MEASURING ROI OF CLASSROOM VS. ONLINE TRAINING
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MEASURING ROI OF CLASSROOM VS. ONLINE TRAINING
- 1. CLASSROOM VS. ONLINE TRAINING SESSIONS - HOW TO MEASURE ROI? By Sandisha Sai on behalf of KelpHR
- 2. Objectives of this session WHY WHAT HOW WHICH HOW MUCH Does an organization need training? Are the types of trainings available? Type suits you best?Effective is it? ROI?
- 3. Some statistics : Glimpse of how organizations spend on training and development North American and European organizations have the largest share of spend on training ~ 75%. Asia comes in with 17%. India spent US$21.5 billion on training in 2013, which is ~ 7% of the global share in spend on training activities The global spend in 2014 was US$322.2 billion Large organizations ( >10000 employees) spend approx. US$838/employee* Mid-size organizations (500 to 9999 employees) spend approx.US$838/employee* Small organizations (<500 employees) spend approx.US$1,888/employee Projected annual spend on training in India for the year 2015 is US$1.5 billion
- 4. Why is training important for the organization? Training Employee retention and enhanced performance Increased revenue and organizational competitiveness
- 5. Why do Organizations invest in Training Change in workplace Improvement in quality Introduction of new technologies and upgradations
- 6. What are the types of organizational trainings? Top management training sessions - Leadership programs Middle management development sessions Employee training sessions Induction On the job Coaching Mentoring Job rotation Job instruction technique Lectures Role playing Simulations / audio visual Self-instruction
- 7. It is important to ask: Is the training program beneficial to the company What type of training is better suited Can it be quantified Does it have the buy-in of the employee What type of training does he/she need
- 8. Charting out a training plan Is there a need? Who needs to be trained? Is the training aligned to the overall objective? Who will conduct the training? How can they help transfer knowledge on the job? How will they monitor and evaluate the training? What form of training will they adopt?
- 9. What is classroom training?
- 10. What is online training?
- 11. Types of sessions for both Classroom Online Induction Simulation Roleplay Webinar Seminar Workshop Lecture Self instruction Coaching/mentoring
- 12. Advantages and disadvantages CLASSROOM TRAINING ONLINE TRAINING Face-to-face Remotely conducted and accessed Interactive One way participation or participation via web conferencing Lesser need for technology Lesser need for physical infrastructure Resources and audience have to be present at the stipulated time Sessions can be taken up anytime, anywhere Fixed date and time On demand access to sessions Course content can be flexible and changed to suit the audience Specially designed content for e- learning Easier to evaluate and measure effectiveness Online surveys and activities can map the level of participation Easier to measure completion rates, behaviour changes and learner engagement Courses have to be dynamically designed to keep the audience tuned in
- 13. Advantages and disadvantages (cont’d) CLASSROOM TRAINING ONLINE TRAINING One time session Session can be revisited any time the employee wants to brush up his/her knowledge Cost of travel/stay/training can be very high Online web conferencing services unite participants from any part of the globe Non verbal communications are possible. Role plays, simulations, etc. Self-paced online, on demand sessions Personalized feedback loops Online feedback surveys Focused on all participants Focused on the individual learner Instructor can control and adapt Trainee is in control Learning is also spontaneous as it is in real time Trainees can revisit the module/modules
- 14. Concept of blended training Blended or hybrid learning combines e-learning with the traditional classroom training.
- 15. Advantages of blended learning It offers the best of both worlds It enhances corporate training effectiveness It simplifies corporate training logistics It is cost-effective It allows your employees to have control over their training It enhances employees soft skills It facilitates corporate training feedback
- 16. CASE STUDY 1 - Selecting the right training module MakeMyTrip - Here is a typical case of a small organization that shot to success overnight. Their revenue and FTE base grew so fast that their existing training capabilities could not catch up. They were hiring by the thousands all over the country and their orientation programs were unable to meet the demands. Plus the cost of taking the new employee to the training was also proving very expensive.
