Return On Investment (ROI)

When it comes to corporate training programs, it is important to show the “numbers” and measure the training’s effectiveness to justify the budget. Every business project that requires an investment has to undergo a return on investment (ROI) evaluation, why should training be any different?

Research indicates that only 16% of companies put enough effort into evaluating training outcomes. The vast majority merely measured the “happy sheet” – the attendees’ feedback immediately after completing a course. Imagine if a delivery company justified the purchase of a new fleet of lorries by saying how much their delivery drivers enjoyed watching a promotional video of it?

This is not a reliable measurement of training effectiveness.

The ComSkills team use all four Kirkpatrick Model levels to measure any training course (see How We Work). This framework can also be extended with a fifth level that includes a way to measure training ROI.

Level 5 helps companies use cost-benefit analysis to determine the value of a training program. It helps organisations determine whether the money they spent on training can be translated into real-world benefits such as increased productivity, profits or efficiency.

What is training ROI?

One client recently said their organisation had saved £750,000 in the last year by transitioning from face-to-face training to e-learning. This figure included savings in flights, fares, hotels, taxis, subsistence expenses, room hire, administrative costs and training expenses.

Transitioning from face-to-face training to e-learning will reduce costs, and this figure should be included as part of any training course evaluation. But this is a cost-saving and not return on investment.

The ROI of training should be the net financial benefit generated by a particular training program. In simple terms, it is the monetary amount of value a particular course has generated minus how much it costs, and the number should be positive for a training course to be considered successful.

How do you calculate the ROI?

ROI evaluation starts at course design. What do you want to achieve? What will success look like? Therefore, it is best to define the key performance indicators (KPIs) right from the start and decide how much they should change due to a training course. This is built into the four-part Kirkpatrick model used by ComSkills when we design our training courses.

By adding a fifth level that includes calculating the actual change in the KPIs caused by a training course and how much you’ve actually spent on the course, you can measure the ROI.

The industry-standard formula for ROI is straightforward:

ROI

‘Amount gained’ stands for the monetary value generated by a course and ‘Amount spent’ are all the expenses incurred in developing and implementing this course.

You can consider an ROI investment successful for a training course when its benefits are significantly higher than the incurred costs.

What benefits can you measure for ROI?

  • Increase in Productivity
  • Increase in Sales
  • Increase in Engagement

This list is not exhaustive. The client can calculate ROI for anything where a monetary value can be established.

How do you calculate the ROI of a training course?

To calculate the ROI of a training course, you need to implement each step in turn.

return on investment

Level 1: Survey the trainees to gauge their reaction.

Level 2: Measure the learning that took place through an online survey, quiz or exam.

Level 3: This stage studies behaviour in the workplace and makes it easier for organisations to see whether training resulted in on-the-job changes. It can include self-evaluation forms, assessments by line managers and peer observations.

Level 4: This level looks at whether other processes were responsible for driving changes in outcomes. For example, changing economic conditions and an altered business landscape could be affecting profits or revenues.

Level 5: This level is called ROI determination and is a form of cost-benefit analysis. To conduct this step, you’ll need to:

1. Choose which factors to measure, you could measure sales, productivity, efficiency or some other business metric.

2. Take pre-training measurements

3. Take post-training measurements

4. Calculate the benefit to the company

Training course ROI real-world example

ComSkills has designed a monthly Research and Monitoring private webinar training course for a client. Each training course costs £2,000 and has 10 attendees.

The training goal is to increase productivity and improve how their employees use information to enhance decision support.

Level 1 – the employees who attended were asked to complete an online survey form to gauge their training reaction. Typical questions included:

  • Did you enjoy the training?
  • Was the training worthwhile?
  • Did the training meet your expectations?

Level 2 – the attendees’ work performance is tested both before and after the training. The ComSkills course includes short practical tests and demonstrations where the attendees demonstrate that they have mastered a particular skill or procedure to increase efficiency.

Level 3 – the client measured the attendee’s performance in the workplace. Using an online survey, the client discovered that the attendees saved 30 minutes a day in research and monitoring time. There was also an improvement in the quality of their output.

Level 4 – the client isolated the effects of the training from any other variables, such as introducing new equipment or changes in the departmental organisation.

Level 5 – the client calculated the ROI of the training. In this example, the training helped increase the average attendee’s productivity by 6.25% (30 minutes a day in an eight hour day).

The client calculated that each attendee received an average of £15 per hour pay (annual salary of £31,200). Over 100 x 8-hour working days, the training would result in a £750 increase in productivity per employee or £7,500 for all ten attendees over a 100-day period.

You can then use the standard ROI formula to calculate the ROI:

ROI (percentage) = (Monetary benefits: – Training costs:/Training Costs: x 100.

ROI% = £7,500 – £2,000/£2,000 X 100 = 275%.

This gives an ROI of 275% and indicates that the Research and Monitoring online training course was extremely worthwhile.

Return On Investment