Calculate Your Learning and Development ROI With Ease

Is it worth investing in the training of your employees? What will be the economic benefit for the company? How do you calculate the return on this expenditure? The answer to all these questions can be found using the ROI of training.

Rewarding employees and encouraging professional growth can also be done through subsidized training. That’s where training ROI comes in. Since most of the initiatives a company takes aim to generate profits, whether hiring an employee, changing office or buying new computer equipment, the same is true for training.

That is why it is essential to understand what ROI means and how to calculate the return that training will bring to the company.

Why is it important for companies to calculate the ROI of training?

ROI (Return On Investment) is the economic value we use to evaluate the profitability of an investment.

In the field of training it’s not very common to think in terms of ROI. The reason? Mixing metrics with people is not always easy.

The truth is that measuring ROI is very important for any company, regardless of its size or sector. In addition, it’s very useful for?making decisions that are profitable?and achieve an economic return for the company.?

It also helps us when making future decisions, since with previous experiences we can determine?which trainings are more profitable than others.?

Knowing how to use ROI well can be very beneficial to your business because it will help you to:

• Monitor the efficiency of the course in practice.
• Justify your training expenditure.?
• Compare the results that one course delivers against another.?
• Find out whether employees are acquiring new skills and knowledge to increase productivity.
• Establish continuous training within the company.

How to calculate the ROI of training

Proving ROI with a sale can be much easier than with a training course, as you have to be able to justify the benefits very well. This is why ROI is so important.?

Practical example for measuring ROI

Do you want to know?how to calculate the ROI of training? Use Donald Kirkpatrick’s model:

ROI = (profit earned – investment) / investment x 100?

Imagine that HR decides to implement?specific training to improve the skills of four employees:?Teresa, Juan, Cristina and Ignacio.

All of them have taken a time management course. They have applied the knowledge they have learnt in their daily work and,?after 3 months, they have increased their productivity by 25%.?

Given this data, how do we know if this action has been profitable??

On the one hand, we know that the average individual productivity improvement since the training has been 6.25%. And according to the price per hour of the employees and what is invoiced to the client, it has resulted in?a profit of $1,000.

On the other hand, according to the the training budget prepared, the?total investment was $200, as each course had an individual cost of $50.

So all that remains is to apply the training ROI formula:

ROI = (1,000 – 200) / 200 x 100 = 400%

As you can see, the training has been successful, as the result is over 100%. In other words, the higher the percentage we obtain, the more profitable the investment has been.

Who is in charge of calculating the ROI in a company?

The people who manage the ROI of training in a company are the people in charge of the?Human Resources departments.?

These mission of these professionals is to guide workers to help and motivate them so that they feel at ease in the company.?Human capital is the most valuable asset of any organisation.

Types of training for companies

There are many sector-specific courses and training, e.g.?language courses for companies. It will be up to each company to find the one that best suits its needs.?

If you have an internationally oriented company, you can offer?English classes?so that employees can communicate better with customers. Or if your company doesn’t have a marketing department, but you want to?encourage communication, it might be interesting to look at a social media course.?

What are the methods?

• Online training:?this is one of the most common when you don’t want to travel to a specific place for training. This option is very practical because it can be done anywhere and is compatible with remote working.?
• In-house training:?this modality consists of taking a course in person at the company’s offices. Here the participation of the whole team is important to make the training more useful.?
• Collaborative training:?this is based on collaboration between the whole team as meetings are held between employees from different departments. This type of meeting encourages bonding and interaction among the entire workforce.?

How training is managed

• Bonus training:?every month an amount is paid into the social security for training (also known as training credits). Through the social security, the company and the employee pay for the subsidised training.?
• Subsidised training:?in this case, the training is free of charge, as the courses are managed by the state or private organisations.?

Tips for a great training ROI

All investments are carefully planned so that they generate ROI in the future. Therefore, when an organization sets aside a certain budget to invest in employee training, it also expects a return on investment.?

Here’s how to make your training a success and recover your investment.

1. Use training as a strategic business tool

Training should be seen as part of a?business development strategy, not just as an enhancement for the workforce.?

If you can align employees’ skills with the company’s development areas, you can give your project a bigger boost.

