21372659 Measuring ROI of Training

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MeasuringROI of

Training


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presentations on HR management and

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Agenda

1. Measuring the Effectiveness of Training

Program

2. Measuring Return on Investment of Training

3. Enhancing the Effectiveness and ROI of

Training


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Measuring the Effectiveness of

Training Program


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TrainingNeedAnalysis

TrainingObjectives

TrainingDelivery

TrainingEvaluation

Training Process

What are

the training

needs forthis person

and/or job?

Objective

should be

measurableand

observable

Techniques

include on-

the-job-training,

action

learning, etc.

Measure

reaction,

learning,behavior,

and results


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The Four Levels of Evaluation

Level 1 - Reaction

Level 2 - Learning

Level 3 Behavior

Application

Level 4 Business

Impact

Four Levelsof Training

Effectiveness


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Test the trainees to determine if

they learned the principles,

skills, and facts they were to

learn.

Evaluate trainees reactions to

the program. Did they like the

program? Did they think it

worthwhile?

Level 1 -

Reaction

Level 2 -

Learning




What final results were achieved in terms of the

training objectives previously set? Did the numberof customer complaints about employee drop? Did

the reject rate improve? Was turnover reduced,

and so forth.

Ask whether the trainees behavior on the job

changed because of the training program. For

example, are employees in the stores complaint

department more courteous toward disgruntled

customers than previously?

Level 3

Behavior

Application

Level 4

BusinessImpact




Value ofInformation

Frequency ofUse

Difficulty ofAssessment

Level

I. Reaction

II. Learning

III. Behavior

IV. Results


Least

valuable

Mostvaluable

Frequent

Infrequent

Easy

Difficult



Level 1 - Reaction

Evaluate trainees

reactions to the program:

Did they like the program?Did they like the

facilitators?

Did they like the training

accommodation and

facilities?

Level 1 -Reaction



Guidelines for Evaluating Reaction

1. Determine what you want to find out

2. Design a form that will quantify reactions

3. Encourage written comments and suggestions

4. Get 100 percent immediate response

5. Get honest response

6. Develop acceptable standards

7. Measure reactions against standards, and take

appropriate action

8. Communicate reaction as appropriate



Please give us your frank reactions and comments. They will help us to evaluate

this program and improve future programs.

Program :

Facilitator :

1. How do you rate the subject (interest, benefit, etc)

a. Excellent

b. Very Good

c. Good

d. Fair

e. Poor

2. How do you rate the facilitator? (knowledge, ability to deliver and communicate?)

a. Excellent

b. Very Goodc. Good

d. Fair

e. Poor

3. How do you rate the facilities? (comfort, convinience, etc)

a. Excellent

b. Very Good

c. Good

d. Fair

e. Poor

4. What would have improved the program?

Sample ofReaction

Form



Level 2 - Learning

Measuring learning means

determining one or more of

the following :

What knowledge was

learned?

What skills were

developed or improved?

What attitudes were

changed?

Level 2 -Learning



Guidelines for Evaluating Learning

1. Use a control group if practical

2. Evaluate knowledge, skills and/or attitudes both

before and after the program

3. Use a paper-and-pencil test to measure knowledge

4. Use a performance test to measure skills

5. Get 100 percent immediate response

6. Use the results of evaluation to take appropriate

action




Experimental Group Control Group

Pre Test Score 45 46Post Test Score 55 48

Gain 10 2

Pretest and Posttest Scores on Change Management Training

Example :


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Level 3 Behavior Application

The frequency of

application of new

skills/knowledge/

attitudes (on the job)

The effectiveness of the

skills/knowledge/

attitudes (as applied on

the job)

Level 3BehaviorApplication


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2. Allow time for behavior change and application to take

place

3. Evaluate both before and after the program if practical

4. Survey and/or interview one or more of the following :

trainees, their immediate supervisor, their subordinates,

and others who often observe their behavior

5. Get 100 percent response or a sampling

6. Repeat the evaluation at appropriate times

7. Consider cost versus benefits


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Example of Survey to Measure Behavior Application

Understanding and Mot ivat ing

1. Trying to understand my subordinates 5 4 3 2 1

2. Listening to my subordinates 5 4 3 2 1

3. Praising good work 5 4 3 2 1

4. Talking with subordinates about

their family and personal interests

5. Asking my subordinates for their ideas 5 4 3 2 1

6. Applying "Management by Walking Around" 5 4 3 2 1

Time and energy spent after the prgram

compared to time and energy spent before

the program

5 4 3 2 1

Instruct ion:

The objective of this questionnaire is to determine the extent to which those who

attended the recent program on Leadership have applied the principles and techniques

that they learned there to the job.

