ROI training 98
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ROI training 98



This is one approach in calculating the return of investment in training activities. ...

This is one approach in calculating the return of investment in training activities.

The nets benefits are calculated based on before and after training performance.

Calculating the costs of training is a matter of accumulating costs incurred on the relevant training activities.



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ROI training 98 ROI training 98 Presentation Transcript

  • Arriffin Mansor 1
  •  Why ROI Identify a feasible ROI Process Use ROI to measure the effectiveness of training 2
  •  Training budgets are increasing ROI is the ultimate level of evaluation Competitive pressures on costs and productivity Top executives are requiring ROI information 3
  •  Commitment of Training Expenditure as a Percentage of Payroll: ◦ US – 1% - 4% of Payroll ◦ Europe – 2.5% to 3% of Payroll ◦ Asia – 4% to 8% of Payroll 4
  • Importance : 5 – Critically important and 1 is Unimportant Level of Level of Agreement ImportanceAgreement with Trend: 5 – Very much progress and 1 – No progress1. Training Costs are monitored more accurately to manage 3.92 4.83 resources and demonstrate accountability2. Measuring the return on investment in training is growing in 4.02 4.71 use3. Systematic evaluation processes measure the success of 4.57 4.69 training4. Needs assessment and analysis is receiving more emphasis 3.76 4.645. Training staff and line management are forming partnerships 3.95 4.57 to achieve common goals6. Training is linked to strategic direction of the organisation 3.96 4.487. The learning organisation concept is being adopted. 4.09 4.478. Training delivery is changing rapidly 4.26 4.399. Training is shifting to a performance improvement role 4.25 4.3710. The technology of training is developing rapidly. 4.68 4.32 5
  •  ROI measures the contribution of a program/ solution designed in relation to the costs or capital involved ROI = Value of Benefits – Cost of Training Cost of Training 6
  •  Balanced Scorecard (Drs Kaplan and Norton), Kirkpatrick Four-Level Framework (Kirkpatrick, 1975), Jack Phillips’s Five Levels of Evaluation 7
  •  Balanced Scorecard (BSC) is a management framework used for implementing organisational strategy by linking the objectives, initiatives and measures of a business. It integrates traditional financial measures with other key performance indicators including customer perspectives, internal business processes and organisational development and innovation. 8
  •  Level 1 Reaction Evaluation Level 2 Learning Evaluation Level 3 Transfer of Learning Evaluation Level 4 Results Evaluation This model is also adopted by Singapore Skills Development Fund (SDF) for companies’ Training Effectiveness Reports to SDF for funding purposes. 9
  • Level Measurement Focus1. Reaction & Measures participant satisfaction with Planned Action the program and captures planned actions.2. Learning Measures changes in knowledge, skills and attitudes.3. Application Measures changes in on- the-job behavior.4. Business Impact Measures changes in business impact variables – any measurable results?5. Return on Compares program benefits to the costs Investment 10
  •  Singapore Airlines Singapore Technology Motorola Compaq Companies who submit to SDF for funding 11
  •  Improve program/Process Discontinue/Expand Programs Approve projects (If Pilot) Rank projects Like a front end analysis – to decide whether worthwhile to proceed on the training project. Develop Data Base of Program Results Inform/Educate Management Inform/Educate target Groups Build Skills with Staff 12
  • Evaluation Purposes Tabulating Evaluation ProgramInstruments Costs Converting Collecting Isolating the Data to CalculatingPost Program Effects of Monetary the Return on Data the Program Value Investment Significant InfluencesEvaluating Policy Statement Identifying Timing Procedures & Guidelines Intangible Staff Skills Benefits Management Support Evaluating Technical Support Levels Organisational Culture 13
  •  Interactive Selling Skills – 3 days course, 48 participants Retail Merchandise Company You may want to pay attention – you will be tested on your understanding! – Level 2 Evaluation 14
  • Surveys, Performance records If management don’t Evaluation believe in it – don’t do it Instruments Evaluation Purposes Tabulating Program Costs*Performance Monitoring*Questionnaire Increased Sales/Profits*Follow-up Session Converting Collecting Isolating the Data to Calculating Post Program Effects of Monetary the Return on Data the Program Value Investment Control Groups Significant Influences Evaluating Policy Statement Identifying Timing Procedures & Guidelines Intangible Staff Skills BenefitsQuestionnaire Management Support-3 mths later Evaluating Technical Support Levels Organisational Culture 15
  •  Selected Data: ◦ Success with Objectives 4.3 ◦ Relevance of Material 4.4 ◦ Usefulness of Program 4.5 ◦ Exercises/Skill Practices 3.9 ◦ Overall Instructor Skill 4.1 16
  •  All Participants Demonstrated That They Could Use The Skills Successfully 17
  •  Selected Data: Strongly Agree Neither Disagree Strongly Agree Agree/ Disagree DisagreeI utilise the 78% 22% 0% 0% 0%Skills taughtIn the program With Each Every Several At Least At Least customer 3rd Times Once Daily Once customer each day WeeklyFrequency ofUse of skills 52% 26% 18% 4% 0% 18
  •  Post Training DataWeeks After Training Training Groups Control Groups1 $9,723 $9,6982 $9,978 $9,7203 $10,424 $9,81213 $13,690 $11,57214 $11,491 $9,68315 $11,044 $10,092Average for Weeks $12,075 $10,44913, 14, 15 19
  •  46 participants were still in job after 3 months Ave Wkly Sales ◦ Trained Groups $12,075 ◦ Untrained Groups $10,449 Increase $1,626 Profit Contribution 2% $32.50 Total Weekly Improvement (x46) $1,495 Total Annual benefits (x48wks) $71,760 20
