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Running training like a business

How to better demonstrate training ROI and get closer to speaking the C-level language

When you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.

Lord Kelvin

Over the last several years, the pressure on training and development managers has increased dramatically. As competition gets tougher, board members need training and development systems that demonstrate  quantifiable increases in productivity, that help people learn and change more quickly than ever before, and that increase engagement while creating an emotional connection and sense of belonging.

The demand to prove results initially caused confusion in the HR community, whose members believed that their activities should primarily involve their right brain, rather than their analytical left brain.  HR managers could previously walk into board meetings without being able to prove how and why money was spent or what results were produced. They just demanded bigger budgets and often blamed their poor results on external factors and lack of sufficient resources.

Now, the emphasis is generally placed on the value generated for the company rather than on the specific activities necessary to increase performance. Training and development managers are faced with the task of proving the results of their work. They must shift focus from spending their budgets to demonstrating return on investment (ROI), increasing their accountability, and learning new skills to measure and demonstrate results.

Despite its importance, training measurement is little understood in many organizations, and training and development managers often fail to develop a measurable and realistic methodology.

Some common mistakes in measurement:

1. Using unrealistic numbers

Not long ago we had a meeting with an HR director who stated that the ROI on training exceeded 600%. This happened during the 2009 crisis when the same company was struggling with their return on equity (ROE) dipping below 9%. The other board members laughed and one of them sarcastically remarked that the company should shift from its main business to providing training. Needless to say, the HR director was fired soon after.

2. Failing to make a distinction between data and information

Another common mistake is trying to over-measure, then overloading other managers with tons of indicators without describing their business impact. Instead, measurement should answer important and relevant business questions.

3. Measuring activity and not productivity

According to our recent global survey (at the end of 2010), less than 8% of companies have a training ROI measurement system that is linked with business value and balanced scorecard (known also as Kirkpatrick’s Level 4 of evaluation). The remaining 92% of the companies barely even measure such things as number of participants, their perception of the event, and what new information they learned.

Training costs money, but then again so does ignorance.

Company objectives

Learning strategies

Learning solutions

Sample measures

What do the top managers want to achieve?

How can the training department help?

What specific means will be used?

How will success be measured?

Sustainable growth

Increased profitability

Engaged employees

Loyal customers

Effective leaders

Sales growth

Create a common vision

Manage change effectively

Improve communication

Optimize processes

Better manage projects

Retain customers

Improve teamwork and alignment

Empower employees

Retain talent

Create standards for performance appraisal

Create better leaders

Improve planning

On-the-job training

Classroom training

Executive retreats

E-learning

Training transfer tools

Conferences and seminars

Measurement tools

Coaching

Corporate universities

Training share

Unit share

Loyalty

Likability

Satisfaction

Average price per learner

Hours of training per employee

Turnover

% of jobs filled from within

 

Where are you?

According to Silega’s World Learning Overview (WLO), there was a clear distinction between low- and high-performing companies*

Sample measure

Description

Low-performing companies

High-performing companies

Training share

% of employees that are part of a regular and standardized learning program

18%

64%

Training hours per new employee

Training hours per year

24

136

Training hours per experienced employee

Training hours per year

16

86

Loyalty

How willing are employees to leave and under what circumstances (1 – actively looking for opportunities, 10 – would resist a very attractive offer from competitors)

4.3

7.9

Satisfaction

% of satisfied employees from current training programs who are willing to participate in future initiatives

38%

91%

Average investment per learner

The average cost of training an employee per year (USD)

320

2720

Capacity utilization

Average training attendance in %

46%

82%

Program measurement

% of learning programs measured at some of Kirkpatrick’s levels

12%

94%

Internal talent pool

% of jobs filled from within

39%

63%

Alignment

% of employees who understand how their job contributes to the company’s mission

31%

78%

Turnover

% of total headcount per year

33%

18%

* based on average annual growth over the last 5 years.