There are several ways I see training directors attempting to justify the investment in Training and Development programs. Many times these proposals and budgets are predicated on intangibles, and worse, often the proposals are presented in bizarre ways that are difficult to understand and somewhat foreign to the higher-ups in the organization that must approve the expenditures.
In some respects, training professionals, who are charged with helping the organization communicate effectively are to blame, since success often depends on how your higher-ups like to see their numbers.
In order to help in this particular area, here are three commonly used formulas, all working off the same hypothetical figures: Let's assume that benefits of a new training program total $250,000, while project costs to design and implement the program come to $175,000.
Benefits - Costs = $75,000 ROI
Benefits/Costs = 140% ROI
(Benefits - Costs)/Costs = 43% ROI
Even after you've pulled together all the numbers, tallying a comprehensive ROI for a training and development solution still isn't easy. First, there are many ways to calculate ROI, and one isn't any better than the next; it all depends on how your higher ups prefer to see the numbers presented, so you'll need to have that conversation. In one formula, you take the benefits and subtract the costs and you have your simply answer. In another, you divide the benefits by cost. In a third approach, you subtract costs from benefits and divide that difference by those initial costs.
Next, you'll need some way to determine measurable and quantifiable benefits to the extent possible. Don't get too hung up on this however, as the primary focus in many companies now is on training effectiveness, as training organizations strive to deliver maximum impact and to align with the business strategy. The key for the training leader here is that they zero in on what positive "business impact" means to those to whom you report.
A complication of which you need to be aware, is that beyond hard and direct cost savings, you may be called on to quantify all the intangible benefits that the training and development program delivers to your organization. And that's not so simple to do. Despite the large number of books, seminars and articles written about training measurement, most organizations continue to struggle with the process. Although there has been an intense focus on measuring the business impact of training, most organizations measure tactical aspects,such as course completions and volumes – things that are relatively easy for the training department to measure, but aren’t very valuable to the front office.
Thus, it is important for the training leaders of today to go back to school themselves to better understand how their contribution is really being measured.
Recent Comments