accountability, cost implications, cost-benefit analysis, Donald Kirkpatrick, effectiveness of training, Evaluation, fifth level of evaluation, financial benefits, four levels of training evaluation, increase in revenue, Jack Phillips, line managers, measurement, monetary values, reaction learning behaviour business results, Return On Investment, ROI, Samir Dawoodani, Training, training programmes, training session
Most professionals struggle with a lack of support for further training from their line managers who are reluctant to send them on training programmes because of the cost implications. In such situations, the best way to convince management about the effectiveness of training is by calculating the Return On Investment (ROI).
Previously, we had discussed Donald Kirkpatrick’s four levels of training evaluation (reaction, learning, behaviour and business results). Building on these steps, Jack Phillips, a renowned expert on accountability, measurement and evaluation, considers ROI to be the fifth level of evaluation. According to him, ROIs assess the value of expensive, high-profile training programmes using cost-benefit analysis – they convert data from Kirkpatrick’s fourth level (results) into monetary values and compare it to the cost of training. In effect, ROIs asks: “For every dollar invested in training, how many dollars does the employer get back?”
The formula for calculating ROIs is as follows:
ROI (%) = Benefits – (Training Costs/Training Costs) x 100
For instance, ‘Pakistan Phones’ (a fictional company) has assessed that there was a 10% increase in the number of phones sold after a new training programme was conducted with its sales team. If the 10% annual increase in revenue amounted to Rs 250,000 and the cost of training was Rs 75,000, the ROI is 233%.
(250,000 – 75,000)/75,000 x 100 = 233%
So every 1 rupee invested in training leads to an increase in revenue of Rs 2.33
While there are financial benefits of using ROIs to evaluate the value of a training session, it is imperative to remember that ROIs will not provide any information regarding how to improve the training since ROI is only concerned with how much the training in question is ‘worth’.
– Samir Dawoodani
The writer is an HR and training consultant and can be contacted via LinkedIn. firstname.lastname@example.org