- 17. What they did and how they did it They hired an external training solutions provider to design some online modules for their requirements, which were: • Consistency in training across locations • Scalable solution to meet growing workforce • Increased rate of employee engagement
- 18. The external solutions provider took their existing training modules and revamped them to suit online training programs. This helped them: • Cut down costs of module development • Costs of physical training • Expedite training across locations • Quicker on the job • As a result: 26% employee engagement 97% completion rate
- 19. Case Study 2: Managing employee attrition Zig Ziglar a great US motivational speaker said, “What’s worse than training your workers and losing them? Not training them and keeping them!”
- 20. What Tesco did right
- 21. Criteria for measuring training success NumbersReactions Income received Direct and Indirect costs Efficiency Performance to schedule Behaviour change Learning Performance change
- 22. Measuring the effectiveness of the session The Kirkpatrick Four levels of evaluation method uses just four parameters to measure the effectiveness of a training program Reaction Learning Behaviour Results
- 23. Quantifying the success Non-monetary measures Monetary measures
- 24. Why evaluate and measure training? To validate training as a business tool To help improve the design of training To help in selecting training methods To justify the costs incurred in training To ensure that the ROI in training exceeds the investment
- 25. Forecasting and measuring costs Costs of designing and developing the program Cost of promoting the program Cost of administration Cost of training Cost of content and materials Cost of infrastructure/technology Cost of employee attendance Cost of evaluation
- 26. Forecasting and measuring benefits Cost of labour Increase in productivity Increase in income
- 28. Four levels of impact for ROI model ROI BUSINESS IMPACT APPLICATION LEARNING ENGAGEMENT
- 29. Calculating ROI ROI = BENEFITS – COSTS /COSTS * 100 or BCR = Programme benefits / programme costs
- 30. How to decide what is better for your organization
- 31. Why should we be quantifying training initiatives Dip in economy Steep competition Rising cost of business Organization wide cost cutting Inability to quantify the benefits of training Inability to quantify the value add
- 32. How to justify your budget spend? Learning drives business outcomes
- 33. CASE STUDY 3 - Measuring ROI on Classroom training Indian Oil Corporation conducted approximately 2434 in-house training sessions in behavioural and functional training in order to improve the attitude sets and skill levels of its employees, as well as improve their competencies in the core functions. Their primary motivation for driving the training enterprise-wide was: • Improve attitude sets • Upgrade skill levels • Positively impact business bottom line They chose two programs for the analysis: 1. Threshold program for mid to top level management to drive general management skills. 30 participants 2. Excellence in Project Management Program – how to optimise investment in the face of challenges. 30 participants
- 34. They chose the following parameters: • Questionnaires to ascertain the degree of success • Trainees estimate of cost incurred to put them through the training • The latter included the following subdivisions: • Faculty honorarium • Cost of flight, stay, food • Cost of material, stationery, giveaways • Daily allowance • CTC • For the Threshold program, the total cost was Rs. 15,49,989
- 35. For the Threshold program, the parameters that estimated the cost impact were better decision making, efficient management, efficient handling of situations, better teamwork and the total cost attributed was Rs. 32,50,000 ROI = benefits – cost/costs * 100 32,50,000 – 15,49,989/15,49,989 *100 =109.68%
- 36. Case Study 4: Training success story The IT industry is the largest user of Training and Development and spends anywhere between 3 to 5% of their revenue on training as opposed to non-IT sectors who spend around 0.5 to 2% on their training initiatives. One of the most famous stories in the training industry is that of IBM. They have always been known for their zest towards developing their employees and in the 1990s, their spend on training alone crossed USD1 billion. In an effort to lower their costs of training but at the same time not compromise on their employee development, they came up with the idea of e-learning.
