6 steps to find the ROI of your training program

Marijn
Founder & CEO
TrainTool
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You have probably heard the standard opinions: even though communication training may help awareness, self-confidence and recognition, it remains something that is ‘nice to have’. Something that you can’t measure and therefore does not deserve priority. However, this is not the case anymore: soft skills can be measurably improved and the Return On Investment (ROI) may help you to convince others. How does it work?

Determining the ROI was added as the fifth phase of Kirkpatrick’s evaluation model in 1992 by dr. Jack Phillips. Leopard Learning has used this in an example. After you have evaluated the training effect on reactions, learning, behavior and result, determining the revenue is the icing on the cake. In this way you can show if it was worth the investment! Follow these 6 steps to determine the ROI of your training program.

1. Collect data beforehand

To know the worth of the data after the program, you must be able to compare it to a baseline. So determine the level of the trainees (and non-trainees, possibly) and collect data on the process or the output that must be improved with the program. For example, if you are going to train customer service staff in handling complaints quickly, you might want to measure the time that they need for that now. It’s important to have a good estimate of the costs per complaint on average, because you will figure out the revenue based on this.

2. Collect data afterwards

A lot of time can pass between point 1 and 2. In these months, trainees practice the skill repeatedly and the effect of their implementation in practice is visible. By measuring the skill at the end of the program in the same way as beforehand, you have an objective view on individual growth. Then, questionnaires among managers, clients or colleagues can reveal the change in practice. Collecting the same data as in step 1 shows the handling time.

3. Isolate the effects of the program

Establishing the connection between skill development and corporate results is the biggest challenge in determining the ROI. First of all, acknowledge external factors that may have influenced the results, like the introduction of a new product for example. Ask the input from (managers of) trainees, clients and/or analysts. Then, you can estimate the impact with techniques like control groups, trend line analysis, forecasting and expert estimates.

4. Convert the data into monetary advantage

Now you should convert hard and soft data into a monetary value. Focus on a measuring unit that can be valued per unit. Complaints, for example, cost €500 directly and indirectly. Subsequently you calculate the change: after isolating the effects of the program, 30 of the 60 less complaints after 6 months can be determined to be due to improved skills. Then estimate a realistic number on an annual basis, say 50. The value becomes 50 x €500 = €25,000.

5. Identify the costs of the program

Fortunately, identifying the costs is less work than the revenue. Most of all if your staff was training online. When they trained offline as well, you need to add material costs, facility costs, trainer costs, travel and accommodation expenses, food, lost time costs and staff salary to the development and licence costs. Also think of administration, evaluation of needs and possible purchase of tablets, for example. Let’s use €15,000 for this example.

6. Calculate the ROI

Now we have two figures that we can enter in the ROI formula:

ROI = (Revenue – Costs) / Costs * 100%

Our example: (€25,000-€15,000) / 15,000 * 100% = 67%

In financial terms, this would be a fantastic ROI. But next to the fact that these figures have been made up, you cannot compare the ROI from different disciplines. By combining conservative estimates with reliable sources and communicating this clearly, you can substantiate the investment. In addition, you can compare the ROI of different training programs. Be aware that many advantages cannot be made quantifiable or that they only appear later on, like improved teamwork, internal communication or staff satisfaction.

Curious about what more you can do with your training program data? Check our analytics!

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