Circle the answer that you consider appropriate for each question.

5 = Much more 4 = More 3 = Same 2 = Less 1 = Much less


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Level 4 Business Results

Indicate the extent to which you

think this program has

influenced each of these

measures in your work unit,department, or business unit:

Productivity

Quality

Customer Response Time

Cost Control

Employee Satisfaction

Customer Satisfaction

Other

Level 4BusinessResults


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2. Allow time for results to be achieved

3. Measure both before and after the program if practical4. Repeat the evaluation at appropriate times

5. Consider cost versus benefits

6. Be satisfied with evidence if proof is not possible


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Performance Indicators

HARD DATA INDICATORS

Downtime duration

Number of defect products

Sales volume

Production unit

Customer satisfaction index

Response time to orders

Number of accidents at work

Others


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Performance Indicators

SOFT DATA INDICATORS (intangible impacts)

Job satisfaction

Conducive working relationship

Effective communication

Stress rate

Quality in decision-making


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Example : Measuring Training Results

0.00

50.00

100.00

150.00

200.00Program : TQM

Training

Results after

3 months of

training, number

of defects

dropped to 80

units/day

120 units

80 units

Before training After training


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0.00

10.00

20.00

30.00

40.00

50.00

Example : Measuring Training Results

Program :

Sales Training

Results after 3

months training,

number of sales

per salesman

increase to 30

units/month.

20 units

30 units

Before training After training


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Measuring

Return on Investment of

Training


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Level 5 : Return on Investment of Training

Level 1 - Reaction

Level 2 - Learning

Level 3 Behavior

Application

Level 4

Business Impact

Level 5 Return

on Investment of

Training


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Criteria for Selecting Programs for Levels

4 and 5 Evaluation

Importance of the program in meeting the

organizations goals

Cost of the program

Visibility of the program

Size of the target audience

Extent of management interest


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Benefits of ROI of Training

Measure contribution

Set priorities

Focus on results

Alter management perceptions of training


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ROI of Training Model

CollectData

Isolate the

Effects of

Training

Convert Data

to Monetary

Values

Calculate ROI

of Training

Tabulate

Program

Costs

Identify

Intangible

Benefits


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Net Program Benefits

Program CostsX 100

Return on Investment Formula

ROI =

Examp le :

Costs per program (25 participants) $ 88,500

Benefits per program (1st year) $230,625

$ 230,625 88,500

$ 88,500

ROI = X 100

ROI = 161 %


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Collecting Data

Identify appropriate

performance indicators

Develop a collection plan

CollectData


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Example of Performance Indicators

Units produced Items sold

Work backlog

New accounts opened

Productivity Inventory turnover

Etc.

Output

Equipment downtime Overtime

Time to project

completion

Processing time Repair time

Lost time days

Etc

Time


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Example of Hard Indicators

Unit costs Variable costs

Overhead costs

Operating costs

Number of costreduction

Etc.

Cost

Scrap Waste

Rejects

Error rates

Rework Product defects

Product failure

Quality


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Example of Performance Results

Some performance results after training

program:

Scrap was reduced from 11 % to 7.4 %

Absenteeism was reduce from 7 % to 3.25 %

The annual turnover rate was reduced from 30

% to 16 %

Lost time accidents were reduced 95 %


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Isolating the Effects of Training

Methods toIsolate theEffects ofTraining

UsingControl Group

TrendLines

Participants

Estimate

Supervisors ofParticipants

Estimate


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UsingControlGroup

A control group arrangement can be

used to isolate training impact.

With this strategy, one group

receives training, while another,similar group does not receive

training.

The difference in the performance of

the two groups is attributed to the

training program.



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TrendLines

Trend lines are used to project the

values of specific output variables if

training had not been undertaken.

The projection is compared to theactual data after training, and the

difference represents the estimate

impact of training.



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Trend Lines Analysis

Jan Feb Mar Apr JulJunMay Aug

At the beginning of

May, a Sales training

Program session was

held

Volumeof

Sales

The

difference

represents

the estimate

impact of

training.