- 37. Within one year they saved USD166 million By 2001 they saved about USD350 million after implementing e-learning The ROI earned from their basic Blue e-learning course was as high as 2284 percent By 2002, IBM was listed as first company to have the largest enrolments into e-learning courses While their e-learning courses did not completely replace their traditional courses, the impact was undeniable Later, IBM identified this as a business opportunity and started developing e- learning products for other organizations as well
- 38. Training is a continuous process as is learning
- 39. Way forward….. For the fiscal year 2015…. Accenture has made an investment of US$800 million to build skills and develop their workforce TCS has begun an online instructor led training program called iClass and their investment of RS.360.9 crores last year has already gone up by 19% this year. Their employees spend an average of 10.3 days/year in training At the associate level, employees in Infosys spend an average of 37 days/year in training
- 40. For more information on how to identify your training program and justify it, reach out to us at info@kelphr.com
Editor's Notes
- Training is a way to constantly update your learning and it leads to better organizational effectiveness and ultimately better profitability. There is no doubting that. This is perhaps why it is also called as Learning and Development. In this webinar, we will mull over how choosing the right kind of training can help the organization in better managing attrition as well better employee engagement. Training or Learning & Development as it called in big organizations, is as veered towards developing its employee as it is towards gainfully and effectively engaging him/her. Managers today are facing a big challenge of balancing high attrition and engaging a workforce that is getting increasingly versatile. With newer trends coming in into the workforce, such as the concept of the millennials, effectively engaging the employee becomes crucial. The Dale Carnegie Employee Engagement Survey of 2014 showed that 54% of the Indian workforce is not completely engaged at work and this also ultimately effects not only the percentage of attrition, but also the realization of the organizational business goals and of course the bottom line growth. HRD and Training managers have always faced a challenge in justifying the need for training in the organization as it has not always been easy to show in monetary terms what the ROI on training can be. But with managing attrition especially amongst high performers becoming an escalating issue, organizations are turning towards adopting holistic solutions in the form of L&D to plug the leak. With the whole structure of L&D now coming under scrutiny, several companies are embracing different trends to train their employees, be it the traditional classroom training, the more modern concept of e-learning or the blended hybrid approach. It has become very important to correctly identify the need for training and to adopt the right form of training that would most suit the need. But in order to continuously rollout training programs in the organization, it is also vital to quantify the returns that they get, both in terms of quantifying the non-monetary employee engagement as well as showing the monetary return on the investment. Training has now been clearly divided as classroom and online training. While the traditional form of classroom training is still widely prevalent, there is no denying the fact that online training sessions have several USPs as well and many organizations are, for several reasons, preferring to have a larger budget allocated to the latter. It is important to understand the pros and cons of the two forms of training first before trying to determine how to calculate the ROI on them. Or trying to figure out which form or what percentage of a mix of both would suit the unique needs of your organization. Our session today will explore, first the importance of training, then how to choose between classroom and online training and finally and most importantly, how to quantify the benefits of the training.
- As we mentioned earlier, training is a process whereby employees are constantly upgrading their skill sets and knowledge and therefore it does become imperative for training managers and HR heads to continuously plan for training sessions. Our take home from this session today would be to understand which form of training would be more beneficial for the need/budget of your organization in particular. In order to arrive at this conclusion, it would be simpler to understand it in a steady progression of the following subheadings: Why is training important for the organization? What are the types of organizational trainings? Charting out a good training plan What is classroom training? What is online training? Types of sessions for both Advantages and disadvantages How to decide what is better for your organization Measuring effectiveness Calculating ROI How to justify your budget spend? Quantifying training initiatives
- Let’s look at some facts and figures before we move ahead. North American and European organizations have the largest share of spend on training ~ 75%. Asia comes in with 17%. India spent US$21.5 billion on training in 2013, which is ~ 7% of the global share in spend on training activities The global spend in 2014 was US$322.2 billion Large organizations ( >10000 employees) spend approx. US$838/employee* Mid-size organizations (500 to 9999 employees) spend approx.US$838/employee* Small organizations (<500 employees) spend approx.US$1,888/employee Projected annual spend on training in India for the year 2015 is US$1.5 billion The year 2015 bodes well for the training industry within corporates in India as the projected estimate for annual spend on L&D is in the ballpark of US$1.5 billion now. Larger and mid-size organizations incur lesser cost of the training programs, as the cost is spread across the employee base. The larger the base, the lower the cost. Given this reason, larger organizations usually need to spend less than mid-size organizations on their training programs. The numbers can establish the fact that all organizations have allocated a separate budget for their training initiatives. However, very often low economy rates or the inability to measure and justify the training program can lead to a decrease in the budget. An organization is primarily concerned about its holistic objectives being met, but if training departments are unable to prove these results then it also means that they are unable to justify their budget. Why organizations increase or decrease their investment in training and L&D becomes the point of discussion in the rest of the slides.
