Training programs are a key part of employee and professional development. Strong companies understand the importance of providing regular and targeted training to improve employee performance, increase knowledge in key areas and run a more efficient operation. Training is also important for employee engagement and to help team members prepare for future roles within the company, not to mention becoming more effective in their current role.
THE PROBLEM WITH HOW COMPANIES MEASURE TRAINING EFFECTIVENESS
Investing in training can be an expensive undertaking, and you need to be able to justify these costs by proving its worth to business leaders in your company. We all know training is important, but this alone is not enough to justify training costs. Effective and targeted training that provides a good return on your investment is the goal.
The mistake many companies make when measuring training success is only focusing on success factors that don’t take business impact into account, such as:
- Training attendance
- Training completion
- Satisfaction of trainees
While these are important factors, they fall short from an ROI perspective. However, they are a good sign of how training is conducted and its overall effectiveness.
TRAINING PROGRAM ROI FORMULA
Use the following formula to determine training program ROI and support your case for the need for training:
% ROI = (benefits / costs) x 100
For example, let’s say a training exercise boosts sales by $5000 and the total cost of the training was $3000. Using the ROI formula:
5000/3000 x 1000 = 166.6%
This training program is a success from a business perspective because it yields a 166.6% return on the investment in training. This shows that training is warranted from a business perspective and is a good investment.
WAYS TO MEASURE THE ROI OF TRAINING PROGRAMS
There are also many other ways to measure the ROI of a training program. Some of the key areas to are:
1. LABOUR SAVINGS/EFFICIENCY
3. COST SAVINGS
4. INCOME GENERATION
5. INCREASED CONVERSIONS/LEADS
How you choose to measure training program ROI depends on your company focus, goals and objectives, as well as the purpose of the training program. The key to is offer training that will have an impact on your employees’ current roles – effective training benefits both the employee and the company.