ROI of Training Programs

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An aproach to evaluate the return of investment of training programs

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  • Label c1, c3, c3,, etc
  • Incluir tablas de datos
  • Put the results in a Graphic Way
  • Put the results in a Graphic Way
  • ROI of Training Programs

    1. 1. EducationandResearchDepartment–InfosysMysore PresentedbyMiguelFernandez
    2. 2. Context Current Trend Motivation Need Objective of the Project ROI Fundamentals ROI Model – Forms & Formulas Project Scope Changes Learnings and Challenges Plans before and after ending Internship
    3. 3. Corporate have started investing in training programs to enable their employees with the required competencies to perform the job efficiently. Infosys Limited has established the largest corporate university at the Mysore Campus for training and development. 1 2
    4. 4. “The world is going to be too tough and competitors too ingenious as companies are shaken loose from traditional ways of conducting business. Therefore, the old principles no longer work in the age of Globalization” (Markovic, 2008) According to Begel (2008) in the software development IT industry “Employers recognize that students entering the workforce directly from university training often do not have the complete set of software development skills that they will need to be productive”.
    5. 5. “Most companies have failed the challenge of measuring the overall benefits after training”
    6. 6. “Estimate ROI on training programs to measure the overall benefits and help management in taking appropriate steps: optimize resource utilization and deciding on future investments”
    7. 7. Understand the given need and analyze the gap between the existing models Propose a model that is best suitable to address the need in hand and Justify it with sample data collected from the field. 1 2
    8. 8. “Return on Investment (ROI) is a measurement process of collecting and analyzing data before and after training programs to determine the benefits of the investment of such training within the corporation” The most widely known are Donald Kirkpatrick’s model and Dr. Jack Phillips models Variety of Authors and Models
    9. 9. Did they like it? Did they learn? Did they use it? Did it impact the bottom line? “Kirkpatrick Model does not Address the measurement of ROI”
    10. 10. Did they like it? Did they learn? Did they use it? Did it impact the bottom line? What is the return on the invesment? “Dr. Phillips Model measures ROI at one point of time”
    11. 11. “Measure net benefits through an incremental perspective overtime” Then, Incremental ROI comes into scene
    12. 12. “Measure Incremental Return on Investment overtime”
    13. 13. Training Increase Revenue Improves Competency Increase in Productivity Risk Reduction ROI
    14. 14. Input Training Program Infrastructure & Human Resource Investment Data Source – Budget Production No. of Trainees No. of Trainees No. of Trainees Exit Performance Revenue Generation Risk Reduction Return on Expectation Above Benchmark Benchmark Performance Below Benchmark Sitting on Bench Risk Reduction Performance 6 month period 12 month period evaluation Evaluation of L1 & L2 Evaluation of L3 & L4 L5:ROIEvaluation
    15. 15. ROI Forms Performance Revenue Generation Risk Reduction Return on Expectation
    16. 16. ROI Forms: This model involves the measure of ROI in four different forms: 1) Performance, 2) Revenue Generation, 3) Risk Reduction and 4) Return on Expectation Performance Revenue Generation Risk Reduction Return on Expectation
    17. 17. Performance The ROI form of Performance is percentage of employees creating value within a firm in terms of productivity, quality, cost and time after the process of competency building through a corporate training program. In short, it is the number of employees performing at the corporate benchmark. Performance
    18. 18. Revenue Generation The ROI form in terms of revenue is the monetary value of wealth created by the percentage of employees that are performing well according to the corporate benchmark. In short, it is the incremental revenue after training. Revenue Generation
    19. 19. Risk Reduction The multiple impacts of Training Programs reach the clients, which are more likely to be satisfied, repeat business and develop loyalty to the firm. Hence, positive impacts reduce significantly the risk of the business. Risk Reduction
    20. 20. Return on Expectation The ROI form of ROE is aimed to determine the correspondence between the Expected Results of corporate training program by the Stakeholders and the Outcomes provided by employees and supervisors. Return on expectation
    21. 21. 0 Revenue$ Productivity Training Cost Revenue Risk Total Training Cost On the job Training cost Risk%
    22. 22. 1) Employees are classified by Project Manager either as above benchmark, benchmark or below benchmark performers according to their behavior and results in production. 2) The first period of evaluation is 12 months after the completion of the training program. The second period of evaluation is 24 months after undergoing training. 3) It is assumed that “below benchmark performers” do not bring any benefit to the company, since they are performing the equally as people without any prior training Manager.