Trend Projection

Actual sales performance


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Participants andSupervisors of

ParticipantsEstimate of

Trainings Impact

This method rests on the assumption that

participants (and their supervisors) are

capable of estimating how much a

performance improvement is related to the

training program.

Because their actions have produced the

improvement, participants (and their

supervisors) may have very accurate input

on the issue.

They should know how much of the

change was caused by applying what they

have learned in the program.



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Participants andSupervisors of

ParticipantsEstimate of

Trainings Impact

Typical Questions to Estimate :

What percent this improvement

can be attributed to the application

of skills/techniques/knowledgegained in the training program?

What confidence do you have in

this estimate, expresses as a

percent?

What other factors contributed to

this improvement in performance?



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1 Training Program 50% 70%

2 Change in Procedures 10% 80%

3 Adjustment in Standards 10% 50%

4 Revision to Incentive Plan 20% 90%

5 Increased Management Attention 10% 50%

6 Other - -

Percent

Improvement

Caused by

Confidence

Expressed as

a Percent

Factors Which Influenced

ImprovementNo.


Example of a Participants Estimation

The conf idence percentage is mu l t ip l ied b y th e

est imate (50 % x 70 %) to p roduce a usable training

factor value of 35 %


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1 Training Program 50% 70%

2 Change in Procedures 10% 80%

3 Adjustment in Standards 10% 50%4 Revision to Incentive Plan 20% 90%

5 Increased Management Attention 10% 50%

6 Other - -

Percent

Improvement

Caused by

Confidence

Expressed as

a Percent

Factors Which Influenced

ImprovementNo.


Example of a Participants Estimation

The confidence percentage is multiplied by the estimate (50 % x 70 %) to

produce a usable training factor value of 35 %

This adjusted percentage is then multiplied by the actual amount of

improvement (post-program minus pre-program value) to isolate the portion

attributed to training

The adjusted improvement is now ready for conversion to monetary values,

and used in the return on investment


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Converting Data to Monetary Values

Converting

Data to

Monetary

Values

Steps to Convert Data to Monetary

Values

1. Focus on a unit of improvement

2. Determine a value of each unit

3. Calculate the change in performance

data

4. Determine an annual amount of change

5. Calculate the annual value of

improvement


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Steps to Convert Data to Monetary Values

An example to illustrate the steps to convert data to monetary values

1. Focus on unitimprovement

One grievance reaching step two in the

four-step grievance resolution process

Steps Illustration

2. Determine avalue of each

unit

Using internal experts, the cost of anaverage grievance was estimated to be $

6,500 when considering time and direct

costs (V = $ 6,500)


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3. Calculate thechange in

performancedata

Six months after the program was completed,

total grievances per month reaching step two

declined by ten. Seven of the then grievance reductions were

related to the program as determined by

supervisors (isolating the effects of training)

Steps Illustration

4. Determine anannual amountfor the change

Using the six month value, seven per

month (grievance reductions), yields an

annual improvement of 84 (7 x 12 months)


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5. Calculate theannual value ofimprovement

Annual value = 84 x $ 6,500 = $ 546,000

Steps Illustration


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Tabulatingcost of theprogram

Tabulating the costs involves

monitoring or developing all of the

related costs of the program

targeted for the ROI calculation.

Tabulating Cost of the Program


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Cost components that should be

included are :

The cost to design and develop

the program

The cost of all program materials

provided to each participant

The cost for facilitator

The cost of the facilities of the

training program



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Cost components that should be

included are :

Travel, lodging, and meal costs

for the participants Salaries, plus employee benefits

of the participants who attend

the training

Administrative and overhead

costs of the training function,

allocated in some convenient

way



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An Example to Illustrate ROI analysis

Weeks after

training Trained Group Control Group

1 US$ 9,723 9,6982 9,978 9,720

3 10,424 9,812

13 13,690 11,572

14 11,491 9,683

15 11,044 10,092

Average for weeks 12,075 10,449

13, 14, 15

Post Training Data

Average Weekly Sales


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Data US$

Average weekly sales

Trained Group 12,075

Control Group 10,449

Increase 1,626

Profit Contribution from Training 2 % 32.50

(Training Impacts)

Total weekly improvement 1,495

(32.5 x 46 participants)

Total annual benefit 71,760

($ 1,495 x 48 weeks)

Annualized Program Benefits

Note : 46 part ic ipants were st i l l in job af ter 3 months


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Cost US$

Facilitation fees 11,250

Program materials : $ 35 x 46 1,610

Meals : 3 days x $ 28 x 46 1,288

Participant salaries plus benefit (35 %) 12,442

Coordination and Evaluation 2,500

Total Cost 29,090

Cost Summary : An Illustration

ROI (%):

$ 71,760 - $ 29,090

$ 29,090

146 %

x 100=

=


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Enhancing Training

Effectiveness


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How Effective is Your Training Program?

