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Assessing the ROI of trainingpixel.gif (807 bytes)

pixel.gif (807 bytes) Forecasting and measuring benefits
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THE FINANCIAL BENEFITS of training can not be measured in terms of student reactions, nor the amount of learning that has been achieved; not even the extent to which behaviour may have changed. The real benefits come from improved performance – traditionally the hardest training outcome to forecast or measure.

So, what do we do when faced with this difficulty – back away and focus our evaluation efforts on easier measures? No, we do the very best we can, because all other measures fail to reflect the financial reality that training must pay off – in hard cash.

If it is any comfort, trainers are not alone in finding it difficult to calculate the benefits of what they do. Is it any easier to predict the benefits to be obtained from launching a new product, running an advertising campaign, initiating a research programme or changing the pay and benefits policy?

Let's look at the major categories of benefits. Note that these categories are not necessarily mutually exclusive - in some respects they provide alternative ways of looking at the same underlying benefit. Because of this, you should be extremely careful not to include the same basic benefit under more than one of these headings.

Labour savings
Labour savings occur where, as a result of the training, less effort is needed to achieve current levels of output. We have to assume that savings are realised by a reduction in the amount of labour applied to a particular job, not by utilising the newly available time to achieve further output on the same job.

Labour savings will only be realised if the labour applied to a job can really be reduced, whether this comes as a result of redundancies, transfers of staff to new positions or re-allocations of work. If the time savings simply result in more slack, then there is no saving.

Examples of labour savings include:

  • reduced duplication of effort
  • less time spent correcting mistakes
  • faster access to information

Productivity increases
Productivity increases occur where, as a result of training, additional output can be achieved with the same level of effort. This implies that the organisation requires or desires more output in this particular area. If it does not, then it might be better to express the benefit as a cost saving.

Examples of productivity increases include:

  • improved methodologies reducing the effort required
  • higher levels of skill leading to faster work
  • higher levels of motivation leading to increased effort

Other cost savings
Cost savings can be achieved in a variety of ways, not just through savings in labour, and this category allows you to take account of these. Examples include:

  • fewer machine breakdowns, resulting in lower maintenance costs
  • lower staff turnover, reflected in lower recruitment and training costs
  • a reduction in bad debts

Other income generation
In some job positions, it may be possible for new income to be generated as a direct result of training. Sometimes this can be satisfactorily recorded as a productivity increase, but there will be times when a more direct and specific analysis is required.

Make sure that you offset from the income any variable costs that are incurred as a result – it is the net contribution that you are looking for.

Examples of other income include:

  • a higher success rate in winning competitive pitches, leading to increased sales
  • sales referrals made by non-sales staff
  • new product ideas leading to successful product launches

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                                                     Fastrak Consulting Ltd, 1999. All rights reserved.                                   Last revised 4/2/99.