    23. 23. 1. Profits made without training must be compared with profits generated after training. 2. Revenue generation is only possible by benchmark and above benchmark Performers 3. Below benchmark performers do not bring revenue to the company since they are not demonstrating better performance that an untrained worker. Hence, Poor performers are equal to untrained employees and this they represent a cost based on their annual salary. 4. Revenue earned by employees at various levels of performance. Assuming that the earnings will vary depending on the level of performance of an employee.
    24. 24. Assessment of current ROI in Training programs Assessment of ROI in Training with Incremental Perspective
    25. 25. EducationandResearchDepartment–InfosysMysore PresentedbyMiguelFernandez
    26. 26. Recap and Phase 1 Methodology Phase 2 – Data Collection ROI Calculation Findings & Suggestions Statistics
    27. 27. Input Training Program Infrastructure & Human Resource Investment Data Source – Budget Production No. of Trainees No. of Trainees No. of Trainees Exit Performance Revenue Generation Risk Reduction Return on Expectation Above Benchmark Benchmark Performance Below Benchmark Sitting on Bench Risk Reduction Performance 6 month period 12 month period evaluation Evaluation of L1 & L2 Evaluation of L3 & L4 L5:ROIEvaluation
    28. 28. Input Training Program Infrastructure & Human Resource Investment Data Source – Budget Production No. of Trainees No. of Trainees No. of Trainees Exit Performance Outstanding Performers Above Benchmark Benchmark 6 month period 12 month period evaluation Evaluation of L1 & L2 Evaluation of L3 & L4 Below Benchmark
    29. 29. “Measure Incremental Return on Investment overtime”
    30. 30. • 6 Text Books on ROI (Kirkpatrick’s and Phillips) • 7 research papers on ROILiterature Survey • Questionnaire review by Project Managers and Instep Project Mentors • Questionnaire sent to 15 Project Managers Data Collection • Use of the ROI Model and Formulas • Different forms to Measure ROI for different Stakeholders. • Calculations are based on 2,500 trainees Evaluating results
    31. 31. Questionnaire was put online and the link was sent to Project Managers
    32. 32. Data was collected from Project Managers Inputs
    33. 33. Results were estimated using our ROI Model
    34. 34. Bassi, et al (1996) reported that 96% of companies he surveyed used some form of the Kirkpatrick framework to evaluate training and development programs. But, companies still short in their measurement efforts. In more detail McMurrer et al. (2000) surveyed the American Society for Training and Development Benchmarking Forum to determine what percentage each of Kirkpatrick's four levels is used in organizations. He found that Level 1 usage is 95%, Level 2 usage is 37%, Level 3 usage is 13% and Level 4 usage is only a roughly 3%. Level 1: 95% Level 2: 37% Level 3: 13% Level 4: 3% Twitchell et al. (2000) performed a meta- analysis of studies executed in the last 40 years. This research indicates ranges for the use of Kirkpatrick's four levels including 86- 100% for Level 1, 71-90% for Level 2, 43-83% for Level 3 and 21-49% for Level 4. Level 1: 86-100% Level 2: 71-90% Level 3: 43-83% Level 4: 21-49%
    35. 35. The incremental ROI of Performance change in percentage of employees performing at the corporate benchmark in terms of productivity, quality, cost and time after training. 1) Performance Benchmark is decided by PM’s. 2) Based on the level of competency and performance. 3) Maximum time to become fully productive is four months.
