Measuring roi of training

Measuring Measuring ROI of ROI of

TrainingTraining

AgendaAgenda

1. Measuring the Effectiveness of Training

Program

2. Measuring ‘Return on Investment’ of Training

3. Enhancing the Effectiveness and ROI of

Training

A.Measuring the Effectiveness A.Measuring the Effectiveness of Training Programof Training Program

The Four Levels of EvaluationThe Four Levels of Evaluation

Level 1 - Reaction

Level 2 - Learning

Level 3 – Behavior Application

Level 4 – Performance Impact

Four Levels Four Levels of Training of Training

EffectivenessEffectiveness

Level 1 - ReactionLevel 1 - Reaction

Evaluate trainees’

reactions to the program:

Did they like the program?

Did they like the

facilitators?

Did they like the training

accommodation and

facilities?

Level 1 - Level 1 - ReactionReaction

Guidelines for Evaluating ReactionGuidelines for Evaluating Reaction

1. Determine what you want to find out

2. Design a form that will quantify reactions

3. Encourage written comments and suggestions

4. Get 100 percent immediate response

5. Get honest response

6. Develop acceptable standards

7. Measure reactions against standards, and take

appropriate action

8. Communicate reaction as appropriate

Level 2 - LearningLevel 2 - Learning

Measuring learning means

determining one or more of

the following :

• What knowledge was

learned?

• What skills were

developed or improved?

• What attitudes were

changed?

Level 2 - Level 2 - LearningLearning

Guidelines for Evaluating LearningGuidelines for Evaluating Learning

1. Use a control group if practical

2. Evaluate knowledge, skills and/or attitudes both

before and after the program

3. Use a paper-and-pencil test to measure knowledge

4. Use a performance test to measure skills

5. Get 100 percent immediate response

6. Use the results of evaluation to take appropriate

action


Experimental Group Control Group

Pre Test Score 45 46

Post Test Score 55 48

Gain 10 2

Pretest and Posttest Scores on Change Management Training

Example :

Level 3 – Behavior ApplicationLevel 3 – Behavior Application

• The frequency of

application of new

skills/knowledge/

attitudes (on the job)

• The effectiveness of the

skills/knowledge/

attitudes (as applied on

the job)

Level 3 – Level 3 – Behavior Behavior ApplicationApplication



2. Allow time for behavior change and application to take

place

3. Evaluate both before and after the program if practical

4. Survey and/or interview one or more of the following :

trainees, their immediate supervisor, their subordinates,

and others who often observe their behavior

5. Get 100 percent response or a sampling

6. Repeat the evaluation at appropriate times

7. Consider cost versus benefits

Level 4 – Performance ResultsLevel 4 – Performance Results

• Indicate the extent to which you

think this program has

influenced each of these

measures in your work unit,

department, or business unit:• Productivity• Quality• Customer Response Time• Cost Control• Employee Satisfaction• Customer Satisfaction• Other

Level 4 – Level 4 – PerformancePerformance ResultsResults



2. Allow time for results to be achieved

3. Measure both before and after the program if practical

4. Repeat the evaluation at appropriate times

5. Consider cost versus benefits

6. Be satisfied with evidence if proof is not possible

Performance IndicatorsPerformance Indicators

HARD DATA INDICATORS

• Duration involved

• Number of defect products

• Sales volume

• Customer satisfaction index

• Response time to orders

• Others

Performance IndicatorsPerformance Indicators

SOFT DATA INDICATORS (intangible impacts)

• Job satisfaction

• Conducive working relationship

• Effective communication

• Stress rate

• Quality in decision-making

Example : Measuring Training ResultsExample : Measuring Training Results

0.00

50.00

100.00

150.00

200.00Program : TQM TQM

TrainingTraining

Results after 3 3

months of months of

training,training, number

of defects

dropped to 80

units/day

120 units

80 units

Before trainingBefore training After trainingAfter training

0.00

10.00

20.00

30.00

40.00

50.00

Example : Measuring Training ResultsExample : Measuring Training Results

Program :

Sales TrainingSales Training

Results after 3 3

months trainingmonths training,

number of sales

per salesman

increase to 30

units/month.

