How Can I Measure ROI for Our Training Programs Without a Formal Procedure?

Hello everybody,

My name is Megha Wadhwa. I am working with a Training consultancy where we conduct training programs for our clients. For example, we are currently working with a major client in the telecom sector. We have provided training to all call center executives on a program aimed at unleashing internal creativity, energizing and motivating employees, creating a common understanding of customer centricity, and developing initiatives and action plans. These workshops span across departments and functions, focusing on customer-centric behaviors and attitudes. In other words, this is a significant Organizational Development (OD) initiative.

My concern lies in the fact that we do not have a formalized measurement procedure in place beyond Level 1, which measures reactions. Can you assist me in figuring out if, at this stage post-program implementation, I should conduct a Return on Investment (ROI) analysis for this initiative? I am considering identifying certain parameters and surveying 30% of the participants to gauge the percentage of change they have experienced in the defined parameters after attending the program.

It would be greatly appreciated if you could provide guidance on how to proceed, including which parameters to focus on and if there are alternative methods for calculating ROI. As I am relatively new to this field, your insights would be invaluable.

Thank you for your assistance.

Hi Megha

In finance, the return on investment (ROI) or just return is a calculation used to determine whether a proposed investment is wise, and how well it will repay the investor. It is calculated as the ratio of the amount gained (taken as positive), or lost (taken as negative), relative to the basis.

With this same concept you need to calculate the ROI on training..

The process of calculating ROI

To calculate ROI you must first make estimates or obtain measurements of the costs and benefits associated with a training programme. As you will see, the calculation of ROI is then a relatively simple process. Let's start with the costs …

Forecasting and measuring costs

• Design and development costs
  
  Promotional costs
  
  Administration costs
  
  Faculty costs
  
  Materials
  
  Facilities
  
  Student costs
  
  Evaluation costs

Forecasting and measuring benefits

• Labour savings
  
  Productivity increases
  
  Other cost savings
  
  Other income generation

Calculating return on investment

Return on investment tells you the percentage return you have made over a specified period as a result of investing in a training programme. On the assumption that benefits will continue to accrue some time after the training, then the period that you specify is critical to the ROI figure you will obtain. You may like to specify a period that fits in well with your organisation's planning cycle – perhaps a year or two years. On the other hand, you may wish to calculate the period to correspond to the lifetime of the benefit, in which case you will need to know how long the average student stays in a position in which they can continue to apply the knowledge and skills being taught.

It is relatively simple to calculate return on investment:

% ROI = (benefits / costs) x 100

Payback period

Another way at looking at ROI, is to calculate how many months it will take before the benefits of the training match the costs and the training pays for itself. This is called the payback period:

payback period = costs / monthly benefits

Payback period is a powerful measure. If the figure is relatively low – perhaps only a few months – then management will be that much more encouraged to make the training investment. As a measure, it also has the advantage of not requiring an arbitrary benefit period to be specified.