    36. 36. OP 0% AB 8% B 21% BB 71% Performance ROI Stage 1 – Without Training OP 8% AB 21% B 55% BB 16% Performance ROI Stage 2- With Training
    37. 37. Stage 1- Without Training % below the benchmark performance: 71 = 71% 8+21+55+16 Stage 2 -With Training % below the benchmark performance: 17 = 17% 8+21+55+16
    38. 38. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Without Training With Training 71% 17% 29% 83% Above Benchmark Below Benchmark ∆ ROI 54%
    39. 39. The incremental Revenue ROI form is the monetary revenue change caused by employees performing as an impact of the training program. 1) Different levels of performers earn singular revenues. 2) Different projects have singular earnings. 3) Below Benchmark performers earn $0 USD for the company
    40. 40. 1) Salary to Trainee 2) Salary to Educator 3) Infrastructure 4) Library 5) Computers 6) Software 7) Materials 8) Etc, etc. Others
    41. 41. Cost $ USD Time basis Salary $ 3,340 6 months Others $ 400 6 months *4 months $ 2,260 4 months Total Cost $ 6,000 /Trainee 6 months Total Cost $ 1,000 /Trainee 1 month *Refers to the assumption that 4 months after training are required to reach benchmark level of performance. Source: Education and Research Budget 2008-2009. Confidential
    42. 42. Source: DM’s and PM’s Performance level Earning Rate $USD Daily Earnings Monthly Earnings % People at performance level Monthly Earnings by performer level OP $ 27/Hr 8.5 Hrs Day = $ 230 22 Days Month $ 5,049 0 $ - AB $ 23/Hr = $ 191 $ 4,208 8 $ 33,660 B $ 21/Hr = $ 179 $ 3,927 21 $ 82,467 BB $ - /Hr = $ - 0 71 $ - Total Monthly Revenue Generation by 100 trainees $ 116,127 Conf ident ial Confide ntial
    43. 43. Source: DM’s and PM’s Performance level Earning Rate $USD Daily Earnings Montly Earnings % People at performance level Montly Earnings by performer level OP $ 27/Hr 8.5 Hrs Day = $ 230 22 Days Month $ 5,049 8 $ 40,392 AB $ 23/Hr = $ 191 $ 4,208 21 $ 88,358 B $ 21/Hr = $ 179 $ 3,927 55 $ 215,985 BB $ - /Hr = $ - 0 16 $ - Total Monthly Revenue $ 344,735 Conf ident ial Confide ntial
    44. 44. Revenue 1 - Cost 1 = ROI 1 Monthly Earnings % People at performance level Monthly Earnings by performer level Monthly Salary ($556) Net Benefit $ 5,049 0 $ - $ - $ 4,208 8 $ 33,660 $ 4,453 $ 29,207 $ 3,927 21 $ 82,467 $ 11,690 $ 70,777 $ - 71 $ - $ 39,523 $ (39,523) $ 116,127 - $ 55,667 = $ 60,460 Confident ial Confide ntial
    45. 45. Revenue 2 - Cost 2 = ROI 2 Monthly Earnings % People at performance level Monthly Earnings by performer level Total Training cost ($1000) Net Benefit $ 5,049 8 $ 40,392 $ 8,000 $ 32,392 $ 4,208 21 $ 88,358 $ 21,000 $ 67,358 $ 3,927 55 $ 215,985 $ 55,000 $ 160,985 $ - 16 $ - $ 16,000 $ (16,000) $ 344,735 - $ 100,000 = $ 244,735 Confident ial Confide ntial
    46. 46. 0 Revenue$ $xxxx $xxxxx Stage 1 ROI Stage 2 ROI Confidential
    47. 47. •The investment in Training have significant returns for the company in performance and revenue. •54% increase in the benchmark performance after training. •The Revenue ROI of the company after Training is about 407% •Training duration can be reduce for 8% of the workforce resulting in early release to production.
    48. 48. Improve Quality of intake Review and Update Training Content & Model Assesment Model Course Structure (CS) E-Learning Intern Model Strengthen soft skills
    49. 49. 1. Literature Survey: A. 110 hrs of literature survey B. 6 textbooks C. 4 authors D. 7 research papers E. 6 web based content 2. Data collection A. 7 Units B. 15 Projects C. Sample Space of 2,700 Software Engineers D. Period of Data 2008-2009
    50. 50. Dr. Sundaresan Krishnan Iyer – E&R Ms Meenakshi S – E&R MsAnooja Mary Jacob – E&R MiguelAngel Fernandez Delgado-MBAIntern
    51. 51. Questions and Answers
    52. 52. Low customer turnover Customer loyalty Continuity in relationship with customer High customer satisfaction Extensive training Employee satisfaction, positive service attitude Repeat emphasis on customer loyalty and retention Higher profit margins Broadened job designsLowered turnover, high service quality Above average wages Intensified selection effort Train, empower frontline personnel to control quality Source: Heskett and Schlesinger
    53. 53. Source: Lovelock and Wirtz 1. Hire the Right People 3. Motivate & Energize Your People 2. Enable Your People Be the preferred employer & compete for talent market share Intensify the selection process Empower Frontline Build high performance service delivery teams Extensive Training Utilize the full range of rewards Service Excellence & Productivity
    54. 54. NEWSChange Management

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