Applying “Return On Investment” (ROI) to Training & Development.
Both national and multinational organizations tend to spend a great deal of money every year on training & development their employees. Sometimes the training is considered an “INVESTMENT in PEOPLE”. However, more frequently, it is seen by Senior Management as an expense that has to be assumed under the law or to keep the peace within the company. Some of the money is invested in “hard skills” which are purely work-related such as using a specific computer program like Excel, learning a foreign language, operating machinery, etc., and the rest is invested (or, more frequently “wasted”) in “Soft Skills” such as Communications training: Presentations, Meetings skills, leadership, Negotiation, etc. which are more difficult to evaluate.
Since the start of the economic crisis, many organizations have actually cut, or almost eliminated, Training & Development budgets in order to save money as they are seen as an unnecessary expense rather than as an investment in the future of the organization. Thought it might seem obvious, many people seem to forget that a better trained group of employees is going to be much more motivated, effective and productive than those who are not trained so cutting these budgets is actually counter-intuitive and counter-productive.
One of the principal problems for both HR & Training departments is the task of proving to Senior Management, Managers and other employees that any training done has produced a positive improvement on the skills of the employees involved and, more importantly, a noticeable effect on the profits of the organization. Since “Hard Skills” are relatively easy to evaluate, there is no real problem. It is easy to see if someone knows how to use a specific computer program – Tell them to do it a specific task and there is an obvious and immediate answer: Yes or NO.
“Soft Skills” on the other hand present a far greater challenge: Since you are dealing with “people skills” how can you measure the effect of the training done? However, EVERY course should have a predetermined set of Key Performance Indicators (K.P.Is) agreed by the HR Dept / organization & the Training provider before the course. These K.P.Is should form the basis for an evaluation of the R.O.I. of every course.
The following are some examples of possible K.P.Is for various types of “Soft skills” training courses. We recommend a minimum of seven (7) and a maximum of ten (10) K.P.Is per course and as the basis for an R.O.I. analysis.
At the end of the course the trainees will be able to:
Negotiation: Show that they are able to prepare all of the documentation necessary before entering into the negotiation and share the psychological reasons behind their preparation and use, etc.
Presentations: Show that they are able to structure the presentation in the most appropriate manner and justify the steps used on the basis of sound psychological & communication theory, etc.
Meetings: Show that they are able to prepare all of the documentation required beforehand and effectively carry out the meeting by controlling the time, the behaviour of the participants & the results obtained.
I would like to propose that HR Managers & Trainers consider using R.O.I. techniques to measure the improvement in soft-skills after any & every training. However, it appears that there is a certain degree of reticence, or fear, in using evaluation techniques “because we are dealing with people” and the trainees might be offended or feel bad!
However, In many organizations the HR department have no problems measuring the language skills of employees receiving language training when they enter the language program and again at the end of the course / year AND deciding if the organization will continue paying for the language courses! This double standard is both inappropriate, unrealistic and unfair to the Organization – If the organization pays for training, they should get visible, real & measurable results.
The objective of training is to provide new and better ways of working and organizations are always investing in new technology or “Innovation”: both of which are designed to improve profitability and productivity. If, after being evaluated, they do not produce the required results, they are discontinued. It should be the same with training courses & providers.
We believe that it is the responsibility of the HR department and the line managers to ensure that the employees use the material covered in the training course actively in their daily work activities. Why spend so much money for a training course and then do no follow up on its use, success and the benefits obtained by the company? It is easy to understand the attitude of Senior Management if there is no real proof of the value of the training!
One simple way for the HR Dept / Managers to identify the R.O.I. is to include in the trainees´ annual objectives a section where they are OBLIGATED to use the newly learned skills, techniques and tools in certain contexts and then evaluate the trainees on their usage & application by others who have received the same training. This would be a relatively simple and effective way of using the K.P.Is to ensure that the organization benefits from its investment in its staff. However, it is recommended that the following 6 conditions are met whenever possible:
1. The senior managers have received the training before the other employees.
2. The Senior Managers actively support & permit the use of the new techniques / tools
3. The Managers / HR provide active reinforcement of the new training on-the-job.
4. There is NO interference from the immediate (work) environment.
5. The trainees have the perception that the training was practical & realistic.
6. The trainees have access to the support of the trainer.
An additional benefit of these steps is that they help to identify training providers who are less proficient at covering the K.P.Is required by the client organization & the trainees. Many organizations are loyal to their oldest training providers, however, loyalty to the organization that pays their salaries every month is more important.
Over the last few years, many of our forward-looking clients have actually implemented this process and the overall improvements at all levels in the organization, both short-, medium- & long-term noted by managers and employees have resulted in a much more motivated, efficient, productive and professional group of employees.
Please feel free to contact the author if you require more information.
© Brownlee & Associates, Madrid, Spain, 2012. All rights reserved. This material may not be copied, translated or reproduced in any form without the prior written consent of Brownlee & Associates.