Implementing a corporate training program involves defining what will be covered, choosing the platform and materials that will support the program, the best learning method, among many others.
And, what's behind it all? A significant investment, which is expected to justify the resources used.
Therefore, we will take a closer look at everything related to training ROI and how your company can benefit from this metric.
What is training ROI?
The concept of ROI (return on investment) was created to establish the relationship between how much you earn as a result of an investment and how much it took to invest to achieve that result.
Therefore, training ROI measures the result that the investment spent on training brought to the company and can be used to evaluate the entire process or just some of the program activities.
Importance of training ROI?
Considering that The objective of training in companies is, at the end of the day, to increase revenue and reduce expenses, it is easy to understand why it is so important to know whether what was invested in employee development had the expected return. Especially at the current moment, when it is not possible to envisage more positive horizons for the global financial crisis we are going through.
The training ROI results serve as a learning experience for more future actions while spending less, from the adoption of strategies that yielded the greatest return: improvement of what did not present such a good return and rejection of what has not proven effectiveness and, consequently, did not bring the expected profitability.
Difference between BCR and ROI
BCR and ROI are metrics widely used by companies to measure results. While the BCR (benefit-cost ratio) esteem benefits or returns, the ROI indicates real benefits or returns.
The BCR projects expenditures by dividing the total expected benefits of the program by the total expected costs.
BCR = training benefits ÷ training costs
ROI accounts for the total costs employed and the net benefits achieved.
Its formula is:
ROI = (net training benefits ÷ training costs) x 100
But calculating ROI doesn’t just involve this formula. There are steps you must follow to measure it. And that's what we'll talk about here.
Step by step to measure ROI
Knowing how to measure the ROI of your training program is as important as the benefits that the program brings, such as increased productivity, improved quality, and reduced waste. So, let's go through the steps to make your task easier.
Choose a quantifiable result
Choose your goals and the impact you hope to achieve with the training. If, for example, the training is aimed at sales, quantify at the end whether there was an increase in KPIs - Key Performance Indicator, which means key performance indicator. If it is customer service training, compare the number of customer complaints before and after the training. If you see a reduction, congratulations: you have reached your goal.
So, remember: be focused on planning your training in a way that produces business results that interest you and gather the data that allows you to prove that you were successful.
Gather data you can evaluate
With training underway, gather as much measurable data as you can about your impact. Of course, the main ones are those related to the ROI measures you want to obtain, but there are three types of measures that can help you when making your calculations:
- Learning effectiveness: At the end of the training, apply a Likert scale asking students to evaluate the new knowledge or skills they acquired. If you want to take more comprehensive measurements, apply this scale at the beginning and end of training.
- Impact on work: Between 30 and 90 days after training, send a questionnaire to participants to establish how quickly they were able to put what they learned into practice and to what extent they improved their skills.
- Actual results: This is where things really get serious. The most direct way to measure training results is to monitor participants' day-to-day behavior. Another way is to compare each person's recorded sales before and after training.The greater the difference for more of these numbers, the greater the success achieved. Also use follow-up questionnaires or interviews that directly address participants' perceptions of the training results.
Carry out an analysis that goes beyond training
Changes in participants' performance often coincide with the end of training. But this does not necessarily mean that training was solely responsible for them. So, when calculating training ROI, ask yourself to what extent the change has to do with the training program and how much can be credited to another factor.
Doing this is simpler than you might think. And we'll help you with some insights to make your analysis even easier. Check out:
- Create a control group: debt participants into groups and start training one of them within a month. Next, train the next group of employees. Therefore, throughout the first month, you will be able to compare the KPIs of the group that was trained with those of the group that was not.
The difference between the two will be an important indicator of how much training is influencing your employees' performance. But remember: the groups must be very similar in terms of their KPIs and working conditions. Otherwise, the comparison will not be valid.
- Ask participants to evaluate what is happening: Ask supervisors to record participants' thoughts about the training, as well as variables that may have impacted their performance during the training.
Also ask participants to assign a percentage to each variable according to the impact of each one on the results. For example: training, 70%; new marketing campaign, 40%; new product launch, 20%; and so on. Even though this data is not completely accurate, it will help you reach your training ROI.
- Analyze trends: Gather results six months before the training and project your expectations for the end of the training. Then, just compare the results.
Convert your results into monetary values
Gather training results — which could be more sales, lower turnover, fewer customer complaints — and convert them into a monetary value.
And, to calculate the monetary impact of your training, evaluate the amounts your company typically spends to replace an employee who resigns, to resolve a customer complaint, and so on.
If you don't have an established standard cost, use your cost history considering how much you normally spent. With this estimate, it will be possible to compare monetary values before and after training.
If you are unable to establish these values, look for a specialist to help you estimate the monetary value of your results. But make sure it's someone with expertise in the area.
As you can see, training ROI is extremely important for you to improve your employees' performance and, as a consequence, increase the company's profitability.
If you need specialized help to get the most out of your Training ROI, talk to Take 5!
