return on investment: training and development
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Return on Investment:
Training and Development
ROI and Evaluation
ROI Contents
Purpose of ROI, and Value of training What is ROI Why ROI Methodology Toolkit
Models Benefit/Cost Ratio
ROI (%)
Costs Program
Benefits ProgramBCR
100(%) xCost
CostBenefitROI
The Value of Human Capital
We all know Human Capital (and its development) is vital
Human Capital is often much undervalued as an investment opportunity
ROI can be very highPhillips refers to 800% being achievable regularlyTennessee Valley authority claim 1000%+A world-class corporate university claimed 5,612%
Why ROI?
• Pressure on training functions to show demonstrable return• Value for money from training activity• Value of HRD to the business; e.g.
• Financial benefits• Staff productivity• Staff retention
• Clear alignment with corporate goals• In-house vs outsourced training
• ROI analysis is a tool to support the contention that training is valuable; demonstrate benefits vs cost
• Pressure to reduce costs must be balanced by visibility of benefit
• “Warm and fuzzy” is no longer any good! (in most cases)• Jay Cross alternative view
ROI as Process
Use evaluation techniques to acquire performance data
Use Training Needs Analysis to direct the project to the right data
Use analytical techniques to calculate ROI from the data
Use ROI results to review training effectiveness Use the reviews to inform future decisions
ROI as Perception
Which of these perceptions indicate your client’s view of ROI (which you need to address)? The Board may see a big picture of how the training affects the company’s ability
to achieve its corporate goals The finance department may be looking to see how training stacks up financially
against other ways to invest the company’s money, and whether the training, as carried out, was financially more effective than alternative forms of development
The business unit manager may be solely concerned with the impact on performance and productivity in achieving the goals of their department
The training and development manager may be concerned with the impact training programmes are having on the credibility and status as the training function within the company and its ability to secure investment in the future to drive further business performance enhancements
What is ROI?Elements of “Total ROI”
Reducing costsIncreasing benefits/performance/capability
Use of ROIROI of a training project’s contribution to business or
projectROI of one delivery method vs. another (e.g. ILT vs. e-
learning)Role of ROI
Pre-training assessment and expectation settingPost-training feedbackPost-experience value measurement
The Process Model
1: Measure reaction &identify planned actions
Immediate reaction and response
2: Cognitive learning and retention
Skills, knowledge, attitude changes
3: Assessing application of learning to the job
Actual change in behaviour
4: Identifying business results
Quantify business value of change
5: Calculating ROI Compare monetary value with costs
Getting Started
•Select your project to measure
•Select a significant project; align with significant goals
•Start with a project that has clearly definable metrics
•ROI measurement Plan
•Data Collection Plan
•Identify the “returns”
•Identify the investment factors
•Select the survey audiences and sources of data
•Select your data collection methods
•Analysis Plan
Investment Factors
Costs incurredPayments to suppliers and service providersTime and attention to create and deliver the
trainingOpportunity costTime and costs involved in the ROI
measurement exerciseOther Internal costs
Process Summary – Data Collection Plan
Data collected at different times to provide:Pre-training baselinePost-training change analysisPost-experience change analysis
Data Collection PlanState the objectives of the training / learningState the objectives of each phase of data collection at each
evaluation LevelIdentify any previously used metrics, values or methodologies
used by the client, and determine suitability for the current exerciseSelect the appropriate evaluation methodsIdentify the audiences who will be surveyed for dataSet the timing for the data collectionAllocate responsibilities for data collection and analysis
Process Summary – ROI Analysis Plan Continuation of the Data Collection Plan, capturing
information on the key items needed to develop the actual ROI calculation. List Significant Data items (usually Level 4 or 3) to be collected
Benefit Factors Cost Factors
Methods to isolate effects of the learning/training from other influences
Methods to convert data to numerical values Intangible benefits Other influences Communication targets
Process Summary – Data Collection Identify the purposes of the evaluation.
State clearly what the evaluations are to measure and what the goals of the training are intended to be.
Be as specific as possible about the goals of the training Ensure goals address the performance enhancement,
business improvement or cost savings expectations. Select the evaluation instruments and methodology. Establish the timing for the data collection.
Decide whether pre-training analysis is required, or post training analysis, or both. (e.g. pre-training and multiple post-training assessments may be necessary to effectively identify the skills changes in Levels 2, 3 and 4.)
Carry out the data collection at the levels 1-4
Process Summary – Sources of Data Organisational Performance Records, showing outputs and
measurements taken as part of the business’ normal reporting process
Testing and certification assessment records Participant feedback Instructor feedback Feedback from participants’ supervisors/managers Feedback from participants’ subordinates Team/group peer feedback Feedback from other internal or external groups (eg HR training
departments)
Process Summary – Evaluation Methods Identify how the data will be collected and analysed Surveys On the job Observation Interviews Focus groups Action plans (or Performance contracts) and
Program assignments Performance data monitoring
Process Summary – Isolate effects of training Separate training (personal productivity) component of
performance change, from new software/systems/processes
Essential for credibility Potential methods
Use control groupsImpact assessments and estimates by participants,
managers, peersTrend linesDiscount/adjust for over-estimates
Apply “inflation adjustment” for estimates and assessments
Process Summary – Convert to money Convert data to monetary value
Specific costs and time incurredCosts and time savedQuality increase, reduced wasteImproved customer service and
satisfaction“Intangible” benefits (retention,
commitment, fewer complaints, reduced conflicts etc)
Process Summary - ROI
Calculate ROI Benefit-cost ratio= Program Benefits
Program Costs
ROI % = Net Program Benefits
Program Costs x 100
Break-even time = Investment
Benefit x Period in months
Evaluation Levels
1. Reaction and Planned Action
2. Learning
3. Application and Implementation
4. Business Impact
5. Return on Investment
Writing Objectives
Easy as A, B, C, D
Audience: Who?
Behavior: What do “they” do?
Condition: What is the setting and method of evaluation?
Degree: Measurement to be met.
Example Objectives
Course objective: Learners will be able to make 15 entries in a customer database in 15 minutes with no more than 1 error.
Application objective: Learners will be able to reduce the data entry error rate by 50 percent over the next 6 months.
Impact objective: Employee time spent correcting database errors is reduced by 25 percent from last year’s rate.
Incr
easi
ng S
cope
Costs, Budgets, Accounting
Quantifying ROI means accounting for all the costs of the program.Fixed costs: independent of the number of
participants.Variable costs: Dependent on the number of
participants. There are costs at every step – make sure to
account for them all.
Benefits and Soft Skills
Change in:Attitude, work climate, leadership, teamwork.
We desire these changes because they ultimately effect productivity.Allow time for change in attitude or behavior, then
measure these changes and report qualitatively.Allow time for change in productivity, then
measure for data and report quantitatively.
Create a Data Collection Plan
What? New information that needs to be
recorded? Who? When? How?
Trend Line Example
Trend Line 35 Y axis: 30 Number of Customer Complaints 25 Projected Value 20 Before Training 15 Training Intervention 10 New Projected Value After Training J F M A M J J A S O N D X axis: Months
Stakeholders: Review
Customer Employee Supervisor Subordinate President Board of Directors Stockholders
Thank You..
Any Questions:
Dr. Pratik Surana
+91-9890653263
pratiks@qicpl.com
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