How to measure ROI (Return on Investment) of training programs in your organization?

One of the challenging tasks, which very few HR professionals dare to do is to determine ROI of training program. I was one of them for around initial 8 years of my professional experience. I use to conduct training programs, take feedback from participants, update my training calendar and that’s it. I never thought of determining ROI of training programs, which I have conducted in my organization. Later on, I realized that all efforts put in by me and my team is of no use, if we can’t measure ROI (Return on Investment) of training. We should know whether we have achieved our objective or not? If not, then where we were wrong and redo it. If yes, then how much and how it is benefiting organization as well as individual?

Management is also interested to know about returns they got after investing so much money on various training programs conducted across organization. 

Today, I am sharing my experience on how to determine ROI of training programs. As mentioned in my previous post “How to get best out of training programs conducted in your organization?” training programs are conducted to enhance knowledge of participants, developing skills in participants or moving them to a particular behavioral change.  Hence we should keep in mind the type of training program we have conducted to find ways to determine ROI.

You can measure ROI of training in following ways:

• Enhancement in Learning / Knowledge gain of participants
• Positive change in behavior of participants
• Impact on business due to skill development of participants
• Return on investment of training program

Enhancement in Learning / Knowledge gain of participants

After conducting a training program, which focus on enhancing knowledge of participants, you should evaluate impact in the terms of knowledge increase among participants. You can do it simply, by taking pre and post test of participants and measuring improvement in their knowledge. 

For example, if you have to conduct a training, on Awareness of AIDS-HIV (Download presentation on AIDS-HIV), you can design two question papers- one for pre test and second for post test. Download sample test paper to evaluate effectiveness of training on AIDS-HIV.

You can see the impact of the same by comparison of both pre and post test marks. You can download spreadsheet to determine effectiveness of knowledge based training programs.

Positive change in behavior of participants

In case of training based on behavioral change, you can check participants applying those behaviors, taught during training, in their day to day to operation. Also you can see degree of application of such behavior before or after training program. 

As trainer, you can observe it by yourself, while participants are on shop floor or you can also take help of their supervisors to give their inputs. It is time consuming process and trainer or training co-ordinator spends good amount of time in evaluating each and every person.

For example, if you have conducted a training program on customer relationship for a team of sales person who are suppose to sale mobile phones on mobile counter, then you can prepare a list of behavior taught to them during training program and evaluate them on application of those behaviors when they are live on sale counter.

You can evaluate them on following behaviors. 

• Greeting customer in nice way
• Listening customer queries/ requirement/ grievance before replying
• Keeping calm even if customer is angry on you
• Addressing customer as SIR And MADAM
• Getting customer feedback form filled by customer
• Thanking customer for visiting you

You can also download spreadsheet to evaluate application of particular behaviors after training on customer relationship.

Impact on business due to skill development of participants

Every training program, directly or indirectly, should impact business in some way whether it is to enhance knowledge, change behavior or develop skill, it should lead to increase in company business. You should determine impact of training on business. It has to be tangible. Only tangible impact can be quantified. Also there are non-tangible impacts of training on business.                                                  

Tangible impact of training can be determined by improvement in followings:

• Increase in sales
• Reduction in wastage
• Increase in quality of production / work
• Increase in production
• Increase in Customer satisfaction rating
• Increase Turn around time of an activity
• Reduction in error while working

Non Tangible impact of training can be determined by improvement in followings:

• Increase in customer delight
• Increase in Job satisfaction of our employees
• Effective communication etc

Return on investment of training program

I would not suggest you to determine ROI of each and every training program. I would suggest that first of all you should find out training programs, for which you want to determine ROI. 

You can choose such training programs keeping following in mind:

• How much time, energy and money, company has spent on a particular training program?
• How important this training program is for achieving company objective. 

This way, you will choose training programs where management is keen to know ROI and these programs impacts organization overall growth. I have shared an example of a training program on computer skill during time when banks were going automated in my previous post. These kinds of programs should be evaluated and ROI should be determined.

You can determine ROI by following method:

ROI = ( Net Benefit from training program / Cost of training program ) x 100

Example:

Cost of training program on running a new machine     : Rs 20,000/-

Benefit in production after training program (in a year) : Rs 2,00,000/-

Net Benefit = 2,00,000- 20,000

ROI = ( (2,00,000-20000) /  20,000) x 100 = 900%

You can also visit Training and Development section of our HR Forum www.hrsuccesstalk.com  to find out many other things about training and download useful material.

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