- To put it in a very simple yet cascading manner, training leads to better capabilities in the employees, which not only helps to retain them and help their growth, but also helps them to perform better. This, of course, is the prime concern for any organization. While the organization wants to retain its employees, what it predominantly wants is for them to perform optimally and reduce errors so that there is an increased generation of revenue and better market-wide competitiveness and branding for their company. Unfortunately, the reverse is also true. Poor training, inadequate training or the lack thereof can also lead to the employees making very expensive mistakes, which in turn impacts not only their performance and career progression, but also the overall competitiveness and revenue of the organization. Training has always been seen as a support function and training heads are always asked to optimize their cost of training. However, training supports the organization to help it achieve its objectives and while the impacts do not reflect in a short term, the results are felt in the long run. In professional jargon, it is called “building a workforce for the future”.
- Broadly speaking, organizations invest in training as they want to develop their employees and retain them, which would in turn help them achieve their business goals and generate better revenue. That is a point that we have already made. However, there are other aspects that are focused on when developing a training module and they are: Change in workplace – to foster better teamwork, promote leadership skills, increase core competencies, enhance communication skills, etc. Improvement in quality – enable process improvements in order to reduce redundancies and manual errors Introduction of new technologies and upgradations – organizations also look at training programs to roll out an organization wide upgradation or introduction of new technologies, systems, processes, policies, etc. If you speak to a head of HR and a head of Training, they will tell you that the organizational budget is allocated for several types of trainings both at the employee level as well as the leadership level.
- When we look at the types of trainings provided/facilitated within an organization, they could be broadly classified as those for the top management, for the middle level employees and the executive or the lower level employees. While several of the training sessions are in common, the executive level employee training programs usually include the above. Top management training sessions - Leadership programs Middle management development sessions Employee training sessions - These technical and soft skills trainings are usually concentrated on the entry level and as an employee grows in the hierarchy of the organization, the types of sessions are more oriented towards leadership and development. Induction On the job Coaching Mentoring Job rotation Job instruction technique Lectures Role playing Simulations / audio visual Self-instruction Now that we have established that there are several types of training sessions available within an organization, it is important to identify who needs to be trained, what they need to be trained on, and how they will be trained.
- Before allocating the budget and the necessary resources, the two most important questions that need to be answered are: Is the training program beneficial to the company? Does it have the buy-in of the employee? These questions will in turn help you answer the questions of what type of training program is better suited for meeting the objective and also in measuring and evaluating the effectiveness of the program as well as in aligning the right type of training to suit the employee. It will also ultimately help in justifying the need for the training in the first place.
- Before charting out a training plan, all training managers must ask themselves a few questions: Is there a need for this particular training in the first place? If there is, who will be the target audience? Is the training program aligned to the overall organizational objective? Who will conduct the training program? Will he/she be able to transfer the knowledge/information on the job? Will there be a system to monitor and evaluate the training? What form or type of training will they choose? Classroom or Online training? To answer the last question first, as that is the main point of our discussion today, we need to understand the basic differences between the two in order to be able to identify the pros and cons.
- Instructor led training or ILT. This is a practice of training in a real time, classroom like environment where there is an instructor or facilitator training a group of individuals/employees. These sessions can be either in the form of a lecture or a workshop and can simultaneously address a number of participants.
