The reasons for training may seem obvious. It’s meant to solve issues and improve performance, right? However, reason alone is not enough to justify your training initiatives.
To satisfy stakeholders, there must be something tangible at the end of it all, and that boils down to one thing: a positive return on investment.
After all, training costs money, and it needs to be money well spent if an organization is to continue investing in it.
The challenge is that there is no one-size-fits-all approach to measuring training ROI, and the reality is that it can be a complex task. In this article, we explore various methods so you can decide which are best for your needs.
What does training ROI mean, exactly?
Training ROI (return on investment) refers to the gains an organization realizes after investing in an employee training program.
Crucially, evaluating ROI helps determine whether the investment was worthwhile and whether it achieved the desired impact.
However, calculating training ROI isn’t always straightforward because the results don’t solely revolve around increased profits. In fact, many benefits of training – such as improved company culture or better time management – are intangible and difficult to quantify in monetary terms.
As such, before we calculate the financial aspects, the overarching question we need to answer is; Did the training solve the problem?
What do you need to measure?
Training exists to equip employees with the knowledge and skills needed to improve performance, productivity, and efficiency.
A basic cost analysis alone isn’t sufficient, as it doesn’t provide the full picture. Additionally, the results of training can take time to impact the financial level. Therefore, measuring other key factors is essential:
- Learning outcomes: Did the training achieve the desired effect? Have the learners improved their skills?
- Costs (monetary, time, etc.): What was the total cost of implementing and running the training? How much did the participants’ time cost?
- Engagement levels: Were learners actively engaged in the training? Were they satisfied with the experience? Did they feel it was valuable?
- Productivity levels: Has productivity improved since the training? Are employees more efficient? Has the accuracy of their work also improved?
- Overall business impact: Did the training contribute to achieving business goals?
Popular training ROI methods
So, now we know what we need to measure, let’s look at how to measure it:
Kirkpatrick’s four levels of evaluation
Kirkpatrick’s evaluation model has been widely used for over seven decades, and for good reason. When applied correctly, it can be one of the most effective methods for determining whether training achieved its intended outcomes.
The model consists of four levels, and instructional designers now recommend starting at level four and working backwards:
- Level 1: Were learners satisfied with the training?
- Level 2: Was the knowledge transfer successful?
- Level 3: Did the training result in a behavior change?
- Level 4: Did the training resolve a performance issue?
The advantage of this framework is its flexibility, allowing it to be adapted to most types of training and environments. However, it can be time-consuming to implement, and while it identifies what was successful, it provides limited insight into areas that were less successful.
Phillips ROI methodology
The Phillips ROI methodology is a more recent extension of the Kirkpatrick model, adding a fifth level to measure the financial impact of training. The ROI can be calculated using the following formula:
ROI (%) = (Net Program Benefits / Program Costs) × 100
By translating training outcomes into monetary terms, this method provides a quantifiable measure of ROI.
This is the kind of data stakeholders are most interested in, and it helps you build credibility with decision-makers – something essential for securing continued investment in your training initiatives.
However, collecting the data required for this equation can be complex. It often involves assumptions and estimations, which can introduce bias or inaccuracies.
Additionally, it’s not always possible to apply this equation. For example, training focused on soft skills or behavior change is notoriously difficult to quantify in monetary terms.
Benefit-cost ratio
A simpler alternative to the Phillips ROI methodology is the benefit-cost ratio (BCR):
BCR = Total Benefits / Total Costs
If you achieve a BCR of one or higher, your training can be considered successful.
While easier to calculate than Phillips ROI, the BCR faces similar challenges. Additionally, because the equation is based on a specific timeframe, it may not effectively capture the long-term value of training.
Training performance analysis (pre and post)
This method is ideal for situations where performance can be quantitatively assessed.
For example, consider a team of customer service representatives who need training on communication skills, problem-solving, and product knowledge. The metrics you might use for pre- and post-analysis include:
- Average call handling time
- First call resolution rate
- Customer satisfaction score
- Number of call escalations
To gather pre-training data, you track these metrics over a period of time, such as one month. After the training, you track the same metrics for another month and compare the results to evaluate improvements.
This method is simple, easy to implement, and allows you to focus on the metrics most relevant to your training goals. However, the timing of post-training measurement must be carefully considered.
