analyze participants’ learning. It’s important to determine whether employees absorb and understand the new information. Organizations should use testing and other evaluation methods to determine whether learning actually occurred.
Unless an organization conducts these two basic steps and receives good marks on both fronts, achieving ROI is highly doubtful. For those organizations that desire a more rigorous analysis, there are two additional steps to undertake.
- Analyze application and implementation. The ultimate goal of training is to change on-the-job behavior. Measuring progress toward this goal requires organizations to collect information on whether employees are using their new skills and how. This step provides the greatest insights as to what isn’t working and why (lack of support, inappropriate skills being taught, wrong timing, etc.).
- Analyze the impact to the business. Calculating the ROI impact on the organization in terms of monetary value can be arduous. A simple approach might be to determine the cost of a business problem, then measure the change post-training. For instance, an organization can usually calculate the costs associated with each new hire. If the company’s problem is high turnover, any training that reduces turnover can then be calculated in savings.
By converting data to monetary values, companies can then capture program costs, identify the benefits, and calculate the return on their investment.