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Measuring ROI for training

A business that makes nothing but money is a poor business - Henry Ford, founder of the Ford Motor Company.

Every L&D Practitioner knows that eventually the inevitable question will come: "What is the return on investment for the training done/to be done/proposed/budgeted for?" Our responses are usually filled with "hippy" statements of happier and more fulfilled; better skilled staff. We need to revolutionise the manner in which we answer this question. Kirkpatrick's model works well to justify training in OUR WORLD, but the financial manager usually wants a more definitive Rands and cents answer!

In order to start, you need to keep track of:

  • Direct costs
  • Indirect costs
  • Efficiency - how much learning took place
  • Performance to schedule - especially for Learnerships!
  • The extent to which trainees mix
  • Behaviour change
  • Performance change

Work out the estimated cost of non-performance based on losses/time lost/etc. by keeping the following in mind:

  • Design and development costs
  • Promotional costs
  • Administration costs
  • Training Delivery costs
  • Materials
  • Learner costs (perhaps you provide things like files/transport)
  • Assessment and Moderation costs

Calculating return on investment

Return on investment tells you the percentage return you have made over a specified period as a result of investing in a training programme. On the assumption that benefits will continue to accrue some time after the training, then the period that you specify is critical to the ROI figure you will obtain. In other words, from an operational point of view, how long will it take to see if production/productivity/ decrease in mistakes occurs?

You can also calculate the period to correspond to the lifetime of the benefit, in which case you will need to know how long the average learner stays in a position/department in which they can continue to apply the knowledge and skills being taught.

It is relatively simple to calculate return on investment:

% ROI = (benefits / costs) x 100

Payback period

Another way at looking at ROI, is to calculate how many months it will take before the benefits of the training match the costs and the training pays for itself. This is called the payback period:

payback period = costs / monthly benefits

Payback period is a powerful measure. If the figure is relatively low - perhaps only a few months - then management will be that much more encouraged to make the training investment. As a measure, it also has the advantage of not requiring an arbitrary benefit period to be specified.

Read more at :

TRAINING GAME: Quick and easy!

Objective: Create some linguistic creativity and a good laugh.

Resource: See below

Players: Small to large groups

Everything which you fill in MUST start with the same letter as your name.

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