Measuring the return on investment of training programs
Our training department organizes many important programs for our employees. But it appears to me that their main objective is to cover only as many participants as possible, without considering the return on investment (RoI) to the company. They don’t bother to do a follow-up or at least measure the training effectiveness or its implementation to the actual job. My question: Is RoI the primary responsibility of the training department or the department where the employee-participants are assigned? — Torn Between A man bought a small farm lot and was visited by his neighbor one day. He asked him: “Can you tell me where the property line runs between our two farms?” The neighbor replied with another question: “Are you talking about owning or mowing?”
Employee training and development programs represent a highly organized and planned effort by many organizations to facilitate learning of job-related knowledge, attitude, skills and habit and make them contributory to individual work performance. And ultimately, to achieve corporate goals.
Private organizations spend millions of pesos on formal training programs to make this happen. They even maintain “corporate universities” that offers broad-based learning opportunities for employees and their management team, including their suppliers, customers, and other strategic partners. One notable corporate university program is Hamburger University, McDonald’s global training center.
According to Richard Daft in Management (12th edition, 2016), Hamburger University “is so well respected that its curriculum is recognized by the American Council on Education, so employees can actually earn college credits.” The idea of having “corporate universities” became popular that there are “numerous other companies, including FedEx, GE, Intel, Harley-Davidson, Procter & Gamble and Capital One, use corporate universities to build human capital.”
And so, who responsibility is it to ensure RoI on training programs? The answer lies in whose training budget was used to make the employee development program happen. Whose resources were used to hire the subject matter experts, renting the training venue and equipment, etc.? If the budget comes from the training department, then it follows that it should conduct an RoI measure with the help of the department that benefited.
On the other hand, if the budget comes from a certain department ( other than training), then it follows that the authority and responsibility should also come from that concerned department, but with the active assistance of the training department. Regardless of where the money comes from, there’s a standard RoI measurement that you can use.
According to Louise Sickley of the Sheffield Business School, the Jack Philips at RoI Institute is one significant evaluation program that can be best applied to learning and development first within the corporate context, before being used by international development and health care organizations.
“This RoI approach to measuring training and development is highly regarded as one of the most comprehensive methods, as it draws on a number of established theories and evaluation models, including Kirkpatrick’s learning evaluation model and Phillips’ RoI methodology, theories of change and the logical framework approach.
“This model is about building a chain of impact to create a link between the specific learning/training activity and the impact or RoI, which could work equally well for coaching as it does for a more traditional staff training programs.”
Specifically, Sickley suggests five models to appreciate the RoI of training programs. These are:
One, engagement. Sickley says it’s the lowest form of seeking the participants’ feedback and needs only simple checking with the individuals on how worthwhile the program was. It can be done by asking the participants to answer a few questions about the training relevance and make them commit to its implementation.
Two, learning. It means “checking or testing” what the training participants have acquired with “new knowledge, skills, attitudes and that they have the confidence to apply it.” This approach is best done through a pre- and post-workshop audit, including the application of a scenario, coaching or simulation testing.
Three, application. Are the training participants demonstrating changes in work behavior? This can be done through a preand post-360 degree feedback mechanism or any evidence proving that they have already completed the planned actions from the coaching or training sessions.
Fourth, business impact. These key measures must be agreed prior to the implementation of any training program. All stakeholders from HR, finance, operations, marketing, etc. within the organization must agree. “If work-based projects are used in the learning solution, the financial impact of these can also be included at this level. The hard impacts are reported at this level where a financial figure can be applied so it can be used to calculate the RoI,” says Sickley.
Fifth is RoI formula. This requires calculating all loaded costs of the training programs, including the man-hours of people attending it, including “on-costs.” This means using the following formula: The net program benefits are calculated as follows: ( benefits – costs) / costs X 100.
It is very important to measure the RoI of training programs. If you can’t measure, you can’t manage. If you can’t count, you can’t control. Therefore, ignore training people who say the impact of their programs can’t be measured. The idea has been refuted many times by the Philips RoI Institute.
In conclusion, whoever is the budget owner or the same authority who must ensure that training programs must be spent wisely to give absolute terms in return? If a sales manager doesn’t know exactly how his people sold and at what margins, would we believe he or she is the right person to manage sales?
The same principle goes to the training manager or the training budget owner. If both don’t know the how and why of training, should we invite them as part of the management team? The answer is obviously in the negative.
ELBONOMICS: The best way to learn something is to teach it first.
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