Employee Training and Development: How to Measure the ROI of Training Programs
Every organization wants to know the value of the programs they create, especially if they pertain to employee training and development. In this post, we’ll talk about the different ways to measure the ROI of training programs.
Does training employees matter? And does paying for training worth it?
According to research by South Central College, Center for Business & Industry – there is a large gap between the skills employees have today and the skills needed for today’s competitive global marketplace. Such a difference is costing the U.S. about $60 billion per year due to productivity issues.
Why Training Matters
In this highly competitive market for real talents, companies do everything they can to find and retain the best employees.(Click here to read ‘Are Your New Hires Leaving Soon After Onboarding? Here’s How to Engage Them’)
There’s no denying that employee training and development are crucial to the success of any organization. Through efficient training initiatives, companies can address various challenges that lead to massive profit loss, such as poor customer service, inflexible workforce, lack of product knowledge, materials waste, and low employee morale.
In 2017, training expenditures in the U.S. increased by 32.5 percent, which is equivalent to $90.6 billion. The average training expenses among large companies increased from $14.3 million in 2016 to $17 million last year small companies rose to 1 million. Training employees do have a cost, that’s true. Successful programs have greater turnouts.
But how do you measure the ROI of a training program?
Calculating the ROI Based on Cost
The standard formula for training ROI is this:
Monetary benefits – Training Costs
_____________________________ X 100%
Training Costs
When applying this formula, choose one item or area to measure based on the type of training you provided. For example, you conducted training to help speed up the resolution of customer issues via phone. For this criterion, your baseline is how long does it take for an employee to resolve a problem and at what cost. So, if for example, it takes your company $200 per week per employee (including salary, equipment cost, facility, etc.) and an employee resolves 200 cases a week, each customer concern costs your company $2 to address and resolve. If you spent $500 on training and saw an improvement of 300 resolved cases a week, the cost per case resolved goes down to $.50.
Many small entrepreneurs have limited funding and depend on financing options like business loans and personal loans online to support operational costs, overhead, and employee development. Some would think that employee training is just an added cost and not applicable for small businesses but, based on the 2017 Training Industry Report by Training Mag, training expenditures account for one-third of the total budgets of small companies.
Ways to Measure the ROI of Training Programs
More than the monetary return, a successful training program is also measured by its effectiveness.
There are plenty of ways to measure the effectiveness of your training programs, such as:
Pre and Post training Assessment
Knowing what employees expect from a training program is a great way to capture their interests and to incorporate these into the sessions. It’s also an effective way to keep them motivated and engaged throughout the learning sessions. Surveys are the most common way to assess whether the training has been successful or not, also called “post-event feedback.” In fact, according to the Association for Talent Development, 90% of organizations perform this type of survey to measure the ROI of their training initiatives.
Learn More:
How to Train New Employees: 5 Steps for Planning
Data Mining
Some companies employ learning management systems that provide some metrics and generate reports that give insights into the effectiveness of training. These can include the time spent on each course or activity, the dropout rates, and the time to complete each item or activity. All these variables can suggest meaningful insights. For example, a high dropout rate could mean that the session was difficult to understand.
Evaluating the Experience
Top talents look for top training. According to research by ManpowerGroup Global Marketing, 65% of employees expect to receive training from their managers or leaders. The impact of training on engagement and retention is also a great factor to consider. Providing impactful training does not only ensure that it meets employees’ expectations, but it also helps retain the right people in a difficult talent market.
Evaluating Demonstrated Engagement
High demonstrated engagement suggests that employees are absorbing the new knowledge and skills they’re getting out of training. Quick polls and competitions that test their knowledge help the training facilitators see who is engaged.
Why ROI for Training is Important
There’s no doubt that training is crucial for an organization. But it is equally important to know whether you are getting the worth of your investment. As with all initiatives, the results matter. The ability to measure the impact and value of employee training and development has been a historical challenge in the business world because, for many reasons, one is that measurements can be subjective. There’s no single approach to measuring the ROI of employee training. There are various factors to consider, such as the goal, current knowledge of the employees, their feedback, and performance results. It is also important to know that training is not a one-time event. It is a continuous process wherein employees learn and master the skills they need to grow in the job.