If you measure too soon, the full impact of the training may not yet be evident. If you measure too late, other factors might affect the results, making it harder to assess the success of the training.
Control group comparison
With this method, you compare the performance of a group that received training to a “control group” that did not.
For instance, if you are implementing a training program for retail employees aimed at increasing sales, you could select 50 individuals across several stores to undergo the training, while another 50 employees from different stores serve as the control group.
After the training, you would measure relevant metrics and compare them to the control group to assess improvements.
The control group acts as a baseline, helping account for external factors such as seasonal trends, economic conditions, and other influences that could impact performance.
However, this method can raise concerns about fairness – why did some employees receive training while others did not? Additionally, assembling two groups with similar skills and competencies can be challenging, especially when dealing with smaller teams.
Time to proficiency
Time to proficiency focuses on understanding the long-term impact of training, often used for new teams or employees who need time to get fully acclimated to their roles.
Begin by tracking pre-training metrics. Once the training is completed, monitor each individual’s performance regularly to see how quickly they achieve the desired benchmarks.
This method is valuable for workforce planning because it provides data that helps organizations better map out staffing levels, project timelines, and resource allocation.
However, the risk lies in prioritizing speed over quality. Focusing on quick results might lead the training to emphasize basic competence rather than long-term skill development.
Additionally, this method doesn’t account for individual learning curves. People learn at different paces, and those who take longer to reach proficiency may feel pressured or stressed by unrealistic timelines.
Customer satisfaction and feedback
Those post-interaction surveys you’re invited to complete after contacting customer service exist for this very purpose!
Real-time feedback provides actionable insights into areas where staff need improvement, allowing you to tailor training programs to address those specific issues quickly.
However, tread cautiously – customer satisfaction is influenced by more than just staff interactions. External factors like pricing, product issues, or company policies (which staff have no control over) can easily impact how a customer feels – regardless of how great the employee was.
Moreover, customers’ experiences can be subjective. A customer might simply be having a bad day or have already had an unsatisfactory interaction with another staff member, which can skew their feedback, making it less fact-based.
Competency mapping
Competency mapping is commonly used to assess leadership and soft skills training.
This method evaluates the improvement of specific skills or competencies that the training was designed to enhance. Typically, competencies are organized into three categories:
- Core competencies: Required for all employees across the organization.
- Technical competencies: Job-specific skills needed for a particular role or function.
- Leadership competencies: Essential for managerial or supervisory roles.
To conduct competency mapping, analyze each job role and break down the key tasks and responsibilities into individual competencies.
Then, develop a “competency matrix” that lists and describes each competency along with proficiency levels.
Finally, assess where each individual stands within those proficiency levels both before and after the training.
Your essential data-gathering toolkit
There are numerous ways to collect data for calculating training ROI, each focusing on either qualitative or quantitative data. Here are some key methods:
- Tests, quizzes, and assessments: A valuable way to evaluate knowledge retention, it’s recommended to test individuals before and after training to measure improvements.
- Surveys: These gather feedback from learners on their engagement levels and opinions on the training’s effectiveness.
- Observations: Assess learning and behavior in a real workplace setting. This method is particularly useful for evaluating soft skills and competencies.
- Performance records: Link individual performance to business metrics, such as the number of sales or deals closed. This provides objective data that is free from subjectivity.
- Performance metrics (organizational and individual): What metrics are directly related to business operations? Which are specific to each job role? Track how these metrics change after training to assess its impact.
- Financial metrics: Measure revenue or profit growth over time following the training to gather data on financial ROI.
- HR data: Leverage HR metrics such as attendance records, performance reviews, turnover rates, and employee satisfaction scores to gain additional insights into training success.
Using a learning management system (LMS) can be highly beneficial for this process, as it standardizes data collection and analysis while providing tools to generate reports efficiently.
Final thoughts
When measuring ROI, use a blended approach and employ several of these methods to get a clear picture of the value your training brings.
Setting up the process to capture training ROI will take time and energy, but I promise, it’s worth the effort.
Ultimately, it not only justifies your training initiatives but also drives continuous improvement, ensuring your initiatives continue to align with the long-term success of the organization.
By Janette Bonnet
Janette Bonnet is an experienced L&D professional who is passionate about exploring instructional design techniques, trends, and innovations.