Getting a return on your training investment
By PATRICK VON SCHLAG
Whether you're training optical-networking professionals or medical assistants, if you've got responsibility for training, you're hearing the same message:
"What good is this training?"
"We can't possibly afford to do all this."
"What do you mean we have to?"
These are tough economic times. Training budgets are being slashed, travel eliminated, and we're all being asked to focus on activities that specifically add revenues or save costs. At the same time, we're being asked to transform the skills of our workforce in challenging technologies like DWDM and converged data/voice/ video networks. It's time to take a long look at our return on investment (ROI).
One of the most misunderstood of all metrics in training, ROI is actually a very simple idea. You invest money in training and seek the financial value of the improvements that the training creates.
You can measure financial value in many ways. Industry luminaries segment them into two groups: hard benefits and soft benefits. Hard benefits are more easily converted into dollar values and include improved productivity (more x per hour), better quality (fewer defects per lot), reduced injuries and turnover, improved time-to-market for new products, enhanced productivity for new employees, or improved customer satisfaction (measured by an increase in repeat sales).
Soft benefits are not as easy to quantify. They include improved worker job satisfaction, morale, enhanced corporate image, and improved communication and teamwork. To determine solid ROI for your programs, it is best to choose one or more hard metrics to track.
Tracking and measuring ROI takes discipline, planning, and a good deal of buy-in from the business units you're tracking-but it's a powerful tool when assessing which training programs to build or buy while helping you to make tough choices during lean times. In order to truly measure the impact of a training program, you must first assess four levels of results. Based on a model by researcher Donald Kirkpatrick, the four levels of evaluation form a "chain of effect" that helps you track how the training leads to business results.
Level one is the customary classroom "smile sheet" or course evaluation, where students share feedback about their immediate perceptions of the training and their intentions of using the skills back in the workplace. For example, an employee attends a fiber-optic technology class and feels she has learned a lot about the proper installation and design of fiber-optic networks. She gives the course and the instructor high ratings. This level of feedback indicates a kind of self-assessment about the value of the training.
Level two is the traditional "achievement test," where students take an examination to demonstrate the knowledge and skills they have learned. After the employee completes the fiber-optic class, she's required to take written and hands-on skills tests to demonstrate her new capabilities and scores well. For added value, the employee can take a test before the class as well-the pre-course score is compared to the post-course test to assess the effect of training on skill levels.
Level three is the measure of how much of the knowledge and skills developed in training are applied on the job. Typically, this involves training observers to watch people performing their jobs and assigning objective scores on the use of the new knowledge and skills. So when the employee returns to work after the fiber-optic class, is she using her skills to improve the way that she changes fiber-optic cable?
Level four is a measure of improved business metrics, such as a reduced number of days out due to injuries as a result of training in proper safety techniques. To continue our example, as a result of the fiber-optic class, post-training installations result in 36% fewer errors and customer repeat business rate subsequently increases from 61% to 67%.
ROI is the actual dollars and cents value of the business metrics below. Your company will have a good idea of these metrics, and if in doubt, ask your finance department. For example, each 1% of errors might track to $500,000 in lost profit. Hence, reducing errors by 36% adds $18 million to the bottom line. Increasing the repeat business rate improves customer profitability by $1 million per percent increase and improves return on marketing by $250,000 per percent. A 6% increase in repeat business then adds $6 million in profitability and $1.5 million in improved marketing value. In total, if you could achieve these results with these metrics, you'd have added $25.5 million of value. If you spent $5 million in training to create these results, your ROI would be 25.5/5 or 5:1 (or 510%).
Projects that demonstrate 510% ROI usually get funded. If you're struggling to get your organization to see the value of the training they get, doing an ROI project can be a great way to help them see the value that training and development brings to the organization. When times are tough, people who can demonstrate the bottom line financial impact of their activities will get funded. You know that your training programs make a real impact on your people. Do an ROI project to show them how much.
Patrick von Schlag is director of business strategy for Global Knowledge Inc. (Cary, NC), a worldwide information technology education provider. He can be reached via the company's Website, http://am.global knowledge.com/wire.