20 units

30 units

Before trainingBefore training After trainingAfter training

B.Measuring B.Measuring Return on Investment of Return on Investment of

TrainingTraining

Benefits of ROI of TrainingBenefits of ROI of Training

• Measure contribution

• Set priorities

• Focus on results

• Alter management perceptions of training

ROI of Training Model ROI of Training Model

Collect Collect DataData

Isolate the Isolate the Effects of Effects of TrainingTraining

Convert Data Convert Data to Monetary to Monetary

ValuesValues

Calculate ROI Calculate ROI of Trainingof Training

Tabulate Tabulate Program Program

CostsCosts

Identify Identify Intangible Intangible BenefitsBenefits

Net Program BenefitsNet Program Benefits

Program CostsProgram CostsX 100X 100

Return on Investment FormulaReturn on Investment Formula

ROI =ROI =

ExampleExample : :

• Costs per program (25 participants)Costs per program (25 participants) RsRs

88,50088,500

• Benefits per program (1st year)Benefits per program (1st year) Rs Rs 230,625230,625

Rs 230,625 – 88,500Rs 230,625 – 88,500

Rs 88,500Rs 88,500ROI =ROI = X 100X 100

ROI = 161 %ROI = 161 %

Collecting DataCollecting Data

• Identify appropriate

performance indicators

• Develop a collection plan

Collect Collect DataData

Example of Performance IndicatorsExample of Performance Indicators

• Units produced• Items sold• Work backlog• New accounts opened• Productivity• Inventory turnover• Etc.

OutputOutput

• Equipment downtime• Overtime• Time to project

completion• Processing time• Repair time• Lost time days• Etc

TimeTime

Example of Hard IndicatorsExample of Hard Indicators

• Unit costs• Variable costs• Overhead costs• Operating costs• Number of cost

reduction• Etc.

CostCost

• Scrap• Waste• Rejects• Error rates• Rework• Product defects• Product failure

QualityQuality

Example of Performance ResultsExample of Performance Results

• Some performance results after training Some performance results after training

program:program:

• Rejections were reduced from 11 % to 7.4 %

• Absenteeism was reduced from 7 % to 3.25 %

• The annual turnover rate was reduced from 30

% to 16 %

• Customer complaints were reduced by 65 %

Isolating the Effects of Training Isolating the Effects of Training

Methods to Methods to Isolate the Isolate the Effects of Effects of TrainingTraining

Using Using Control GroupControl Group

Trend Trend LinesLines

Participants Participants EstimateEstimate

Supervisors of Supervisors of Participants Participants

EstimateEstimate

Using Using Control Control GroupGroup

• A control group arrangement can be

used to isolate training impact.

• With this strategy, one group

receives training, while another,

similar group does not receive

training.

• The difference in the performance of

the two groups is attributed to the

training program.


Trend Trend LinesLines

• Trend lines are used to project the

values of specific output variables if

training had not been undertaken.

• The projection is compared to the

actual data after training, and the

difference represents the estimate

impact of training.


Trend Lines AnalysisTrend Lines Analysis

Jan Feb Mar Apr Jul Jun May Aug

At the beginning of May, a Sales training Program session was

held

Vo

lum

e o

f S

ales

The

difference

represents

the estimate

impact of

training.

Trend Projection

Actual sales performance

Participants and Participants and Supervisors of Supervisors of

Participants Participants Estimate of Estimate of

Training’s ImpactTraining’s Impact

• This method rests on the assumption that

participants (and their supervisors) are

capable of estimating how much a

performance improvement is related to the

training program.

• Because their actions have produced the

improvement, participants (and their

supervisors) may have very accurate input

on the issue.

• They should know how much of the

change was caused by applying what they

have learned in the program.


Participants and Participants and Supervisors of Supervisors of

Participants Participants Estimate of Estimate of

Training’s ImpactTraining’s Impact

• Typical Questions to Estimate :Typical Questions to Estimate :

• What percent this improvement

can be attributed to the application

of skills/techniques/knowledge

gained in the training program?

• What confidence do you have in

this estimate, expresses as a

percent?

• What other factors contributed to

this improvement in performance?


1 Training Program 50% 70%

2 Change in Procedures 10% 80%

3 Adjustment in Standards 10% 50%

4 Revision to Incentive Plan 20% 90%

5 Increased Management Attention 10% 50%

6 Other - -

Percent Improvement

Caused by

Confidence Expressed as

a PercentFactors Which Influenced

ImprovementNo.


