Training and development is a hugely important element of business growth. Nowadays, most of the organizations leverage learning and development (L&D) function to upskill their employees. Several of them use eLearning, including mobile learning or mLearning, as a significant part of their training delivery.
Training and development offer many benefits to organizations. It increases productivity, motivates the workforce and also inculcates a sense of belongingness among the employees. As we know, investing in training programs is crucial for any enterprise to stay competitive. At the same time, it is equally important to determine the impact and evaluate the Return On Investment or ROI of training.
What is ROI?
ROI is the return on the investment made by an organization (ROI = Gain or Return/Cost). It can be determined via two factors, viz. the Investment made (or cost incurred) and Value/Gain accrued (or return).
Let us be honest, when you or your company invest on training, both think about it a lot. However, before you start getting tensed about training ROI, you should remember that all tech training programs are not created equal. Opting for the right training method that provides the best value for you or your organization is crucial.
For example, seminars and boot camps are effective when you need intensive training on a single subject and are ideal for employees who can step away from their daily duties to the immersive training. Classroom training benefits people who learn best in a traditional setting. Online classroom training offers the benefits of a traditional classroom while breaking geographical barriers, making lectures available anywhere via the internet. On the other hand, online learning proves suitable for professionals who want to go at their own pace when it comes to mastering a specific skill or subject.
Therefore, while measuring the ROI of training, we should also consider the factors like mode of delivery, training module, the technology and of course the purpose of the training.
Why Evaluate Training ROI?
People like us, who are in the learning and development industry, understand that evaluation with clear metrics not only justifies the investment behind the learning programs, but also makes it easier to secure funding for future training initiatives. Moreover, when executives understand the true impact that the L&D programs have on key business achievements, it helps to build better leadership support for future projects.
Some of the main arguments to justify the evaluation of a training are as follows:
- Evaluation helps to validate training as a business tool. If training is evaluated properly, it can be compared against these other business methods and can be put forth to be selected either in preference to or in combination with other tools.
- Measuring training ROI helps to justify the cost incurred by training programs. There is no denying that when money is tight, training budgets are the first to be sacrificed. Therefore, only a rigorous quantitative analysis can enable the learning and development departments to resist these cuts.
- Training evaluation helps to improve the design of the training programs and the selection of training methods to optimize them for providing better value for the employees as well as the organization.
How to Measure ROI of Training
Evaluation of the training ROI essentially measures the effectiveness of training program and the value that it offers for the money invested. While the advantages of training and development are well accepted, organizations are increasingly seeking ways and means to determine its impact on learners as well as on the business.
To determine the ROI of any given training option, there are a few variables you will need to consider:
- Cost: How much money does the training cost? And how much time will be invested in the training?
- Return: How much time will you and your team save as a result of the new skill?
Measuring ROI of training involves five levels of evaluation, which is a combination of the Kirkpatrick’s model of evaluation and Phillips’ ROI calculation.
- Level 1 – Reaction: Measured by taking feedback from learners. This level measures the satisfaction of the learners.
- Level 2 – Learning: Measured through scoring patterns in the end of the course. This level measures the learners’ skills that they have acquired after the training and how those skills have enhanced their knowledge.
- Level 3 – Behavior: Evaluated using a combination of techniques to understand how much of the newly acquired learning is being applied on the job. This level assesses the impact of the training program on employees’ behavior and how it has increased their efficiency and productivity.
- Level 4- Business Impact: Usually measured through productivity gain. This level measures the impact of the training on business. It evaluates business quality by assessing the reduction in re-works, and errors and compares the pre and post training business results.
- Level 5 – ROI: Calculated by converting the business impact gains, determined in level 4, to a monetary value.
Measuring Training ROI: The Checklist
Although the post feedback form is a great way to review a training, it is essential to evaluate a training initiative throughout the process to determine its actual ROI. Here, we have enlisted a few questions that you need to ask to ensure that your training initiative is effectively measured and appreciated by all the stakeholders:
- What is the purpose of the training?
- What business objectives is the technology (for which the training is designed) intended to address?
- What are the KPIs that will show achievement of the intended objectives?
- How will the training initiatives contribute to overall business outcomes?
- What are the other initiatives that may contribute to overall performance improvement?
- How will you assess performance outcomes incrementally (the metrics and approach)?
- How can you plan to expand learning and performance initiatives with changing business goals and objectives?
- What is the impact of other factors on potential ROI measurements?
- What challenges might materialize and how can you mitigate them?
Building ROI metrics into the foundation of the training initiative and separating measurements and results of the training from overall business outcomes help to highlight the value of the learning and development initiatives. Moreover, measuring training ROI can help improve the design of training besides aiding in selecting the appropriate training methods for the employees.