- Also known as computer based training (CBT), distance learning, or e-learning, online training is a form of instruction that takes place completely on the internet. It involves a variety of multimedia elements, including graphics, audio, video, and web-links, which can be accessed through one's internet browser. This form is also known as computer based training, eLearning, mLearning (mobile learning), distance learning, self-paced learning, asynchronous training. Online training involves the creation of learning content focused around a specific topic which is then assembled in to a variety of multimedia elements such as presentations, interactive content, graphics, audio, and video which form a course. This content is then uploaded in to a delivery tool known as a Learning Management System (LMS) and courses are made available to trainees and accessed via a web browser. Online training courses are designed to guide people through information and coursework, or help trainees to better perform in specific tasks. Some of these courses may even be mandated as a workplace requirement by law. Live interactions and real-time feedback for things like quizzes, tests and surveys. Interactions between instructors and students are also conducted via an online medium through chat or email.
- A few examples to illustrate how different types of trainings sessions are usually conducted. However, there are no hard and fast rules. A classroom session is also called as an instructor lead training session, but the same instructor can conduct a pre recorded/live lecture that reaches the audience via the online media. Coaching and mentoring is almost always a face-to-face and one-on-one session but due to geographical constraints, they can be conducted online as well.
- Slide 12 and 13 Classroom: Face to face Interactive Lesser need for technology Resources and audience need to be present at the stipulated time Fixed date, time and location Course content can be flexible to suit the changing needs in the session Easier to evaluate and measure effectiveness as non-verbal communication can be monitored too Easier to measure completion rates, behavioural changes, and learner engagement One time session Cost of travel/stay/training can be expensive Non-verbal communications like roleplays etc are possible Personalized feedback loops Equal focus on all participants Instructor can control and adapt Learning is spontaneous Online: One way participation or via web conferencing Lesser need for physical infrastructure Anytime, anywhere accessibility On demand access to sessions Specially designed course content Online surveys and activities can ma the level of participation Courses have to be dynamically designed to capture the attention of the participants Session can be revisited anytime Online web conferencing services can unite participants across geographies Self-paced, on demand Online feedback surveys Focused on individual learner Trainee is in control
- Slide 12 and 13 Classroom: Face to face Interactive Lesser need for technology Resources and audience need to be present at the stipulated time Fixed date, time and location Course content can be flexible to suit the changing needs in the session Easier to evaluate and measure effectiveness as non-verbal communication can be monitored too Easier to measure completion rates, behavioural changes, and learner engagement One time session Cost of travel/stay/training can be expensive Non-verbal communications like roleplays etc are possible Personalized feedback loops Equal focus on all participants Instructor can control and adapt Learning is spontaneous Online: One way participation or via web conferencing Lesser need for physical infrastructure Anytime, anywhere accessibility On demand access to sessions Specially designed course content Online surveys and activities can ma the level of participation Courses have to be dynamically designed to capture the attention of the participants Session can be revisited anytime Online web conferencing services can unite participants across geographies Self-paced, on demand Online feedback surveys Focused on individual learner Trainee is in control
- Every classroom program -- including custom built corporate training programs -- can be modified for online delivery. But often the organization might feel the need for a training program that combines the advantages of both. Blended learning (BL) integrates formal and informal learning, face-to-face and online experiences. For the organization, blended learning improves performance and helps in achieving business objectives. The employee is also comfortable as he/she can literally customize the type of training they need. It might involve structured or casual interactions with instructors, peers, coaches, mentors, and supervisors. It happens in classrooms, or at home. Employees can elect to skip entire programs or elements that they don’t need. It encourages the organization to extend lessons and conversations far beyond the classroom and into the workplace through coaching, e-coaching, and online communities. Diagnostics, assessments and feedback can be used to tailor experiences and activities. Blended Learning can be in the form of: Face to face– where the teacher drives the instruction and supports with digital tools. Rotation – students go through a schedule of independent online study and face-to-face classroom time Flex – Most of the curriculum is delivered via a digital platform but instructors are available for face-to-face consultation and support Labs– All of the curriculum is delivered via a digital platform but in one single physical location. It can be combined with traditional classes as well. Self-Blend– Students choose to support their traditional learning with online course work. Online – self explanatory
- These are the advantages. Now, for an organization to choose either classroom, online or a blend of both forms of training, it first needs to be able to evaluate and measure the effectiveness of each type of training as well as the ROI that it can receive. It offers the best of both worlds It enhances corporate training effectiveness It simplifies corporate training logistics It is cost-effective It allows your employees to have control over their training It enhances employees soft skills It facilitates corporate training feedback
- Here is an example of a company that chose to switch over to the e learning type of training. MakeMyTrip - a typical case of a small organization that shot to success overnight. Their revenue and FTE base grew so fast that their existing training capabilities could not catch up. They were hiring by the thousands all over the country and their orientation programs were unable to meet the demands. Plus the cost of taking the new employee to the training was also proving very expensive.