Example of a Participant’s EstimationExample of a Participant’s Estimation

The confidence percentage is multiplied by the estimate (50 % x 70 %) to produce a usable training a usable training factor value of 35 %factor value of 35 %

1 Training Program 50% 70%

2 Change in Procedures 10% 80%

3 Adjustment in Standards 10% 50%

4 Revision to Incentive Plan 20% 90%

5 Increased Management Attention 10% 50%

6 Other - -

Percent Improvement

Caused by

Confidence Expressed as

a PercentFactors Which Influenced

ImprovementNo.


Example of a Participant’s EstimationExample of a Participant’s Estimation

• The confidence percentage is multiplied by the estimate (50 % x 70 %) to

produce a usable training factor value of 35 %• This adjusted percentage is then multiplied by the actual amount of

improvement (post-program minus pre-program value) to isolate the portion

attributed to training• The adjusted improvement is now ready for conversion to monetary values,

and used in the return on investment

Converting Data to Monetary ValuesConverting Data to Monetary Values

Converting Converting Data to Data to

Monetary Monetary ValuesValues

• Steps to Convert Data to Monetary Steps to Convert Data to Monetary

ValuesValues

1. Focus on a unit of improvement

2. Determine a value of each unit

3. Calculate the change in performance

data

4. Determine an annual amount of change

5. Calculate the annual value of

improvement

Steps to Convert Data to Monetary ValuesSteps to Convert Data to Monetary Values

An example to illustrate the steps to convert data to monetary values

1. Focus on unit improvement

• One grievance reaching step two in the

four-step grievance resolution process

StepsSteps IllustrationIllustration

2. Determine a value of each

unit

• Using internal experts, the cost of an

average grievance was estimated to be

Rs,500 when considering time and direct

costs


3. Calculate the change in

performance data

• Six months after the program was completed,

total grievances per month reaching step two

declined by ten. • Seven of the then grievance reductions were

related to the program as determined by

supervisors (isolating the effects of training)


4. Determine an annual amount for the change

• Using the six month value, seven per month

(grievance reductions), yields an annual

improvement of 84 (7 x 12 months)


5. Calculate the annual value of improvement

• Annual value = 84 x Rs500 = Rs42,000


Tabulating Tabulating cost of the cost of the programprogram

• Cost components that should be

included are :

• The cost to design and develop

the program

• The cost of all program materials

provided to each participant

• The cost for facilitator

• The cost of the facilities of the

training program

Tabulating Cost of the ProgramTabulating Cost of the Program

Tabulating Tabulating cost of the cost of the programprogram

• Cost components that should be

included are :

• Travel, lodging, and meal costs

for the participants

• Salaries, plus employee benefits

of the participants who attend

the training

• Administrative and overhead

costs of the training function,

allocated in some convenient

way

Tabulating Cost of the ProgramTabulating Cost of the Program

C.Enhancing Training C.Enhancing Training EffectivenessEffectiveness

How Effective is Your Training Program?How Effective is Your Training Program?

Broad and Newstrom (1992) report studies have

shown less than 30% of what is30% of what is actually taught actually taught

transfers to the job in a way that enhances transfers to the job in a way that enhances

performanceperformance.

Source : Broad, M., & Newstrom, J. W. (1992). Transfer of training: Action packedstrategies to ensure high payoff from training investments. Reading, MA: Addison-Wesley.

Source of Barriers to TrainingSource of Barriers to Training Transfer Transfer

• Lack of reinforcement on the job

• Interference from immediate (work) environment

• Nonsupportive organizational culture

• Trainees’ perception of impractical training programs

• Separation from the inspiration or support of the trainer

The Transfer PartnershipThe Transfer Partnership

Trainee Trainee recognizes need for new skills

Trainee Trainer Trainer designs and/or delivers learning experiences

Trainee Trainer Manager supports learning and application on the job

Manager

ManagerManager

After TrainingAfter Training

• Plan trainees’ reentry

• Provide opportunities to practice new skills

• Have trainees participate in transfer-related

decisions

• Reduce job pressures initially

• Give positive reinforcement

• Schedule trainee briefings for co-workers

• Set mutual expectations for improvement

• Arrange proactive (refresher) sessions

• Provide and support the use of job aids

TrainerTrainer


• Provide follow-up support

• Conduct evaluation surveys and provide

feedback

• Develop and administer recognition system

• Provide refresher/problem-solving sessions

Trainee Trainee


• Practice self-management

• Review training content and learned skills

• Develop a mentoring relationship

• Maintain contact with training ‘buddies’

THANK YOUTHANK YOU

Measuring roi of training

Business

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