Transcript Measuring ROI to Make the Case for Training

HRPYR Topic by Table
Measuring ROI to Make
the Case for Training
Thursday, April 17, 2008
Why did you come to this Topic
by Table?
 Looking for measures.
 Employer’s are starting to look for measures,
so I should learn about it.
 Justification to sell in training programs.
 Justifying travel costs associated with training.
 Identifying how much money we should be
spending per employee per year.
 Selling in soft skills programs.
Some Interesting Facts
 American Society for Training and
Development – investments of $1,500 per
employee per year vs. $125 per employee
per year results in 24% higher gross profit.
 Barrett and O’Connell (2001) report that soft
skills training has a greater effect on worker
productivity than specific training.
Some Interesting Facts cont’d
 Louis Harris and Associates report that
companies that offer no training or poor
training have 41% of employees planning to
leave the organization.
 Blandy et al (2000) report that there is a
direct correlation between training and
changes in sales volume, productivity, and
other profit measures.
Donald Kirkpatrick
Ideas regarding measuring the evaluation of learning
were first published in 1959:
 Reaction - what the participant(s) thought and felt
about the training.
 Learning/Retention - the resulting increase in
knowledge or capability.
 Behaviour/Transfer - extent of behaviour and
capability improvement and
implementation/application.
 Results - the effects on the business or environment
resulting from the trainee's performance.
Level 1: Reaction
 How participants in a training program react
to it.
 Did they like it? Was the material relevant to
their work?
 Often called a “smilesheets.”
 Every program should at least be evaluated
at this level to provide for the improvement of
a training program.
 Participants' reactions have important
consequences for level two - learning.
Level 2: Learning/Retention
 Attempts to assess the extent participants have
advanced in skills, knowledge, and/or attitude.
 Measurement at this level is more difficult and labour
intensive than level one.
 Methods can include formal to informal testing, team
assessments, and self-assessment.
 If possible, participants should take the test or
assessment before the training (pre-test) and after
training (post-test) to determine the amount of
learning that has occurred.
Level 3: Behaviour/Transfer
 Measures the transfer that has occurred in




participants' behaviour due to the training program.
Evaluating at this level attempts to answer the
question - Are the newly acquired skills, knowledge,
and/or attitude being used in the everyday
environment of the learner?
For many trainers this level represents the truest
assessment of a program's effectiveness.
Measuring at this level is difficult as it is often difficult
to predict when the change in behaviour will occur.
Need to make important decisions in terms of when
to evaluate, how often to evaluate, and how to
evaluate.
Level 3: Behaviour/Transfer
cont’d
 Methods of assessing transfer include:






Performance Appraisals.
360 Degree Feedback Programs.
On the Job Observation.
Focus Groups.
Client Satisfaction Surveys.
Employee Engagement Surveys.
Level 4: Results
 Thought of as the bottom line, this level measures the
success of the program in terms that Managers and
Executives can understand -increased production,
improved quality, decreased costs, reduced
frequency of accidents, increased sales, and even
higher profits or return on investment.
 From a business and organizational perspective, this
is the overall reason for a training program, yet level
four results are not typically addressed.
 Determining results in financial terms is difficult to
measure, and is hard to link directly with training.
Level 5: Measuring ROI
 Jack Phillips created Level 5: ROI to assist
organizations in selling in training initiatives to
Senior Management teams.
Level 5: Measuring ROI
 Think of outcomes prior to starting the
development/design of training programs.

Why are we looking at creating this program
for employees?





High turnover.
Average sick time per year is above what the
policy governs.
Having to hire externally vs. internally.
High number of terminations per year.
Number of grievances are up 20% from the
previous year.
Level 5: Measuring ROI cont’d
 Once the outcomes have been determined,
quantifying the benchmark is key. For
example:



Turnover is at 57% annually at present.
Average sick days per person is 7, even
though the policy states that employees are
able to take 5 per year.
Terminations in 2007 resulted in average legal
counsel costs of $10,000 plus settlement costs
averaging $25,000.
Level 5: Measuring ROI cont’d
 Examples of Direct Costs:
















Cost of time off work to attend training.
Cost of job coverage during training.
Salaries of in-house trainers.
Travel.
Accommodations.
Catering, meals, refreshments.
Training materials.
Design and development costs (internal and external).
Customization costs.
Off the shelf material costs and license fees.
Copywright costs.
Cost of equipment.
Cost of the venue, rooms, etc.
Cost of Utilities.
Cost of insurance.
Computer software and hardware costs.
Level 5: Measuring ROI cont’d
 Examples of Indirect Costs:















General overhead allocation.
Program administration costs.
Coordination costs.
On-line support costs.
Production and supply of training materials.
Office supplies and printing costs.
Incidental costs.
Participant’s evaluations and assessment costs.
Coaching costs.
Consulting costs.
Costs of external organizations/services.
Promotional activity costs.
Cost of lost opportunities (sales/productivity).
Opportunity costs of time.
Indirect labour cots.
ROI Definitions
Net Present Value – the value that the
investment generates over its lifetime.
Benefits Cost Ratio – ratio of the benefits to the
costs of an investment.
Return on Investment – ratio of net present
value to the costs of an investment.
ROI Calculations
Net Present Value = Benefits – Costs
Benefits Cost Ratio = Total Benefits
Program Costs
ROI = Total Benefits – Program Costs
X 100
Program Costs
Creating a Learning Council in
Your Organization
 Start with the senior executives in the
organization to determine what type of
learning initiatives they require or would like
to enhance the skills of their current
teams/departments.
 Create learning champions to help you sell in
learning initiatives and development
opportunities from the top down.
Please contact Jodi at (905) 874-1035
extension 433 or at
[email protected]
with any questions you may have.