- They hired an external training solutions provider to design some online modules for their requirements, which were: Consistency in training across locations Scalable solution to meet growing workforce Increased rate of employee engagement
- The external solutions provider took their existing training modules and revamped them to suit online training programs. This helped them: Cut down costs of module development Costs of physical training Expedite training across locations Quicker on the job As a result: 26% employee engagement 97% completion rate
- Zig Ziglar a great US motivational speaker said, “What’s worse than training your workers and losing them? Not training them and keeping them!” Cost of hiring and rehiring can be anywhere between 30 to 250 percent of the employees total annual compensation. Several studies show that training increases the employees productivity, then his levels of motivation and job satisfaction and that in itself ensures that he/she stay back in the organization. Approximately 40% of employees cite lack of or poor training to be the reason for their quitting. High performing individuals are also concerned about having a clearly charted out path for their career and an employer who shows them that is one that they will stay with. Let us look at an example to see how training initiatives helped this company reduce their turnover.
- After experiencing severe turnover, Tesco, a UK based Retail Company with stores across Europe, North America and Asia and an FTE base of over 472,000 employees decided to devise a plan to retain its employees using training and career development in 2011. They have an in house training “Tesco Academy” whose primary objective besides designing and rolling out training programs is to evolve and adapt to the employees ambitions. Some of the programs that helped them in marginally improve their employee management were: Every little helps – continuous enhancement programs that were aimed at improving core and supporting abilities Optional development program – was aimed at helping the employees study while continuing their work. Approximately 7000 employees are covered at a time under this program. Managers at Tesco have said that roughly 80% of managerial positions are filled from internal hiring, which is proof enough that their turnover is very low.
- Once the organization decides on which type of training suits them better, the next important step is to look at how to measure the success/effectiveness of the program. The form of evaluation that we undertake is determined by the criteria that we choose to measure success: Numbers – number of participants can indicate that the training is addressing a need and that the design and methodology is meeting expectations. But this not a very accurate measure as it does not take into account the effectiveness of the program. Direct cost- indicate the costs incurred for the training session- cost of trainer, course content/material, travel etc. Indirect cost - Indirect costs are costs that may or may not be directly associated with a training event but come into picture whether or not the training took place. Cost of infrastructure, hiring a trainer, cost of employees being away from their work, etc. Efficiency - measures the amount of learning achieved in a stipulated time frame. Performance to schedule -Sometimes the training needs to be completed by a given date if a particular business objective is to be achieved Income received – comes into picture if there is an external provider or in a situation where an internal training resource charges and additional fee for the training. Reactions - Reactions are important because, if students react negatively to your courses, they are less likely to transfer what they learned to their work Learning - in terms of new or improved skills, knowledge and attitudes, is the primary aim of a training session. It can be measured objectively using a test or or assessed exercise. the degree of retention is also crucial. Behaviour change -If a student has learned something from a course, you hope that this will be reflected in their behaviour on the job. To assess behaviour change requires that the measurements are taken before and after the training. This can be recorder either through continued observation or automated recordings. Performance change -If students are using the right behaviours on the job after the session has been completed. A wide variety of indicators can be employed to measure the impact of training on performance – numbers of complaints, sales made, output per hour and so on. Ideally, to accurately assess the spike in performance a comparison to a group that has not gone through the same training may be needed.
- The Kirkpatrick method of measuring and evaluating the success Reaction -whether they felt engaged, and whether they felt the training was relevant Learning - measures the degree to which participants acquired the intended knowledge, skills and attitudes as a result of the training. This level is used by instructors and training executives to determine if training objectives are being met and to make the necessary changes to the training module Behaviour - measures the degree to which participants’ behaviour changed as a result of the training – basically whether the knowledge and skills from the training are then applied on the job Results - seeks to determine the tangible results of the training such as: reduced cost, improved quality and efficiency, increased productivity, employee retention, increased sales and higher morale.
