One of the most important, and sometimes overlooked pieces to planning your annual training and development budget is taking a close look at Return On Investment. This can be a challenge if a company has no previous data and no sound methodology for tracking ROI on these types of expenses. Many companies try to gather information but what they’re tracking isn’t giving leadership a full picture of results.
Try this recommended process to implement a new standardized system for tracking the correct ROI information that provides rich qualitative and quantitative data. With the right data, you can effectively decide which initiatives are worth continuing, and which ones aren’t working. An astute tracking process reassures budget approvers of your financial conscientiousness. And because you’re spending more money on the training and development initiatives that make the biggest difference, over time your programs become sharper, insanely effective and highly praised by team members and upper management.
So where do you start for that kind of awe-inspiring data?
Get clear on your cost per person.
Partner with training firms and training material providers that can provide transparent, accurate pricing which can help you to determine the overall training costs. CFOs appreciate accuracy and transparent financial information. Assuming (1) you can point to quantitative output improvements that help to meet the company’s financial goals, and (2) your budget falls somewhere close to the national average (11%) for percentage of operating budget allocated to training, then your accurate cost estimates will strengthen the case for your training and development plans, not weaken it.
Air on the side of full disclosure with plenty of data to support the upside. Establish your benchmark now. You’ve got to be able to pin-point your baseline costs from which to measure future benefit correlations for potential cost increases. Then make sure your training components include expert coaching and consulting to maximize efficiency, especially for your highest-paid team members.
Conduct surveys after training programs to collect participant feedback on intangibles like whether participants believe the program was relevant. Or what participants might need in order to get more from the training. You can also conduct surveys throughout the program’s implementation to capture the pulse of participants’ buy-in to the content or the likelihood that they will use what they’ve learned on a regular basis.
Assessments are great for gathering information on expected behavioral change. Assessments can test how much employees actually learned and how much they’re able to process the new information they’ve retained into real job-related situations. Simulations and role-playing can also provide evidence of learning and new insights that employees have acquired.
Get 360-degree feedback.
This feedback gauges how, and how much employees are applying what they learned to their jobs. 360-degree feedback is best collected at least 9 months after training has taken place, especially if the individual is gathering some on-the-job experience or going through an extensive training phase. You’ll want to give the employee time to evolve and for those changes to take effect.
Measure productivity improvement.
What impact did the program have on the business? Look for quantifiable improvements in terms of product or service output, quality, costs, time, customer satisfaction and innovation. All of these factors impact the company’s bottom line and can be measured by standardized methods.
Additionally, employee retention figures and whether participants were promoted are both factors impacting human capital expenses and material return on investment.
Make sure to measure based on what type of training is being offered and what areas of your business it’s designed to impact. If the training is intended to teach a new, more proficient, way to onboard and prepare new hires, for example, your baseline criteria to measure against is how long it takes the average employee to reach acceptable performance capacity.
Take measurements and collect metrics before any training occurs to establish your baseline for improvement. If it took six weeks for a new hire to become fully up to speed prior to the training, and only 3 weeks after the training’s completion you can compare the difference that cutting three weeks off the onboarding process made. Account for the cost to train in the new employee’s salary plus allocated training resources. Always frame the data so that it demonstrates the value of your investment with respect to increased productivity. Those numbers are vital to show your higher-ups.
Highlight the intangibles.
Rest assured, if improvements happen in terms of teamwork, inclusion, job satisfaction, morale, and innovation, which are directly linked to leadership development, the value will be seen across the organization. There are a few ways you can quantify intangibles like those mentioned. Retention numbers, promotions, instances of voluntary team project participation, diverse workforce representation, instances of documented disciplinary actions, employee survey ratings, positive mentions on social media and job board ratings are some areas from which to gather numerical baselines for continued evaluation.
Now that you know what to include in your ROI evaluation, why not get started on building the baseline data in all the areas discussed? Accurate data and feedback powers the most impactful training and development initiatives and ultimately drives your company’s workforce toward excellence.