Return on Investment:Training and Development

Session 1

ROI and Evaluation

Objectives

• At the completion of this unit, students will be able to:

> Discuss the importance of determining ROI in training environments.

> Identify stakeholders and develop questions to determine their views and needs.

> Write training goals and observable objectives based on stakeholders’ needs.

Objectives

> Describe the importance of the assessment of learning for ROI.

> Recognize the differences between short-term and long-term assessment.

> Identify items that belong on a training budget sheet to determine ROI.

> Calculate expenses and ROI.> Write a report on training that includes

all relevant data.

Return on Investment

• Rooted in manufacturing.• Advanced to banking, health care, non-

profit, public and education sectors.• Part of quality and efficiency

methodologies.

ROI Is Used To:

> Quantify the effectiveness of training.> Manage the training budget.> Provide evidence to management

and other stakeholders.> Build trust and respect for ourselves

and our unit.> Earn the ears of senior management.> Identify areas for improvement.> Provide data requested by senior

management.> Keep our jobs.

Models

• Benefit/Cost Ratio

• ROI (%)

Costs Program

Benefits ProgramBCR

100(%) xCost

CostBenefitROI

Why is ROI important to you?

Evaluation Levels

1. Reaction and Planned Action

2. Learning

3. Application and Implementation

4. Business Impact

5. Return on Investment

Stakeholders

• Who are they?> Anyone who pays for, participates in,

benefits from, or has decision-making responsibility for HRD and training.

• What should they know?> The need for training.> The results from training.> The costs of training.

Needs Assessment and Task Analysis

• Needs assessment: identifies gaps between what is and what should be in the organization.

• Task analysis: investigates the specific skill(s), knowledge or attitudes and at which point there is a breakdown in use or performance. If the analysis uncovers a lack of knowledge, skills or attitude, then training is required. If it reveals faulty equipment, poor work conditions or lack of incentive, then another solution is needed.

Return on Investment: Training and Development

Session 2

Goals, Objectives, Assessment

Goals

• Organizational Goals

These goals are typically targeted toward the organizational level and include such things as productivity, net income, inventory and cash cycles, and customer satisfaction.

• Learning Goals

These goals typically focus on the individuals in the organization and their performance, knowledge and skills.

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 Objective

AudienceBehavior

Condition

Degree

At the completion of the course the learner

will be able to score 85% or better on a

written multiple choice 25 question test

Example Verbs

• Verbs to Use:> Discuss> Explain> Demonstrate> Identify > List> Perform> Compare/Contrast> Score (on an

assessment)

• Verbs to Avoid> Understand> Comprehend> Know> Do

Objectives in ROI

• Course objectives: What is it that the learners will be able to do upon course completion?

• Application objectives: What goals do the HRD/training practitioner have for the application of the skills gained in training?

• Impact objectives: What effect will accomplishing the application objectives have on the organization?

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

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cope

Learning Assessment

• Alignment between assessment and objective is paramount.> Easy to do with well-written objectives.

• Cognitive, psychomotor and affective domains are assessed in different ways.> Cognitive: written and oral tests; discussion;

compare/contrast exercises.> Psychomotor: demonstration; performance.> Affective: longitudinal observation and/or

discussion.• Be sure to use the right type of assessment for

each objective of the learning event.

Return on Investment:Training and Development

Session 3

Costs, Budgets, Accounting

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.

Output Measures

Outputs are product-driven and include data that are not performance-based but rather outcomes of changes in performance or investment in equipment.

Examples include:> Units built.> Time it takes to build the units.> Income from sale of units.

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.

Karen Kaminski

Tobin P. Lopes

Models

• Benefit/Cost Ratio

• ROI (%)

• Phillips – See Figure 2-2 in text.

Costs Program

Benefits ProgramBCR

100(%) xCost

CostBenefitROI

Benefit/Cost Ratio Example

• Data entry clerks’ average wage: $9.50/hr.• Five hours per week were spent correcting errors before

training.• 20 percent less time correcting errors saves one hour each

week.• 40 clerks.

BCR = .076 for one week. What about 13 weeks? 26 weeks?

076.$5,000

hr 9.50x40x1BCR

Now with ROI%

• Data entry clerks’ average wage: $9.50/hr.• 20 percent less time correcting errors saves one hour each

week.• 40 clerks.• When clerks use their skills for 26 weeks, ROI% is almost

100%!!

%4.921005000

4620100

5000

50001380(%)

xx

xROI

%6.971005000

4880100

5000

5000)26380((%)

xx

xROI

Create a Data Collection Plan

• What?• New information that needs to be

recorded?• Who?• When?• How?

Additional Thoughts

• Access to learners after training:> Do you have access to learners to

follow up on application and use of the knowledge and skills developed during the training?

• Isolating training effects:> Consider what else may have occurred

at the same time as the training that may have made a difference.

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

Return on Investment:Training and Development

Session 4

Reporting Your Findings

Review of ROI

> Justify the training budget.> Quantify effectiveness of training.> Provide evidence to management and

other stakeholders.> Build trust and respect for ourselves

and our unit.> Earn the ears of senior management.> Identify areas for improvement.> Respond to management directive.> Keep our jobs.

Stakeholders: Review

• Customer• Employee• Supervisor• Subordinate• President• Board of Directors• Stockholders

Reporting

• Needs to be:> Timely, targeted and unbiased.

• The purpose is to:> Illustrate success.> Secure approval.> Gain acknowledgement/agreement on

solutions.> Build credibility.> Enhance marketing.

Reporting

• Who needs to know?• What do they need to know?

> How will you inform them?• Presentation.• Briefing paper.• Detailed report.• Letter.

• When and where?• Who will present?• Feedback?

Items to Include in a Report

• Executive summary.• Title of training.

> Goals and objectives.> Who participated, when/where, length.

• Assessment and outcomes.• Evaluation.• Budget.• Recommendations.

Summary

• Know your audience:> Who, existing and desired skills,

knowledge and attitude (audience analysis).

• Expectations of/from organization:> Goals and objectives, stakeholders.

• Assessment and evaluation:> Budget, data collection.

• Reporting.

Finally

Take action on the data collected.

Use it to enhance your training and

therefore your organization.