- Evaluating and quantifying of the impact of the training program can happen both in non-monetary terms as well as monetary ones, such as calculating the ROI, which we will discuss a little later. Apart from looking at the ROI, training managers and HR heads also need to measure the non-monetary value of the training sessions. This can be done in several ways: Keeping a track of the attrition rate post the training Surveys, feedback forms, and assessment activities that are periodically rolled out post the training Keep a track on the increase in operational efficiencies by mapping the reduction in errors, the increase in sales, etc If the process is customer interactive, feedback from customers can also help track improvement in service Instructor evaluation Continuous assessment of change in behaviour and performance Customized score cards that can map the requisite parameters that suit the organization…….
- But why do we need to measure and evaluate the success and effectiveness of a training program? To validate training as a business tool To help improve the design of training To help in selecting training methods To justify the costs incurred in training To ensure that the ROI in training exceeds the investment These factors are not always easy to quantify in monetary terms as but this is the only way to measure the ROI on training, which will then go on to justify the need for the training.
- Now let us get into what we need to calculate the ROI. They are: Costs of designing and developing the program Cost of promoting the program Cost of administration Cost of training Cost of content and materials Cost of infrastructure/technology Cost of employee attendance Cost of evaluation
- Measuring the benefits of training needs something tangible. The reaction, learning or behavioural changes of the participants cannot directly quantify the cost benefits that the organization derives. Cost of labour – reduced errors, reduced time on work, faster access too data Increase in productivity – improved skills, higher levels of motivation, streamlined method of working Increase in income – increase in sales due to improved efficiencies, lesser redundancies and errors, lower turnover, etc. The only way to quantify benefit in numbers is to measure the impact of the improved performance on the growth chart of the organization. This is what is professionally termed as ROI. It will also help to use existing organization performance metrics to measure several parameters.
- Return on investment (ROI) is a measure of the monetary benefits obtained by an organisation over a specified time period in return for a given investment in a training programme. Looking at it another way, ROI is the extent to which the benefits (outputs) of training exceed the costs (inputs). ROI can be used both to justify a planned investment and to evaluate the extent to which the desired return was achieved. But there are some aspects of the training success that cannot be measured by the ROI calculation and they are the ones we spoke about under the heading of non-monetary measures. They are: whether students liked the training or not the extent to which students' personal objectives were achieved
- Four levels of impact for ROI Engagement – Was the training or coaching worth their while? Have they learnt something new and been able to translate it into their work? Learning –have they developed new knowledge, skills, attitude and have they been able to apply it? This can be tested using simulation or comparison exercises Application and Implementation – are there any changes in their behaviour? Can be measured using 360 feedbacks or monitoring their planned actions Business Impact – this can be more tangible, as hard impacts can be captured in financial terms as the cost benefits that the company has received after the training ROI is then calculated. Fully loaded costs of the programme are gathered (cost of programme, participants’ time and on-costs) and the Net Programme benefits are calculated: (Benefits – Costs)/ Costs x 100
- ROI is a key financial metric of the value of training investments and costs. It is a ratio of net benefits to costs, expressed as a percentage. The formula can be expressed as:[(monetary benefits – cost of the training) / cost of the training] x 100 For example – Program benefits for the 1st year is Rs. 2,50,000 Cost per program for 10 participants is Rs. 80,000 ROI = 250000 – 80000/80000 * 100 =212.5% Some companies also prefer to look at it as the Benefits to Cost Ratio which is calculated as benefits/cost
- After calculating the ROI on training, as well as understanding the impact of a specific type of training, every organization chooses to go with either classroom or online training. Several organizations are seeing the benefits of having a blend of both. Whether they want the traditional format or an on-demand course for their employees, they as well as their employees can get the best of both. Our case study 1 demonstrates how a company decided to remodel their existing training format into a e learning course and the benefits that they derived from doing so. In the next few slides, we will explore another case study, where the company sticks to the traditional classroom training and also look at how they derived benefits out of that.
