cedma toolset 2004

2/5/2004 CEdMA Europe

CEdMA Toolset 2004

ROI in Training

Norman BuckberryChairman CEdMA Europe

www.cedma-europe.org

http://www.cedma-europe.org/


ROI Contents

• Purpose of ROI, and Value of training

• What is ROI

• Why ROI

• Methodology

• Toolkit


The Value of Training

• Training consumes resources, but:• It is critical to maximising the value gained from an IT project

• It adds value throughout the lifecycle of any IT investment

• Training needs to be included early in the decision making cycle if it is to be really successful

• ROI techniques can be used to help you to:• understand and justify the need to invest properly and comprehensively

in training

• present the comparative benefits of different approaches to training


The Value of Human Capital

• We all know Human Capital (and its development) is vital

• Human Capital is often much undervalued as an investment opportunity

• ROI can be very high• Phillips refers to 800% being achievable regularly

• Tennessee Valley authority claim 1000%+

• A world-class corporate university claimed 5,612%


Inhibitors to ROI measurement

• Typical inhibitors to carrying out an ROI exercise• Fear of a negative ROI, and the implications this might entail• Reluctance to commit the necessary budget to carrying out the

exercise• The fact that this process takes time, and only really demonstrates

results some months, or even longer, after the completion of the training

• But ROI measurement can provide some valuable returns• Measuring contribution of HRD• Setting priorities• Focusing on results• Altering management’s appreciation and perceptions of training


“ROI on Upgrade” example

• ROI comes from a number of sources during a typical upgrade exercise:• The user and the organisation increase productivity purely from use

of new and enhanced functionality in the hardware and software or better performance of the application or system.

• Reducing as much as possible the time taken to achieve these benefits, and achieving further increases in productivity due to training on the use of the new functionality (compared to the productivity the users might experience without the training).

• Avoiding or minimising a negative productivity impact due to the typical decrease in productivity during the early days or weeks of using new software (as people have to learn new and changed facilities in order to regain their previous level of performance)


Why ROI?

• Pressure on training functions to show demonstrable return• Value for money from training activity• Value of HRD to the business; e.g.

• Financial benefits• Staff productivity• Staff retention

• Clear alignment with corporate goals• In-house vs outsourced training

• ROI analysis is a tool to support the contention that training is valuable; demonstrate benefits vs cost

• Pressure to reduce costs must be balanced by visibility of benefit

• “Warm and fuzzy” is no longer any good! (in most cases)• Jay Cross alternative view


ROI as Process

• Use evaluation techniques to acquire performance data

• Use Training Needs Analysis to direct the project to the right data

• Use analytical techniques to calculate ROI from the data

• Use ROI results to review training effectiveness

• Use the reviews to inform future decisions


ROI as Perception

• Which of these perceptions indicate your client’s view of ROI (which you need to address)?• The Board may see a big picture of how the training affects the company’s

ability to achieve its corporate goals

• The finance department may be looking to see how training stacks up financially against other ways to invest the company’s money, and whether the training, as carried out, was financially more effective than alternative forms of development

• The business unit manager may be solely concerned with the impact on performance and productivity in achieving the goals of their department

• The training and development manager may be concerned with the impact training programmes are having on the credibility and status as the training function within the company and its ability to secure investment in the future to drive further business performance enhancements


What is ROI?

•Elements of “Total ROI”•Reducing costs

•Increasing benefits/performance/capability

•Use of ROI•ROI of a training project’s contribution to business or project

•ROI of one delivery method vs. another (e.g. ILT vs. e-learning)

•Role of ROI•Pre-training assessment and expectation setting

•Post-training feedback

•Post-experience value measurement


The Process Model

•Based on Kirkpatrick’s evaluation levels•Modified by Phillips

•Training Evaluation and data analysis

1: Measure reaction &identify planned actions

Immediate reaction and response

2: Cognitive learning and retention

Skills, knowledge, attitude changes

3: Assessing application of learning to the job

Actual change in behaviour

4: Identifying business results Quantify business value of change

5: Calculating ROI Compare monetary value with costs


Criteria for effective ROI measurement• The ROI measurement must be simple and easily understandable.• The ROI process must be economical to implement.• The assumptions, methodology and techniques must be credible,

logical, methodical and practical.• The ROI process must be theoretically sound, without being over-

complex. • The ROI process must account for other factors, which can influence

the measured outcomes after training.• The ROI process must be appropriate in the context of other HRD

programs.• The ROI process must be flexible enough to be applied pre and post

training.• The ROI process must be applicable with all types of data collected.• The ROI process must include the costs of the training and

measurement program.


