Dinesh Divekar
Business Mentor, Consultant And Trainer
Nashbramhall
Learning & Teaching Fellow (retired)
Wshyamalee
Hr Executive

Hi friends,
do we need to wait till the expect retun period to calculate ROI or can we do it As soon as a programme finished based on projected benefit and not real benefit
For example A training programme was conducted assuming that expected return period is 12 months. Training was done in June.can we calculate ROI on July?
sales of May was 20,000 sales of July was 30,000. Then can we calculate benefit of the programme as 120,000 ( 30-20)* 12 in July month.
then do we need to say we calculated this based on sales projection for future months? what are concerns on ths?
please reply ASAP
Thanks
Shayamalee
29th April 2012 From Sri Lanka, Colombo
Dear Shayamalee,

First and foremost, you should have given little brief about you. Why you are asking all these questions? Are you sales professional or trainer or student? What is your product or service?

Paragraph-wise replies to your queries are as below: -

do we need to wait till the expect retun period to calculate ROI or can we do it As soon as a programme finished based on projected benefit and not real benefit.

Return on Investment (ROI) cannot be calculated on projected income and ROI on training is no exception. In fact I have come across with this novel concept for the first time. To measure ROI, we have to wait till actual change happens.

For example A training programme was conducted assuming that expected return period is 12 months. Training was done in June.can we calculate ROI on July?

Once the training is done, then it takes time to convert the knowledge into the skills. This is no easy task. Learner has to practice. Conversion of knowledge into the skill cannot happen at lightening speed. Neither the training rooms are some factory wherein trainer's job is to load the brains of learners with knowledge. Therefore, the given time span is too less. However, you can check the change in behaviour of the learners. But month's period is too early to do that also.

sales of May was 20,000 sales of July was 30,000. Then can we calculate benefit of the programme as 120,000 ( 30-20)* 12 in July month.

Are you talking about these two months of the same year or July of the subsequent year? If it is of same year, then show me the organisation that has shown 33% increase in sales in just two months! Of course this is possible only in seasonal sale. If 33% jump in sale happens then it could be because of some different factors and not necessarily due to the training.

For certain products or services, the sales process is very slow. For courier/cargo/logistics services it may take even a year to convert the sale. It requires long follow up to convert account.
.

then do we need to say we calculated this based on sales projection for future months? what are concerns on ths?

Return on Investment (ROI) is different from Projection on Investment (POI). You have mixed these two concepts. You are passing off POI as ROI. Though there is no such term called as POI in Economics or Finance, based on your statements, I have devised it.

Final Comments: - I am little critical while giving my observations however, I have analysed your comments dispassionately and there was nothing personal as such.

Ok...



Dinesh V Divekar


Beware of false knowledge; it is more dangerous than ignorance.
29th April 2012 From India, Bangalore
Dinesh Divekar has been very kind to you; having raised questions, he has answered your questions without waiting for your reply. Still, could you kindly answer his questions and also tell us what qualifications you have.
29th April 2012 From United Kingdom
Hi Dinesh,

Thank you very much for your comprehensive & prompt answer. I am working as a HR Executive but new to T&D.working in a sales oriented company.

Assume that we trained new set of trainee sales reps in June and it was a long period of training ( say one week ). Because of the training their soft skills on selling were improved. they were able to collect cash from debtors and distributors on time. In that circumstances can't we expect such a big improvement over the next periods?

I meant we trained staff in the month June 2011 July sales were increased by 10,000 and it was 50% increase when compared to May ( before the training). understood we cant project/Consider as training benefit in ROI as 120,000(10,000*12 ) by next year May i.e 2012,May.This should be a real benefit

Further more consider the following scenario.

Assume the training month as June 2011 and consider the following real sales figure before and after training. consider training benefit is for 6 months

May (2011)/before training - 10,000

June 2011 /training month - 8,000

July - 20,000

August - 30,000

sep - 38,000

october 43,000

November -47,000

December 2011-50,000

Here when we are calculating the benefit of the training. Are we taking the excess amont more than 10,000 (May/before training sales) ? i.e July benefit 10,000=(20,000-10,000), August benefit 20,000 (30,000-10,000) like wise summation of up to December month. ie 10(july)+20(Aug)+28(sep)+33(oct)+37(Nov)+40 (Dec) = total benefit is 168,000. Is this correct? or need to compare this values with untrained group

Again seek your help

Thanks

Shyamalee
30th April 2012 From Sri Lanka, Colombo
Dear Shyamalee,

How do you know that the increase in July was due to training of staff only and not due to other factors. For example, seasonal variations. Have you got gigures for the past year to compare?

Also, let us say the ecomoic climate has improved resulting in a certain increase in sales? How do you know how much that has effected the sales. Similarly, suppose the sales decrease due to other factors which are not under the control of sales staff. Would you then say that the training was not effective?

I am not sure whether you have come across the concepts of Common Cause and Variable Cause variations. If not, kindly see Statistical Thinking: Improving Business Performance - Roger W Hoerl, Ronald D Snee - Google Books
30th April 2012 From United Kingdom
Dear Shyamalee,

First and foremost get rid of the concept of projection. ROI is calculated for the past and not for the future. If you want to calculate the ROI then you have to wait for next six months or year or even more.

To calculate the efficiency of the salespersons, use the following ratios:

a) Sales Ratio = (total sales expenses in the financial year)/(total sales revenue)

Higher the ratio, better the efficiency of the sales persons. Now, find out the sales ratio for the past five years. Find out the sales ratio after the training. It should be higher than preceding year. The difference is ROI on your training.

b) Sales Revenue per Salesperson = (Total number of salesperson employed on the last day of financial year)/(total sales revenue)

Lower the ratio, higher is the efficiency of the salespersons. Calculate this ratio for the last five years. Calculate this ratio for the post-training period also. The difference is your ROI in training. The benefit of calculation this ratio is that you get in value terms.

What if you have been doing training and already the salespersons well trained? In this case, both the ratios will remain same. There will not be any significant change. However, maintaining the ratio is no easy task. It requires lot of spade work and efforts.

Lastly, please make a note to get ROI, you need to create a mechanism wherein you ensure that the training is implemented. Therefore, constant monitoring and follow-up is necessary. Just a week's training will not yield results necessarily. Much depends on the motivation level of the salespersons, the type of product or service that you offer, product knowledge of the salespersons, manager's support to the salespersons, territorial rivalry among the salespersons, operations support to the salespersons, customer service orientation of the operations staffs, field visits by the top management and so on.

Ok...

Dinesh V Divekar

dineshdivekar(a)yahoo(dot)com

Beware of false knowledge; it is more dangerous than ignorance.
30th April 2012 From India, Bangalore
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