Calculating the ROI of training is sometimes simple, sometimes subjective and sometimes not worth the effort.
The return on investment (ROI) is a Holy Grail of sorts for the training industry. Everybody wants it, everybody has theories on how to find it, and most are willing to go to great lengths to do so. It's no wonder when you consider employers spent $55.3 billion on training in 1995, according to the American Society for Training and Development (ASTD).
The idea of an absolute number-a neat package that shows the exact value returned for an exact value invested in training-is a seductive idea. In some cases, it's quite attainable. In other cases, it may simply be a seductive idea-and one that's best not pursued.
When people ask Laurie Bassi, vice president for research at Alexandria, Virginia-based ASTD, what to consider in calculating an ROI, she answers, "The first thing to consider is: Is it worth doing?"
Before embarking on your ROI quest, you should first contemplate the ROI for calculating your ROI. Is it worth the time and money you'll spend? The answer, says Bassi, depends on the type of training you're doing.
Calculating the "easy" ROI.
The ideal type of training suited for calculating ROI is onetime training on a specific skill-teaching customer-service staff the latest computer program vs. putting the executive team through a series of leadership seminars.
The former is a discrete module in which few other factors will affect the outcome, and in which the outcome can be readily tested in a before-and-after scenario. This is the easiest and most clear-cut way to calculate an ROI.
The latter, although it potentially will have a greater effect on the company, is more difficult to quantify. It's hard to do a before-and-after test on leadership skills, and other factors will come to play in workers' performance.
"For the most part, [ROI] is the bane of every trainer's existence," says Laraine R. Mancuso, a trainer at the Learning Annex in New York City. "But industries like manufacturing have the easiest time doing it. You have people producing three nuts and bolts an hour, and after the training they produce six."
ACCO World Corp. in Lincolnshire, Illinois, is a manufacturer of office and school supplies, ranging from paper clips and binders to computer supplies and productivity tools. Valeria Stokes, vice president of learning and development, tracked the effect of training on new production hires. After training, most new hires were able to produce vinyl binders at a 5 to 10 percent higher rate than tenured operators. "As a result of that finding, we recommended that we do recertification of operators on an annual basis to retain that production level." Stokes was able to leverage that to not only continue the training, but expand it.
Let's say you're blessed with one such simple ROI scenario. To measure ROI, you want to start by isolating the impact of training as much as possible. To do this, you can train one group several months ahead of another, so you have a control group to test by. Or you can narrowly focus the training to do a before-and-after comparison. Then you must decide the impact the training should have. If learning the computer program should shorten each customer-service inquiry, then you must attach a cost to that extra productivity.
The bottom line is: Calculate the productivity effect. For instance, each customer-service person is able to handle 10 more phone calls a day. Calculate the dollars associated with thateach phone call represents $6 of the employee's time. Divide the final value-20 employees each save an average of $60 a day-by the cost of the training. Voila--the result is the ROI.
Michelin Tire Corp. in Greenville, South Carolina, recently completed a two-year training effort of its workforce. Its training consultant, Tech Resource Group Inc. (TRG), put Michelin's 7,000 employees through a multi-week course on the company's new desktop environment. …