Getting Started

•Select your project to measure

•Select a significant project; align with significant goals

•Start with a project that has clearly definable metrics

•ROI measurement Plan

•Data Collection Plan

•Identify the “returns”

•Identify the investment factors

•Select the survey audiences and sources of data

•Select your data collection methods

•Analysis Plan


Identifying Returns

• Cost savings (reductions in costs incurred for a given result)

• Cost savings (business benefits from time saved and resources redeployed)

• New opportunities made possible

• Benefits can be hard to quantify (but these are often the most valuable• Competitive advantage

• Improved customer satisfaction

• Company image


Investment Factors

• Costs incurred• Payments to suppliers and service providers

• Time and attention to create and deliver the training

• Opportunity cost

• Time and costs involved in the ROI measurement exercise

• Other Internal costs


Process Summary – Data Collection Plan

•Data collected at different times to provide:•Pre-training baseline•Post-training change analysis•Post-experience change analysis

•Data Collection Plan•State the objectives of the training / learning•State the objectives of each phase of data collection at each

evaluation Level•Identify any previously used metrics, values or methodologies used

by the client, and determine suitability for the current exercise•Select the appropriate evaluation methods•Identify the audiences who will be surveyed for data•Set the timing for the data collection•Allocate responsibilities for data collection and analysis


Process Summary – ROI Analysis Plan

• Continuation of the Data Collection Plan, capturing information on the key items needed to develop the actual ROI calculation.• List Significant Data items (usually Level 4 or 3) to be collected

• Benefit Factors• Cost Factors

• Methods to isolate effects of the learning/training from other influences

• Methods to convert data to numerical values• Intangible benefits• Other influences• Communication targets


Process Summary – Data Collection

• Identify the purposes of the evaluation. • State clearly what the evaluations are to measure and what the

goals of the training are intended to be. • Be as specific as possible about the goals of the training• Ensure goals address the performance enhancement, business

improvement or cost savings expectations.

• Select the evaluation instruments and methodology. • Establish the timing for the data collection.

• Decide whether pre-training analysis is required, or post training analysis, or both. (e.g. pre-training and multiple post-training assessments may be necessary to effectively identify the skills changes in Levels 2, 3 and 4.)

• Carry out the data collection at the levels 1-4


Process Summary – Sources of Data

• Organisational Performance Records, showing outputs and measurements taken as part of the business’ normal reporting process

• Testing and certification assessment records

• Participant feedback

• Instructor feedback

• Feedback from participants’ supervisors/managers

• Feedback from participants’ subordinates

• Team/group peer feedback

• Feedback from other internal or external groups (eg HR training departments)


Process Summary – Evaluation Methods

• Identify how the data will be collected and analysed

• Surveys

• On the job Observation

• Interviews

• Focus groups

• Action plans (or Performance contracts) and Program assignments

• Performance data monitoring


Process Summary – Isolate effects of training

• Separate training (personal productivity) component of performance change, from new software/systems/processes

• Essential for credibility

• Potential methods

• Use control groups

• Impact assessments and estimates by participants, managers, peers

• Trend lines

• Discount/adjust for over-estimates

• Apply “inflation adjustment” for estimates and assessments


Process Summary – Convert to money

• Convert data to monetary value• Specific costs and time incurred

• Costs and time saved

• Quality increase, reduced waste

• Improved customer service and satisfaction

• “Intangible” benefits (retention, commitment, fewer complaints, reduced conflicts etc)


Process Summary - ROI

• Calculate ROI• Benefit-cost ratio= Program Benefits

Program Costs

• ROI % = Net Program Benefits

Program Costs x 100

• Break-even time = Investment

Benefit x Period in months


ROI Tools

•ROI Overview and process summary

•Powerpoint presentation

•ROI calculator

•Worksheets

cedma toolset 2004

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