Calculating the ROI from a Training Programme
Training is extremely important for both educating your staff and also building a sense of company loyalty. There’s no doubt that training your team is important, but how profitable is training and how much are you getting out of it for your investment?
Like many other things in business, we need to develop a calculation to figure out the return on investment, also known as the ROI. This is a helpful metric that allows us to measure whether a particular training programme is actually offering value to your business or not. So in this post, we’re going to explore how exactly this is calculated and offer some advice on how to produce more accurate and meaningful numbers.
Understand exactly what goes into your training programmes
We can’t calculate the ROI accurately if we don’t know how much we’re spending on training programmes. The cost of training employees is something that can change greatly depending on your business, the current level of training they have, and also the service or programmes that you enrol them into. Training is also something that costs time. In some cases, you may be the one training your staff which can take many hours.
So how exactly do you determine the cost of training employees? Here are some factors to consider and add to your calculations.
- What is the cost of the programme itself? This is easily calculated if you’re using an external source of learning such as an online learning programme or enrolling them on a course.
- How much time will be lost when training staff? Your staff won’t be able to work and perform their regular duties when training, so you need to consider what training will cost in terms of time and ultimately money for the business.
- Do you need to purchase anything extra for training? For example, you may need to purchase additional learning materials for your staff to study, or you may need to equip a training room in your office to create a quiet learning environment.
Metrics to help measure the impact of a training programme
Now we need to look at what metrics we can use to measure the impact of a training programme. There are a handful of ways to do this and the ideal choice will depend on the type of business you’re running and the options you have available to you.
Metrics to measure performance
For example, if your employee performance can be expressed as a quantifiable value such as how many sales they made or how quickly they finished their tasks, then this can be used in an ROI calculation to figure out how much their productivity has improved.
Observations from senior management
This is a largely subjective way to measure the productivity of staff since it relies on the expertise and wisdom of your senior staff. Start by asking your senior management to make reports on staff and how well they are performing.
Once a base value is recorded before the training, you ask the senior management to once again observe their staff and express how much they have improved (or worsened) as a percentage. For instance, perhaps teamwork improved by roughly 20% and efficiency increased by 10%.
Rely on the opinion of the trained staff
The easiest way to measure ROI is to ask staff how effective their training programmes were. However, this is largely subjective and may need some data to back it up. As such, a survey is usually used in conjunction with the above methods for measuring how impactful a training programme was.
Calculating the return on investment with the above values
Now that we have a metric for how much your team’s productivity and efficiency have improved, we can now calculate the ROI.
The basic formula for ROI% is the following:
ROI% = ( [$benefit of training] – [$cost of training] ) / [$cost of training] X 100
For example, if you measure your employee’s performance and they made 20% more sales over a 6-month period, then you can use this to calculate how much money they’ve made the company. Let’s say that 20% more sales resulted in an additional $5,000 for the company and the training cost $2,000.
ROI% = ($5,000 – $2,000) / $2,000 X 100 = 150%
This means we can express the ROI of the training as 150%.
The difficult part of calculating ROI is figuring out the benefit of the training. However, with the right metrics, it’s possible to calculate this with ease assuming your business keeps enough data on how staff are performing.