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Determining Training Return-on-Investment (ROI)

Training ROI is important for company management to determine if training investments are worthwhile. ROI is calculated by defining training goals and costs, measuring returns through increased productivity, reduced waste, and improved retention, and comparing returns to costs. Specific, measurable goals like reducing accident rates allow accurate ROI analysis through before-and-after comparisons.

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231 views5 pages

Determining Training Return-on-Investment (ROI)

Training ROI is important for company management to determine if training investments are worthwhile. ROI is calculated by defining training goals and costs, measuring returns through increased productivity, reduced waste, and improved retention, and comparing returns to costs. Specific, measurable goals like reducing accident rates allow accurate ROI analysis through before-and-after comparisons.

Uploaded by

praswa
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Determining Training Return-on-Investment

(ROI)
Company management wants to know that the money they are
spending on training is well spent. They want to know that they are
getting a sufficient return on their training investment (ROI).
Improvement factors include increased productivity, reduction of
waste, and improved employee retention.
Measurement of training ROI starts with defining the reasons and
goals for the training, determining how much the training costs, and
verifying the amount of return.

Questions you may have include:


What is the reason for the training?
What is the investment in training?
How is the return measured?
Measuring the ROI

 The greatest factor in measuring the return-on-investment for


training is the definition of what the training is to achieve.
Measuring the amount of money generated by a group before
and after the training, and then comparing that improvement
with the cost of the training is the way to measure the ROI.
 If no measurable goals
 Having specific goals
 For example, safety training has a specific goal of reducing
the accident rate. Statistics can be made that will verify the
effectiveness of such training.
 ROI is a key financial metric of the value of
training investments and costs. It is a ratio
of net benefits to costs, expressed as a
percentage.
The formula can be expressed as:
[(monetary benefits – cost of the
training) / cost of the training] x 100
To calculate return on investment (ROI),
follow these steps:

2. Identify outcome(s) (e.g., quality, accidents)


3. Place a value on the outcome(s)
4. Determine the change in performance after
eliminating other potential influences on
training results.
5. Obtain an annual amount of benefits
(operational results) from training by
comparing results after training to results
before training (in rupees)
To calculate return on investment (ROI),
follow these steps: (continued)
 Determine training costs (direct costs +
indirect costs + development costs +
overhead costs + compensation for trainees)
 Calculate the total savings by subtracting the
training costs from benefits (operational
results)
 Calculate the ROI by dividing benefits
(operational results) by costs.
 The ROI gives you an estimate of the return
expected from invested in training.

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