How to be objective about ROI

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In the first of three parts, Krystyna Gadd takes a practical look at ROI for trainers and training departments.

Writing objectives for training is not sexy, exciting or what trainers really want to do, but in this article, I will show you how to make it so simple that this missing piece of the jigsaw will take your training from great to sensational, as well as impactful, in minutes. To set a good example and to practice what I am about to preach, the objectives of this article will be, that once you have read it you will be able to:

  • Define Return on Investment (ROI)

  • Define Return on Expectations (ROE) and how it relates to ROI

  • Explain the importance of objective setting for ROI, ROE and training/learning

  • Work through an example of how to set objectives for ROI and learning for a given example (e.g. Feedback skills)

An interesting story to start off with:

It is always refreshing and inspiring to hear how other organisations approach common problems and find a new way of solving them. A well known telecommunications organisation has a new and interesting approach to approving new L&D projects. In years gone by, when a senior manager said 'Deliver this customer service training to all contact centre staff by the end of next month', they did just that. If it did not get the results that were expected, you can guess whom they blamed.

Having had their fingers burnt on more than one occasion they decided to radically alter their approach to the commissioning of any new learning events. Now the process is like this:

  • A stakeholder approaches L&D with a proposal for an new L&D intervention

  • They come prepared with objectives, measures and the expected impact of the intervention

  • A discussion takes place with L&D, further exploring the expected impact of the proposed learning intervention, discussing ROI and ROE

  • L&D considers the project’s merits along with other proposed projects and prioritises according to the organizational priorities.

There are very many benefits to this approach, not least that the credibility of L&D is enhanced as well as the training being more focused and targeted at what the organisation really needs. In order for you and your organisation to be able to adopt a similar approach, there are several things that you need to know and to be able to do. So let’s start with defining ROI.

Defining Return on Investment

It is not a difficult concept, the return on investment is an indicator of what you will get for every pound (or dollar) you spend. Watch this short video to learn more

Return on Investment = Total benefits (£) x 100 (expressed as a Total costs percentage)

If you don’t multiply by 100, this calculation gives you a straightforward “for every £1 spent how may £’s do you get back in benefits?”

Here are some examples of benefits, for which we could calculate a monetary value:

  • Reduction in errors/complaints (calculate how much the errors/complaints cost on average)

  • Increase in sales

  • Reduction in labour turnover (recruitment costs are reduced)

  • Reduction of production time

  • Increases in efficiency

  • Increase in production levels

  • Decrease in wastage

  • Decrease in repeat work

Here is what you need to consider when calculating the total costs:

  • Trainer time:

    • In design

    • During the training

  • Cost of the materials and resources

  • Cost of the venue, refreshments, equipment hire

  • Travel expenses (if applicable)

  • Time away (x hourly rate) of the employees from their normal work

  • Stand-in temporary staff costs

It is useful, if not essential to make sure that before doing any calculations, you have at least listed all the possible costs and benefits.

Krystyna Gadd Assoc CIPD is founder of How to Accelerate Learning and creator of the Learning Loop. For more info watch this short video and contact her to find out more and book a no-fee consultation.

Bibliography

  • “Implementing the four levels” Donald L.Kirkpatrick & James D.Kirkpatrick 2007 B.K Publishers
  • “Learning Needs Analysis and Evaluation”, Frances and Roland Bee, CIPD 2nd Edition
  • “Measuring the impact of training” Gary Platt, Training Journal, 27th January 2011

About Krystyna Gadd

Krystyna Gadd, Founder of How to Accelerate Learning

With 30 years experience in L&D, Krystyna has been training trainers, facilitators and subject matter experts as well as line managers since 2008. Noticing a lack of experience and skill in the area of needs analysis drove her to write her book 'How to Not Waste Your Money on Training'. In it she applies all of her knowledge and skills from the last 30 years to gently guide people to a more data driven, focused approach to L&D.

Krystyna is a consummate professional with a passion for helping people perform better through learning. She is a member of the CIPD and has delivered professional CIPD L&D qualifications. She is also a fellow of the Learning and Performance Institute.

With her background as an engineer, Krystyna applies the same process thinking to L&D as she did in her former career. Having moved from engineering to IT training, she spent years learning her craft firstly for IBM and later as a freelance IT trainer. This gave her great insight into how to make dry and technical training more dynamic and impactful.

A move into soft skills training in 2003 led Krystyna to research accelerated learning. She was particularly drawn to how learning could become more engaging as well as impactful. A frustration with the many models and theories within accelerated learning prompted her to create a signature system ‘Five Secrets of Accelerated Learning’, which simplifies all relevant theories and models for those curious about accelerating learning through their organisations.

Krystyna’s focus is always on achieving business results in a creative and inspiring way. Through Five Secrets, she helps people make this structured and simple. A curious mind drives her to seek new innovations and consider how the latest research can be applied. She is a pragmatist with a thirst for learning and sharing with others, with the ultimate aim to elevate the L&D profession. Finding the right data to inform good decision-making is a must in her eyes.

Since 2008, Krystyna has been training trainers. Noticing a lack of experience and skill in the area of needs analysis drove her to write her book 'How to Not Waste Your Money on Training'. In it she applies all of her knowledge and skills from the last 30 years to gently guide people to a more data driven, focused approach to L&D.

 

 

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