  •  48 participants in 3 courses Facilitation Fees: 3 courses @ $3750 $11,250 Program Materials: 48 @ $35/ppt $1,680 Meals/Refreshments: 3 days @$28/ppt $4,032 Facilities: 9 days @ $120 $1,080 Participants Salaries Plus Benefits’ (35%) $12,442 Coordination/Evaluation $2,500 Total Costs $32,984 21
  • ROI =(Value of benefits –cost of training)/Cost of trainingBenefit Cost Ratio 71,760 = 2.2:1 32,984ROI (%) = 38,776 = 118% 32,984 22
  • Evaluation Purposes Tabulating Evaluation ProgramInstruments Costs Converting Collecting Isolating the Data to CalculatingPost Program Effects of Monetary the Return on Data the Program Value InvestmentEvaluating Significant Influences Identifying Timing Policy Statement Intangible Procedures & Guidelines Benefits Evaluating Staff Skills Levels Management Support Technical Support Organisational Culture 23
  •  Time spent on ROI Cost of conducting the measurement Complexity of variables in ROI Accuracy in measurements Credibility Lack of Skills to measure If staff does not see the need for ROI, it will usually fail Without support from management, ROI process will usually fail. 24
  • No need to evaluate all courses.Egs of courses to be evaluated:Level % Courses4. Participant satisfaction 100%5. Learning 70%6. On-the-job Applications 50%7. Results 10%8. Return on Investment 5% 25
  • • Coca Cola – 8 half-day on supervisory skills workshops – 1447% ROI, Benefit/Cost Ratio 15:1• Yellow Freight System – Performance Appraisal Course – 1115% ROI, Benefit/Coast ratio 12:1• Litton Industries (Avionics) – Self Directed Work Team course – Productivity increased 30%, Scrap rate reduction 50%, 700% ROI• Multi-Marques, Inc (Bakery) – 15 hr Supervisory Skills Training – 215% ROI, Benefit/Cost Ratio 3.2:1 26
  •  Let’s discuss 27
  • Management Budget Cuts Wants to see (No Results) ..And the results Cycle Continues Budget Levels Off Minimum Budget TrainingRenewed increase Levelinterest Renewed Interest in Training 28
  •  A Training Executive met up with an Instructional Designer to discuss about the design of an e-learning programme for 5000 participants worldwide. This is the first time that the company would be using e-learning. The initial investment in the training is huge. The CEO is very excited about the programme and has high expectations of this training. The Training Executive suggested to forecast/measure the ROI. As an instructional designer, would you consider the suggestion by the Training Executive? Why? As the Training Executive, what would you like to achieve from measuring ROI? 29
  •  Cost of Technology - Initial cost of implementing e-learning Newness of e-learning (is it effective & efficient as F2F learning?) E-learning is not a proven process in many organisation – need to show value now than later 30
  •  In many e-learning projects, the client wants to know the projected payback from the project. To venture into the expensive development process without having some sense of the payback is undesired by many clients. Consequently, there is tremendous pressure to forecast ROI even if it is not very accurate. 31
  •  A major consulting firm ◦ CBT course for 7000 consultants in 50 countries. Cost of CBT training program = $106/student. Previous F2F program cost is $760/student. Life of program was 5 years & savings = $4.5m ◦ What does this means to U?  When requesting monetary investment for e-learning, be prepared to evaluate effectiveness  Conduct cost-benefits analysis to assess cost savings for organisation 32
  •  Based on interviews with 300 managers in UK ◦ Managers discouraged staff from CBT ◦ Managers recognised potential benefits of CBT ◦ 44% were unsure where CBT was less expensive than classroom training ◦ 66% felt CBT would isolate staff ◦ What does this means to U?  Evaluate e-learning to get management support  Determine whether e-learning meet organisational efforts & the identified needs 33
  •  Based on Yr 2000 ASTD State if the Industry Report (USA) ◦ Projections for 2001 – significant majority of organisations expect to be using multimedia (91%), CD-ROM (87%), CBT (81%) and intranets (77%) ◦ What does this mean to U?  ROI will provide data to help you decide to continue to stop existing training programmes  ROI will help you to obtain support from the “bean counters” 34
  •  Isolate the effects by getting before and after training performance data. Performance data of with and without training groups 35
  •  Identify key output for the job to be analyzed Identify the input variable for the output with cause effect relationship Compute the KPI by dividing output with the input. It is a ratio. Obtain before and targeted KPIs and insert the actual KPIs in the diagram. Separate the value of the output based on volume and efficiency. 36
  • Example of input output dimension for Sales• Output is net profits in a week RM20,000• Input is weekly sales figure RM100,000• The KPI is 0.20 profit per ringgit sales or return on sales• Insert the previous performance KPI which may be 0.15 profit per ringgit sales• The performance gap between the old and the new position. 37
  •  After Profit 0.20 x 100,000 = 20,000 Before Profit 0.15 x 100,000 = 15,000 Performance Improvement = 5,000 Efficiency improvement Volume improvement 38
  • 39
  •  Increase production units Increase value of sales Cost savings ◦ Less wastage ◦ Less time ◦ Less labour ◦ Less materials ◦ Less overheads 40
  •  Costs of Trainers Opportunity costs of trainees Designing and Planning costs of training program Administration cost of training softwares 41
  •  Calculate the total cost of training or intervention Identify the input and output variable that determine performance. The relationship must be meaningful which has high cause effect relationship Isolate the impact of training with the following test, with and without, before and after. 42