ROI: THE END OF TRAINING AS WE KNOW IT

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How do you measure the effectiveness of training initiatives?

Don’t believe anyone that tells you it can’t be done. It can.

In fact, if you want your people to take training intiatives seriously, you must find a way to connect them with the business results that are important to operational leaders.The challenge for most leaders is not that they expect too much from training, it is that they expect way too little. As a result, leaders are unwilling to put forth much effort in most training programs. The result is as predictable as it is sad: Wasted time, wasted effort and wasted money.

The question of how to measure the effectiveness of training has been increasingly posed to Human Resource Development (HRD) departments over the past decade. So much so, that nearly every HRD conference or convention has a slate of topics revolving around the issue. And the pressure to validate the return o n training dollars invested is only likely to intensify.

In fact, the general trend toward accountability could be the best thing that ever happened to training, but only if we start to think about training expenditures as investments, and demand a return on that investment. We must stop thinking that a successful training program is the one that trains the greatest number of people for the smallest amount of money. Training is irrelevant without a change in results.

And yet there are still lots of folks that would have us believe that training expenses should not be subjected to the same Return on Investment (ROI) decision making criteria as other business expenditures are. They would have us believe that you cannot measure or calculate the ROI of training initiatives. You know what I mean, they say things like “Yeah, it costs a lot of money, but -(insert excuse here)”. Well, the days of allowing training expenditures to made o n pure faith is over. And the training industry will be better for it!The truth of the matter is that training and development is not a mysterious art. It is a serious business discipline that should be conducted as any other business discipline is. Boiled down to it’s root elements, ROI training interventions are based on a very simple formula:

  1. Decide what business outcome we are looking to achieve and how we will measure our success (metrics).
  2. Determine the changes in behavior and application necessary to reach the business outcome.
  3. Identify the skills, knowledge and/or attitudinal shifts necessary for the necessary behaviors to be applied on the job.
  4. Design the intervention process based on the gaps identified.
  5. Measure the results in terms of the business outcomes impacted and calculate ROI.

Based on Kirkpatrick’s work almost 40 years ago on the four levels of training evaluation, the ROI model adds a fifth level: the impact of business results converted to a monetary value and compared to the costs of the training implementation. As with other measures of ROI, training ROI is typically expressed as a percentage (%). Table 1: Description of Evaluation Levels

Level Description

  1. Reaction and Planned Action Measures the reaction of the participant to the program and outlines the plan for implementation.
  2. Learning Measures skills, knowledge or attitude changes.
  3. Job Application Measures behavior change on the job and specific application of the program content.
  4. Business Results Measures the impact of behavior change in the business.
  5. OI Compares the monetary value of the business results to the costs for program implementation (%).

A model for calculating the return o n investment in HRD was proposed by Jack Phillips in his book ‘Return on Investment’. This model provides a methodology for simplifying a potentially complicated process to a series of sequential steps.

  1. Determine the purpose of the evaluation.
  2. Determine the instruments, timing and levels at which you propose to evaluate the effects of the initiative.
  3. Collect the data.
  4. Isolate the effects of the training.
  5. Convert the data to a monetary value that represents a conservative estimate of the benefits of the training. Keep a separate list of the intangible benefits of the training.
  6. Tabulate the program costs.
  7. Calculate the Return on Investment.

In these turbulent times, it is intuitive to many HRD professionals that top performers are looking to the company to invest in the development of their talents and abilities. These small-scale investments may not require the level of justification outlined above. However, it is our belief that the proper utilization of the ROI model is essential for the justification of large-scale HRD initiatives. only a realistic and believable ROI justification will ensure that HRD’s seat at the executive table is placed solidly in the front row.