5 Easy Ways to Measure the ROI of Training

ROI?is a practical way of measuring whether a?particular?training?course?or program?offered value for money.

The traditional ROI formula for training?is the program benefits?(net profit) minus the training costs and then?divided by the program costs.

There are several other methods which are occasionally used to measure ‘Return on Investment’. One?such method is the payback period; the total investment divided by the annual savings, expressed in years.?

Calculating the payback period works better with long-term metrics such as improving staff retention levels?etc.

ROI calculations?of training?aim to answer the following questions:?

• Are trainees?gaining new knowledge and skills so that they can increase efficiency?and/or reduce costs?in the workplace???
• Can?we measure the cost of this training?against?the benefits to both the?individuals?and the organization???

ROI can be used to justify the expense of a training course and to compare one training course to another.

ROI of training can be measured by the following ways:

Use a training ROI calculator

The first way of measuring the ROI of any training is to use?training ROI calculator. This is a simple way of calculating the ratio of the total cost of the training program relative to the total benefits of a training program.?It works best for highly structured jobs where the monetary benefits are easy to isolate.??

Use supervisor?assessments to calculate training ROI

In this approach, a senior manager uses on-the-job observations and assessments to make judgments about the areas in which the middle managers who attended the training have?improved.??

The assessment?will examine certain areas, such as:??

• Teamwork?
• Task completion?

The senior manager will use observations to make informed judgments about the middle manager's performance in those areas. One observation will take place before the training and one after.?

Create an impact study to calculate training ROI

The third easy?way of calculating?ROI?is to create an impact study. A ‘business impact’ is any change brought about by the training. It could be:?

• Sales?
• Staff retention?

Impact studies follow?a?set process:??

• Evaluation Planning?
• Data Collection?
• Data Analysis?
• Reporting?

In?the?evaluation planning?stage,?you?evaluate the objectives of a program?and develop evaluation plans and baseline data.?

?These could include:?

• The number of programs?
• The hours?
• The costs?
• Time to deliver?
• The number of participants?

During the?data collection?phase, we?collect the data during the?program implementation, measuring satisfaction, reaction,?and learning. The most common approach is to use surveys and to ask the training participants to rate the training they received in terms of their satisfaction and reaction.??

Use the Phillips ROI Methodology to calculate training ROI

Jack Phillips published a?10-step?training evaluation methodology?called the?Phillips ROI Methodology. His work was based on early work by?Don Kirkpatrick?who published the revolutionary book?Four Levels of Training Evaluation.???

The Kirkpatrick model featured four levels:??

• Level 1: Reaction
• Level 2: Learning?
• Level 3:?Behavior?
• Level 4: Impact?

Kirkpatrick does not explicitly measure ROI. That’s why Jack Phillips wanted to expand this basic methodology. He added a new level – Level 5 – that helped organizations?calculate?the financial return of a training program.??

The ROI Methodology?offers a balanced way of measuring six types of data:??

• Reaction and Planned Action – Level 1
• Learning – Level 2
• Application and Implementation – Level 3
• Business Impact – Level 4?
• Return on Investment – Level 5?
• Intangibles?

Level 5?helps companies use?cost-benefit analysis to determine the value of?a?training program.?

To calculate ROI using the Phillips’ ROI Methodology, you need to implement each?step?in?turn.??

Level 1:?Survey the trainees to gauge their reaction.??

Level 2:?Measure the learning that took place through a survey, test, or quiz.?

Level 3:?Phillips built upon?Kirkpatricks’ work and expanded this section to encompass ‘Application and Implementation’.

Level 4:?This level looks at whether other processes were responsible for driving changes in outcomes.

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?

2.??????Take pre-training measurements??

3.??????Take post-training measurements?

4.??????Calculate the benefit to the company?

Use?a?training effectiveness measurement?platform to calculate training ROI

The?fifth and arguably?the?easiest way to measure the ROI of training is to use training?effectiveness measurement platform?such as Kodo Survey. This dedicated survey automates much of the work required to conduct ROI, such as:?

• Automatically emailing participants with feedback surveys?
• Collecting and processing the results?
• Automating the testing process so measure learning?
• Assisting with workplace observations?
• Generating reports based on participants reaction?

Overall, the decision over which method to measure the ROI of training depends on your budget, time frame and the importance of the course. The ROI tool is applicable to situations where the work is easily?quantifiable?and the benefits are tangible.

For TRAINING ROI consulting, coaching & training contact our expert?Muhammad Farhan SHRM-SCP, Global Subject matter expert & executive Coach.