A Step By Step Approach to Determine Your Return on Training Investment

A Step By Step Approach to Determine Your Return on Training Investment

Calculate your return on a training investment (or the ROI of training) using the following steps.

1. DEFINE THE BUSINESS NEED

Whether it’s to orientate a new team member, to provide instruction on how to use a new computer system, or to support front-line leaders managing team performance, training is put in place to address a business need. Ask yourself:

• What is the business issue or challenge that you want to address?

A STEP-BY-STEP EXAMPLE 

1. A restaurant has recently introduced a more sophisticated and comprehensive wine list to appeal to a changing customer base. They are now facing challenges selling the new wines to their patrons.
2. The bartenders and servers know how to up-sell food items to their customers, but they don’t “know” wine. Training is the right solution.
3. The training needs to increase their basic knowledge of wines, and of the restaurant’s wine list.
4. A sommelier is brought in to conduct a customized in-house training on basic wine knowledge and specifically, knowledge of the restaurant’s wine list, including pairings, etc.
5. The success of the training will be measured using the wine sales figures.
6. One month following the training the wine sales figures improved. The sales were approximately $8,000 better than the month prior to the training. The total cost of the training (including the time of the sommelier and staff to create the training, time of the sommelier to deliver the training, cost of printed materials and wine, and time for staff to attend) was $5,500. After one month the return on investment is: Return on Investment = $8,000/$5,500 x 100% = 145%

2. DETERMINE IF TRAINING IS THE RIGHT SOLUTION

Training is often a typical response to address issues occurring in an organization or on a team, but training isn’t always the right solution. In order to achieve a positive return on your training investment, make sure that training is the right solution to the issue or challenge you are facing. Ask yourself:

• Do employees know how to perform the job? Do they know the product?
  • If they do, then training is likely not the best solution. Consider whether there’s a process that is out-of-date or needs to be improved, or if there is an issue of motivation.
  • If they don’t know how to perform the job or don’t know the product, then it’s likely a training issue. Move on to the next step.

3. DEFINE THE OUTCOMES FOR THE TRAINING

Think back to the business issue or challenge that the training is intended to address. Identify the outcomes that the training should accomplish, and make sure they are directly related to the business need that you identified in Step 1. Ask yourself:

• What will the training ultimately achieve? What will be the outcomes for attendees and for the business?

4. DESIGN THE TRAINING PROGRAM

Whether you’re designing and delivering the training in-house, using consultants to develop the program, or sending an individual or group of employees to an existing online or in-person course, you need to understand what type of training is compatible with your target audience and the outcomes you need to achieve. Ask yourself:

• What type of training will work with this target audience (one-on-one, classroom, online, etc.)?
• Is there an existing training program that will meet your requirements? Do you need to retain a consultant to customize the training for you?
• What is the general scope/length of training required (one-time, ongoing, 2-hour, half-day, full-day, etc.)?
  • For example, basic operational training may require as little as a half-day training module; to address larger knowledge and/or competency gaps it may be a much longer timeframe.
• What type of activities and experiences will enable attendees to implement their learning in the workplace (hands-on practice with equipment, role-plays, etc.)?
• What type of support is required after the training to make sure that new knowledge and skills are transferred into the workplace?

5. DEFINE YOUR METRICS

Look at the outcomes you identified in Step 3; determine how you will measure the success of the training program. For example, if hotel employees are consistently failing to correctly allocate loyalty points to customers because they don’t understand how to use the updated computer software, the hotel may provide training on this specific computer module. The intended outcome of the training would be to correctly allocate points through the loyalty system. The metrics to measure the success of the training could be: 1) time spent per week on making point adjustments and 2) time spent per week on addressing customer complaints regarding loyalty points. Ask yourself:

• What metrics are you already tracking that measure the outcome you are trying to achieve?
• Are there other metrics that you need to start measuring?
  • If so, take your first measure prior to training and use it as a benchmark.
• How do you track the metrics? How often will you track them?

TIPS FOR DEFINING YOUR METRICS 

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