How To Measure Training ROI?
This is one of the topics in human resources that has a lot of rebates on what to measure and how. Also, it is one of the main indirect requirements of the newly published ISO Human Capital Standard Reporting 30414:2018. Shareholders and stakeholders need to understand how the investment in human resources are been managed. Besides, the hot requirement for HR to be more strategic and valuable towards its contribution to the organization’s outcomes. Before we reach the ROI, we need to have basics and a baseline of data and analytics to evaluate and then develop an action plan for success. This is not only applicable to hard skills but also applicable to soft skills and intangible aspects of human behavior. With soft skills and intangible aspects of training programs, it is quite difficult but not impossible. First, we need to understand the financial aspects of the training programs either for a particular program, collective, or overall department expenses.
Being a strategic department or someone with a strategic approach, you need to think about the future and create the necessary steps to achieve your goals. As the main goal of the learning and development function is to have an impact on the organizational goals and performance either through:
Increasing employee productivity,
Increasing sales or reducing operational expenses,
Decreasing customers’ complaints or increasing customers’ satisfaction,
Increasing employees’ retention or reducing turnovers,
Create an effective diversity and inclusion culture within an organization, etc.
Employees and students intend to forget almost 70% of what they learned after 24 hours (based on multiple resources and studies). To maintain the consistency of the learning and knowledge gained from the training program, employees need to create repetition practice with the support of their line managers. These repetitions must be at least 5 repetitions for a period based on an article by Hermann Ebbinghaus (http://psychclassics.yorku.ca/Ebbinghaus/index.htm). The repetitions are as follows:
First repetition – Within a day
Second repetition – After a few days
Third repetition – After a week
Fourth Repetition – After a month
Fifth Repetition – After a few months
There are 2 phases when we the ROI on training programs. The first phase is the immediate effect of the program based on the current and traditional evaluation form such as knowledge and learning gained, trainer communication and approach, premises, food and beverage, location, initial assessment, and so on. The second phase is important for the strategic contribution of the organization's goals. Based on the above repetition mentioned, you need to evaluate the effectiveness of the knowledge and learning on real-life practices through certain changes in performance patterns. These improvements or changes can be in a form of:
Increasing employee productivity,
Increasing sales or reducing operational expenses,
Decreasing customers’ complaints or increasing customers’ satisfaction,
Increasing employees’ retention or reducing turnovers,
Or any other business and HR metrics.
To know if the training program or formal learning is effective or impacts the performance of the employees positively, we need to partner with business leaders and have some insights or employees’ performance before and after the training program. Keep in mind, that not necessarily the spike or changes in employees’ performance are necessarily related to the training programs. It could be from other reasons such as:
Introducing new products or services by the organizations that let to an increase in sales or services,
New flexible processes and procedures introduced by the company to enhance customers’ experience, generate more sales, or reduce operational costs,
Flexible rules and regulations by the government to attract more businesses, products, and sales,
Moving toward AI and automation led to a reduction in the workforce and increase revenue.
With everything said, we should not forget the 70-20-10 model that was created by three researchers and authors working with the Center for Creative Leadership in 1980. This model consists generally of:
70% of the learning comes from practical and on-job experience including hard skills, soft skills, competencies, and behavior development,
20% from coaching, mentoring, buddying, consistent support and feedback,
10% of learning is from classrooms, training programs, online courses, and formal learning.
Practical scenario and case study:
You arranged and delivered a training program related to communication skills for 10 customer service representatives and now, you must measure the success of the training program. First, you need to know the training cost or investment and then move towards a breakeven or profit. Let’s say the total cost of the training program is USD 10K based on the following calculations: Training fees for 3 days is USD 3,000, Daily employees off work costs are USD 30 multiple into 10 employees, the total is USD 3,000, Food and beverage expenses are USD 500, Printing and arranging content material hard-copies is USD 100, Premise’s rental (if done out of the company premises) is USD 3,000 and USD 900 the cost of coordinator or employee worked on this program.
Then, you need to ensure and justify the investment in this program. The management or stakeholders are expected to receive an ROI on what had been invested. The minimum expected safe line is to break even which means, you have to ensure that the training program generated directly or indirectly USD 10K of business towards goals. Keep in mind that everything must be proven and connected without going into assumptions. Training, learning, and development are not CSR or a waste of money. Everything has to have an ROI and valuable contribution toward the business goals and objectives.
How are you going to approach this case study?
In conclusion, the role of the training and development function is not about scheduling, developing, and arranging for the formal training program; it is a full cycle of 360 degrees of evaluation and effectiveness from formal learning, and deployment on the on-job to contribute toward organizational success. I will be posting more updates related to HR articles to help you succeed in your workplace and have an outstanding impact on your organization as a strategic leader.
Let me know if you have any further details or comments. Have a great day.
Don’t forget to stay safe, healthy, and positive
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