Failing to measure training ROI in corporate education can lead to poor resource allocation, inefficient decision-making, a lack of strategic focus and missed opportunities for growth and success.
It is crucial for organizations to regularly evaluate the ROI of their initiatives to make informed decisions and optimize their investments, and training is no exception.
In this article, you will see a step by step to measure the efficiency of training initiatives in the organization, for a data-driven L&D program that will increase the strategic relevance of the area.
The benefits of measuring training ROI
“Always measure the effectiveness of your investments. Establish a set of KPIs to measure the results of your investments.” Jeff Bezos, Amazon founder
The obsession with the customer and with measuring KPIs (key performance indicators) is what the founder of Amazon mentions as foundations to explain the company’s success.
A survey conducted by Voxy with more than 350 Human Resources professionals found that only 11% of organizations measure ROI on training initiatives.
This shows that there is much to be done in order to provide a better basis for numbers in the L&D area.
Measuring training ROI enables organizations to:
- Assess training effectiveness
- Optimize resource allocation and justify training budgets
- Align training with organizational goals, driving continuous improvement
Step by Step to Measuring the ROI of Training and Development
Measuring the effectiveness of training starts well before the ROI calculation itself. See how to prepare the basis for measuring the return on investment in training.
Step 1: Benchmark and Planning (Before)
“A goal without a plan is just a wish” Antoine de Saint-Exupéry
The planning process can be done in 3 phases:
Skills gap assessment
Skill gaps should be known BEFORE investing in a training program. This will give us a broad vision of where we are and where we want to go, in order to align the actions that must be taken to achieve it.
Understanding current and desired competencies and skills seems basic, but at a recent Voxy event, we conducted a survey with HR professionals that showed that 23% of organizations don’t run a skills gap assessment prior to training initiatives.
Training goals
The impact that the training will have on the company must be clear and, based on that, short, medium and long-term objectives must be established.
Some examples of training goals are:
- Acquire work skills that can be very objective, like working with a new system, or broader skills like effective communication in the workplace.
- Knowledge acquisitions, to prepare the team for change in regulations, for example.
- Leadership development, to prepare the next generation of leaders.
- Compliance with ESG principles
This will allow you to measure the performance of the program, and make changes along the way if necessary.
Study plan
A study plan in corporate learning is a structured roadmap that outlines employees’ learning goals, timeline and the necessary resources.
It helps individuals pursue their professional development objectives in an organized and efficient manner, leading to enhanced skills, knowledge, and career growth.
It will help people to know what they must do to achieve the objectives established in the short, medium and long term.
Step 2: Metrics that Matter (During)
By leveraging metrics, organizations can enhance the overall impact and value of their training initiatives. Some metrics can be:
Utilization Percentages (Hours studied, courses completed, among others)
It is important to be able to measure the hours studied, courses completed, activities completed and other usage metrics to ensure that the KPIs established in our study plan are being met. If not, measures can be taken in time to ensure the results we are expecting.
NPS (Net Promoter Score) and satisfaction surveys
While the NPS is commonly associated with customer feedback, it can also be applied to corporate training programs to measure participant satisfaction and the likelihood of participants recommending the training to others.
In the context of corporate training, the NPS is calculated based on a single question: “On a scale of 0 to 10, how likely are you to recommend this training program to a colleague?”
Employee testimonials
Testimonials play an important role in corporate training by enhancing credibility, influencing decision making, demonstrating tangible benefits, fostering emotional connection and engagement.
Skills assessment tests
Especially for longer duration training programs, it is essential to conduct periodic tests to measure progress, such as a language training proficiency assessment conducted every 6 months.
Step 3: Calculating Training ROI (After)
What is ROI and how does it apply to corporate learning programs?
ROI stands for Return on Investment. It is a financial metric used to evaluate the profitability and efficiency of an investment or business initiative. ROI measures the return or gain on an investment relative to its cost.
For corporate learning plans, it works almost the same way, the difference is in how we measure the “Profit” factor, which will depend on the type of training and benefits obtained.
Some ways corporate training programs turn into gains for organizations:
- PRODUCTIVITY: When people work better and faster after a training program.
- TALENT RETENTION: When people stay longer in the company because of the learning opportunities.
- INTERNAL MOBILITY: When there’s a talent pool within the organization and employee potential is maximized.
Let’s see some simulations:
Example 1:
One company invested in a training program for its team of SDRs to identify better sales opportunities:
Opportunities opened before training program: $50,000
Opportunities opened after training program: $100,000
Profit: ($100,000 – $50,000)= $50,000
Investment: $20,000
ROI=(50,000 – $20,000)/($20,000) = 150%
Example 2:
A company invested in a time management and prioritization program for 100 employees. Productivity gains are measured either through surveys or performance evaluations.
Productivity increase: 8 hours per month, 96 hours per year
Cost per employee hour: $10
Profit: (96 x 10 x100)= $96,000
Investment: $20,000 USD
ROI=(96,000 – $20,000)/($20,000) = 380%
Real life case:
Now an example coming from one of our clients, a Canadian multinational banking and financial services company, with a program for 500 employees:
Other metrics tracked in the program to complement the ROI in assessing training efficiency:
- 91% remained active on the platform in the 12-month program
- 2h44 this is the average number of hours studied per student/month
- 86% of the students improve their level
- 42% completed 2 + proficiency assessments
ROI vs ROE in training programs
Although calculating ROI is a trend in the L&D area, this is not always going to be the best metric. There are situations where measuring the achievement of desired outcomes rather than purely financial returns is more important.
Return on Expectations (ROE) is a metric used to assess the effectiveness and impact of training programs or initiatives based on the expected outcomes or objectives set prior to the training.
Good planning and design of the program will allow you to measure both.
Step 3: Communication plan
When communicating corporate training results to stakeholders, it is important to provide clear and concise information that demonstrates the value and impact of the training program.
According to the Linkedin Learning Report, 41% of L&D professionals expect a higher budget allocation for training in the next few years, so demonstrating ROI and proactively communicating the impact of L&D initiatives to stakeholders is what will solidify L&D’s presence in the future.
The communication process can be done periodically throughout the program, such as:
- Regular business reviews, if the training program lasts 1 year, do it every quarter.
- Final executive review (annual business review), to demonstrate the ROI and ROE of our corporate learning programs.
Best Practices to Accelerate Program ROI
- Dedication to the planning and design phase of the program already represents half of the success of the program.
- Properly identify the skill gaps that exist in your teams and the ultimate goal you want to achieve by implementing a training plan.
- When you are creating your goals, use the SMART methodology. Objectives must be Specific, Measurable, Achievable, Realistic, and Time-bound.
- Every program must have a person in charge, within the company, of monitoring the progress of the people enrolled and results. Without a “Champion or Sponsor” within the company, it will be difficult to achieve a positive ROI.
- Take action in time if any of the metrics is below the desired, follow the instructions of your training provider to improve these metrics.
