Clients frequently ask us for help in justifying budget allocations for professional development training. Decision-makers specifically want to know what the Return on Investment (ROI) data looks like for training expenditures and if metrics can be utilized that demonstrate what kind of ROI they can expect to see.
Ironically, the reality is that it can be a major and sometimes costly undertaking in itself to come up with tangible numbers that indicate the level of success of training programs and the cost savings that were achieved.
We never forget it’s a considerable cash commitment for smaller organizations to invest in their employees’ training, especially any kind of ongoing comprehensive training series. And it’s a decision that isn’t taken lightly, either, or decided upon in a matter of days or even weeks. Planning for a long-term training and development undertaking usually requires justification of the training budget, and it’s no surprise we hear concerns arise during the initial phase of implementation. We understand the high level of risk they feel they are taking with something intangible yet costly like training.
Human Capital Expenditures
We’ve also seen talent survey results that show a good number of employees express desire to work within organizations that offer professional development opportunities. Once implemented, organizations can eventually realize that by making such an investment, they have paved the way for improved employee retention, engagement, and productivity over the long term, resulting in improved bottom lines, even during down economic cycles.
Thinking about training in the same way that businesses categorize capital expenditure and new product development isn’t a traditional view, but the return on the investment for those efforts can be well worth the paradigm shift. Not only can the increased performance and efficiency serve their customers better, but they develop an internal culture that will help them grow their talent from the inside–and keep those star players, no matter the state of the economy.
Benefits of Initiating Long-Term Training Programs
While we’re not aware of organizations that provide ongoing research and established metrics on ROI for the training industry, we’ve found a couple of insightful reports that emphasize the benefits and cost savings of initiating employee training programs.
Measuring the ROI of Training, Upskilling, and Reskilling Employees. This report highlights two ways that training can save a company money and therefore a positive return on their investment: 1) Cost savings driven by employee training; and 2) Revenue growth driven by employee training.
Was It Worth It? Measuring the Impact and ROI of Leadership Training. In this study from 2019, an ROI consultant at Verizon found that running first-time managers through a leadership development program offered a 29% ROI in the first 3 months and a 415% annualized ROI. This means that the business made $4.15 for every $1 spent on training.
How to Measure Your Own Organization’s Training Effectiveness
With the assistance of your training and development experts, one of the best ways a company can gather feedback and assess a training program’s impact is by implementing one or more of the various levels of the Kirkpatrick Model. It specifically defines four levels for measuring training and development outcomes. Which ones you implement depends on the depth of insight you are looking to attain and your budget and resources for such efforts. The first two levels are the most useful to small and mid-sized organizations.
Level 1 – REACTION. This can take the form of an after-class one-page evaluation form. This level of assessment asks questions such as:
- What was the most useful aspect(s) of this program?
- What might you do differently on the job as a result of this program?
- What could be done in the work environment to encourage the use of the skills learned?
It also asks the participants to rate the quality of the instructor and the course content.
Level 2 – LEARNING. This can take the form of pre- and post-assessment quizzes which measure the level of knowledge of related topics before and after the program. It’s a helpful tool to ensure the participants acquired the intended knowledge and skills during the program. One example of this level of assessment asks the participants to rate their knowledge of topics on a scale of 1-4, with 1 equal to no knowledge and 4 equal to mastery of knowledge. Another example of this type of assessment can include multiple-choice questions related to the topics discussed in class.
Level 3 – BEHAVIOR and Level 4 – RESULTS. At these levels, companies carry out costly and time-consuming tasks: 1) proving desired behavioral changes have taken effect, and 2) calculating the cost savings to justify training costs and their return on investment. Because these last two levels are difficult and resource-consuming, companies rely more readily on the results gleaned from executing the first two levels to gather sufficient indicators of improvement.
The bottom line is that investing in training and development consistently provides growth opportunities for organizations that work proactively to align their employee development strategies with their organizational performance objectives. You can build employee skills and increase engagement at the same time, which is a win for you, your employees, and your customers.