Data consistently points to the dramatic improvements companies enjoy when they focus on employee training. Organizations with well-developed employee training programs have a 24% higher profit margin, and make more money per employee – 218% more money per person, in fact . Clearly, the return on investment (ROI) achieved with employee training is impressive. But how do you implement a successful employee training program?
You do it by focusing not just on ROI for your company, but also on ROI for your training program. The best and brightest people on your team are looking for training that helps them grow in their careers. Your training program needs to provide great ROI for your employees. Manpower Group’s recent report on talent shortage indicated that 45% of employers can’t find employees with the skills necessary for success .
Is this a surprise? More and more jobs rely on employee knowledge, and employee knowledge is increasingly intertwined with technological know-how. And since technological advances move quickly, it makes sense that employees have a tough time keeping up. And this is why well designed employee training programs are necessary for company-wide success.
Today, well designed programs are delivered electronically using computers and mobile devices. One day, marathon training sessions are out. Employee training programs happen in small pieces, or microlessons, that can be accessed and taken in the course of a normal work day. And, learner performance data is immediately available to training teams.
Ultimately, measuring employee training ROI requires a clear picture of the desired outcome. Conducting performance gap analyses in problem areas is the first step. Employee surveys and feedback sessions are an excellent way to hear directly what your team needs to be successful. It’s also good to be specific in your focus. Talk to top performing members of a team and understand their approach and process. Then analyze less successful team members to get a clear picture of how and why performance is lagging. This will help you analyze and correct any institutional shortcomings that can’t be solved with employee training.
Determining ROI for your employee training
Training is all about improving a behavior or teaching a new skill. The way to determine the success of your course is to have a quantifiable measure that can be assessed before and after the course is taken. The measure should be directly related to the behavior or skill you are working to change or improve. This measure is called a metric.
Some common metrics are:
- Hours worked on a process
- Customer retention
- Cost of customer acquisition
- Productivity ratios
- Sales revenue
Depending on the industry and behavior or skill training, the metrics could be aligned to individual performance, team performance, or the performance of the whole company. A training initiative that shows a metric improvement can be translated into dollars saved by calculating the ROI. ROI is calculated by subtracting the cost of an investment from the gain of the investment, divided by the cost of investment. The result is expressed as a ratio or percentage. For example:
(Gain in dollars from training improvement – Cost of training program)/Cost of training program = Percentage of return
Suppose a $5,000 training initiative was implemented to reduce customer hold time. Six months after training, the company has saved $8,400. The return on investment is 68% in six months.
You may be limited by the data available about the dollar value of each metric. It will be difficult to accurately project ROI without this information. However, there are ways to make educated guesses about metric values. For example, in a call center you may pay a call center agent $15 per hour to take calls. If he or she is only able to take two calls per hour, then each call is costing the company $7.50. If after training the agent can double that, then each call is reduced to a cost of $3.75. Of course, there are other overhead expenses that impact the actual cost of a call to the company, but in the absence of that information a basic analysis like this can help get your point across.
Metrics are also related to objectives. Objectives are short written statements that describe the skill or behavior change expected of learners. Objectives must be aligned to the appropriate metrics to draw a clear conclusion of the success of the course both in terms of metrics improvement and ROI. For example, the expected outcome of a course is that learners will be able to use their internal resources to resolve customer concerns. It would make sense to use a metric such as customer satisfaction to measure the success. It would not make sense to use a metric such as minutes spent on the phone call. A customer may be satisfied on a five minute phone call and just as well on a twenty minute phone call, so long as the issues are resolved.
Aligning objectives and metrics is crucial to accurately predicting ROI and achieving the projected goal. But remember, while ROI is always an important business goal, effective learning is always the focus of a successful training program. Without a well planned and well designed employee training program, ROI will never be as high as you’d like.