• Ask the Right Questions to Measure Training ROI

    There are several schools of thought on how to calculate training return on investment (ROI) but little consensus.  Intulogy, an agency specializing in creative outsource training solutions, recently published a White Paper with guidelines on how companies can calculate training ROI.

    Companies seeking to measure training ROI should ask the following questions:

    • Is training being used to remedy a specific problem?  For instance, if training is being used to address lost sales, dropped calls, accounting inconsistencies or errors or legal compliance, it is possible that training  ROI corresponds to the quantifiable loss.
    • Is training used to address a major event such as a new system implementation or acquisition?  Many studies indicate that system implementation failures often result from lack of training.  If the change event is related to acquisition, merger or some other change event not related to technology, losses may be recognized in terms of error rates, customer dissatisfaction or work duplication.  In this case, ROI corresponds to loss prevention and the overall ROI for the company’s arguments for purchasing the new system or acquiring the company.
    • Is training being used to comply with government regulations?  In this case, ROI is directly related to the penalties for non-compliance of regulations.
    • Calculating ROI related to improvements in customer service, sales or management may be based on the decision-makers’ experience and median expectations of employee performance.  In this case, ROI is measured by quantifying progress against benchmarks.
    • If training is associated with professional development that focuses more on individual growth and skill development rather than comprehensive business needs, the question of ROI may depend more on the value of the individual employee.  In these cases, calculating ROI is related to what employee retention is worth to an organization.

    Another approach to measuring training ROI involves seeing if there are any ratios or formulas that should be applied regarding sales revenues to training expenditures.  It is important to note that there is no single ratio or formula that can be applied.  This will depend on the size of your organization and types of business processes. However, a common ratio is that training amounts to approximately 2% of payroll costs.

    Clearly, there is no universal method to calculating training ROI. However, these questions and guidelines should offer some help in starting to evaluate the value and effectiveness of your company’s training program.

    Read the complete White Paper at http://www.intulogy.com/good-reading/training-roi.html.

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