2. Be clear on the company’s objectives

Any business should consider what its?training goals?are and what benefit will best strengthen the knowledge and skills of the workforce.?

These goals should be explicitly communicated to employees so that they understand what is expected of them before, during, and after training. They will then be more aligned with the company’s objectives.?

3. Identify flaws with external help

It can sometimes be difficult to see?flaws within your own team. If this is the case, seek the help of an external consultant to help you identify these needs objectively.

4. Ask for a commitment to training from the team

Being clear about the objectives of training is crucial, but it’s also crucial that all staff understand its?value from an individual perspective.?

To?improve employee engagement, ask them to think about what the training can do and what they want to get out of it. Another good idea is to encourage the team to write down any questions they have before the learning programme and see if they manage to answer them during the intervention.

5. Choose the training according to your needs

Make sure the course objectives match your?business goals. Look for training that is specific to your company, not general training. This will help you to improve your job performance.

How L&D Leaders Calculate the ROI of Employee Learning and Development Initiatives

Curious to dive deeper, we at Katalis.App turned to several Learning & Development (L&D) leaders for their insights. Here is what they had to say:

When developing an employee learning and development program, begin with looking at the entire ecosystem

1 DisneyLand Paris

When developing an L&D program, it is critical that you think broadly enough, taking into consideration a range of current business goals, as well as anticipating upcoming company needs and market changes. Bruno Fournet, HR Director, Center of Excellence Learning & Development at?Disneyland Paris, has a similar idea – in looking ahead to the end goals, and considering other factors. He emphasized the importance of setting up metrics that align with business KPIs, as well as tracking those KPIs over time.

Putting people first: concentrating on the customer or the learning audience

2 Microsoft

Sometimes, desired outcomes of employee learning and development programs may be as simple as community involvement, connection and community growth. Karen Valentine, Manager Learning Portfolio Program Owner, Global Learning & Development at?Microsoft, manages a peer-to-peer community learning program for all managers at Microsoft, one that is led by managers. While learning impact matters, it does not come first, for her team. Rather, the needs of the?audience?come first and foremost.

“We have an audience-centric design, where we surface front of mind tensions for managers and then create space for managers to come together to discuss and share experiences and challenges,” she said. “While we still use the typical quantitative metrics like consumption, satisfaction, and net promoter score, the real magic comes in the form of qualitative feedback and community engagement in the sessions.”

Karen cited an example, when a recent listening mechanism showed that managers were dealing with a large range of demands around workload, hybrid, and organizational change, and the community sessions were accordingly focused on creating the psychological safety for candid and supportive conversations.?

Going beyond the classroom – focusing on the impact of learning through observation

3 Amazon

We live in a different world, and focusing on the impact of learning solely in the context of the traditional classroom environment is not always going to be feasible in this day and age. Rather than participating in a one-week training course in a classroom environment, for instance, Marela Klepo, Learning and Development Manager at?Amazon. Pointed to the rise of self-led,?hands-on learning?as well as learning on the job, as modern programs such as personalized learning enter the picture. “If [learning] is more hands-on, it is a lot easier to measure and track through observation,” she said. “If something does not work out, we take a step back and look at it holistically.”?

For training leaders, Marela suggests observing and tracking the behaviors of their team members. Such continuous analysis will allow them to track whether they see improvements over time. “In a class, we often focus on teaching people with the hope that they will eventually be 100% competent in all their skillsets, so it’s really about engaging your teams and the leaders who are part of your organization.”??

Training is key to attracting and retaining talent

Business training is vital for companies. If you don’t make a commitment to keep up to date in your sector, your company can become obsolete and?the competition will gain a big advantage.?

In addition, a worker who performs the same tasks daily can become demotivated. But if you offer them the possibility of acquiring new knowledge, their attitude will change, and so will their performance.?

You also improve your corporate image because you care about your employees, and anyone who applies for a position in your company will know that it is a good place to grow professionally. For the same reason, building employee loyalty is also an ideal initiative.

Don’t forget that your employees are the best prescribers of your company!

Final words

Now that you are clearer about the ROI of training and how to calculate it, it is time to implement a training plan in your company that will improve productivity, reduce costs, and increases customer satisfaction.