Measuring ROI to Make the Case for Training

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Measuring ROI to Make the Case for Training
HRPYR Topic by Table
Thursday, April 17, 2008
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Why did you come to this Topic by Table?

• Looking for measures.
• Employers 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.

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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 OConnell (2001) report that soft
  skills training has a greater effect on worker
  productivity than specific training.

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Some Interesting Facts contd

• 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.

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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/applicat
  ion.
• Results - the effects on the business or
  environment resulting from the trainee's
  performance.

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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.

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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.

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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.

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Level 3 Behaviour/Transfer contd

• Methods of assessing transfer include
• Performance Appraisals.
• 360 Degree Feedback Programs.
• On the Job Observation.
• Focus Groups.
• Client Satisfaction Surveys.
• Employee Engagement Surveys.

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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.

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Level 5 Measuring ROI

• Jack Phillips created Level 5 ROI to assist
  organizations in selling in training initiatives
  to Senior Management teams.

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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.

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Level 5 Measuring ROI contd

• 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.

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Level 5 Measuring ROI contd

• 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.

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Level 5 Measuring ROI contd

• 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.
• Participants 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.

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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.

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ROI Calculations

• Net Present Value Benefits Costs
• Benefits Cost Ratio Total Benefits
• Program Costs
• ROI Total Benefits Program Costs
• Program Costs

X 100
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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.

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Please contact Jodi at [phone] extension
433 or at jzigelstein_at_theemployerschoice.com with
any questions you may have.