Broad and Newstrom (1992) report studies have

shown less than 30% of what is actually taught

transfers to the job in a way that enhances

performance.

Source : Broad, M., & Newstrom, J. W. (1992). Transfer of training: Action packed

strategies to ensure high payoff from training investments. Reading, MA: Addison-

Wesley.


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Source of Barriers to Training Transfer

Lack of reinforcement on the job

Interference from immediate (work) environment

Nonsupportive organizational culture

Trainees perception of impractical training programs

Separation from the inspiration or support of the trainer


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The Transfer Partnership

Trainee Trainee recognizes need fornew skills

Trainee TrainerTrainer designs and/ordelivers learning experiences

Trainee TrainerManager supports learningand application on the job

Manager


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The Transfer Matrix

Before Dur ing After

Manager

Trainer

Trainee

Time Periods

R

olePlayers


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Manager

Before Training

Build transfer of training into supervisoryperformance standards

Collect baseline performance data

Involve supervisors and trainees in needs

analysis process

Involve trainees in program planning

Brief trainees on the importance of the training

(course objective, content, process, and

application on the job) Review instructional content and materials

Plan to participate in training sessions

Encourage trainees attendance at all sessions


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Trainer

Before Training

Align the training plan with the organization'sstrategic plan

Systematically design instruction

Provide proactive opportunities

Design a peer coaching component for the

program and its follow-up activities


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Trainee

Before Training

Provide input into program planning

Actively explore training options

Participate in advance activities


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Manager

During Training

Prevent interruptions

Transfer work assignment to others

Monitor attendance and attention to training

Recognize trainee participation

Participate in transfer action planning

Review information on employee in training

Plan assessment of transfer of new skills to the

job


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Trainer

During Training

Develop application-oriented objectives

Answer the WIIFM question

Manage the unlearning process

Provide realistic work-related tasks

Give individualized feedback

Provide job performance aid


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Trainee

During Training

Maintain an ideas and application notebook

Participate actively

Form support groups

Plan for applications

Create behavioral contracts


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Manager

After Training

Plan trainees reentry

Provide opportunities to practice new skills

Have trainees participate in transfer-related

decisions

Reduce job pressures initially

Give positive reinforcement

Schedule trainee briefings for co-workers

Set mutual expectations for improvement

Arrange proactive (refresher) sessions

Provide and support the use of job aids


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Trainer

After Training

Provide follow-up support

Conduct evaluation surveys and provide

feedback

Develop and administer recognition system

Provide refresher/problem-solving sessions


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Trainee

After Training

Practice self-management

Review training content and learned skills

Develop a mentoring relationship

Maintain contact with training buddies


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References/Recommended Further Readings

1. Donald Kirkpatrick, Evaluat ing Training Programs : The FourLevels, Berrett-Koehler Publishers. You can obtain this excellent book at this link :http://www.amazon.com/Evaluating-Training-Programs-Four-

Levels/dp/1576753484/ref=sr_1_1?ie=UTF8&s=books&qid=1219800986&sr=1-1

2. Jack J. Phillips and Patricia Phillips, In Ac t ion : Measur in g

Return On Investment, American Society for Training &

Development. You can obtain this excellent book at this link : http://www.amazon.com/Action-Measuring-Return-Investment/dp/1562860089/ref=sr_1_3?ie=UTF8&s=books&qid=1219801000&sr=1-3

3. Mary Broad and John Newstrom, Trans fer of train ing : Ac t ion

Packed Strategies to Ensure High Payo ff from Training

Investments, Addison-Wesley. You can obtain this excellent book at this link :http://www.amazon.com/Transfer-Training-Action-Packed-Strategies-

Investments/dp/0738205672/ref=sr_1_1?ie=UTF8&s=books&qid=1219801069&sr=1-1
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