- Now, lets look into why we need to quantify training initiatives in the first place – in order to justify the need for it? Yes, certainly. Training and HR managers constantly feel the need to do so, especially when factors such as those below come into the picture: Dip in economy Steep competition Rising cost of business Organization wide cost cutting Inability to quantify the benefits of training Inability to quantify the value add
- So, how do you justify your spend? Charting out the training plan, estimating the costs and calculating its ROI in order to get the buy-in from the management are all crucial steps in drawing up a training module. A few questions that you as a training head and the organization needs to ask first is: Will the organization get a value add out of this training? Will my employee benefit personally/professionally out of it? Will it impact their engagement at work? Will it improve their efficiency? will it help me reduce turnover? Is it aligned to the overall business objectives? Will I see an increase in business outcomes/revenue/competitiveness? Will it help in continuous improvement? Let us look at a case study where a large corporate calculated the ROI on their traditional training in order to justify their spend.
- Indian Oil Corporation conducted approximately 2434 in-house training sessions in behavioural and functional training in order to improve the attitude sets and skill levels of its employees, as well as improve their competencies in the core functions. Their primary motivation for driving the training enterprise-wide was: Improve attitude sets Upgrade skill levels Positively impact business bottom line They chose two programs for the analysis: Threshold program for mid to top level management to drive general management skills. 30 participants Excellence in Project Management Program – how to optimise investment in the face of challenges. 30 participants
- They chose the following parameters: Questionnaires to ascertain the degree of success Trainees estimate of cost incurred to put them through the training The latter included the following subdivisions: Faculty honorarium Cost of flight, stay, food Cost of material, stationery, giveaways Daily allowance CTC* - CTC was taken into account as well as they had to measure the amount of money that company was losing by not have the employee working. For the sake of making this simple, let us only look at how they calculated the ROI on one of these programs. For the Threshold program, the total cost was Rs. 15,49,989
- For the Threshold program, the parameters that estimated the cost impact were better decision making, efficient management, efficient handling of situations, better teamwork and the total cost attributed was Rs. 32,50,000 ROI = benefits – cost/costs * 100 32,50,000 – 15,49,989/15,49,989 *100 =109.68%
- Training success story The IT industry is the largest user of Training and Development and spends anywhere between 3 to 5% of their revenue on training as opposed to non-IT sectors who spend around 0.5 to 2% on their training initiatives. One of the most famous stories in the training industry is that of IBM. They have always been known for their zest towards developing their employees and in the 1990s, their spend on training alone crossed USD1 billion. In an effort to lower their costs of training but at the same time not compromise on their employee development, they came up with the idea of e-learning.
- Within one year they saved USD166 million By 2001 they saved about USD350 million after implementing e-learning The ROI earned from their basic Blue e-learning course was as high as 2284 percent By 2002, IBM was listed as first company to have the largest enrolments into e-learning courses While their e-learning courses did not completely replace their traditional courses, the impact was undeniable Later, IBM identified this as a business opportunity and started developing e-learning products for other organizations as well
- It is obvious from the success story of IBM that training initiatives cannot be brought in for a short duration and then discarded altogether. Training as is learning is a continuous process. Similarly, the measure of the impact of the training program cannot also be monitored briefly and then let go. Many of the benefits may not be realized just after the program ends. The organization may need to specify itself a time frame within which they closely monitor the impact felt after the training. The true measure of the impact happens over a long duration, during which time the various parameters are closely monitored to see if they ultimately are aligned with the business objectives. If there has been an overall increase in sales, an increase in revenue, improvement in the customer satisfaction matrix, an improvement in efficiencies, a reduction in turnover, etc. over the specified period, then the organization can conclude that the training initiatives that they rolled out were indeed fruitful and the need for any further training programs are easily justified.
- For the fiscal year 2015…. Accenture has made an investment of US$800 million to build skills and develop their workforce TCS has begun an online instructor led training program called iClass and their investment of RS.360.9 crores last year has already gone up by 19% this year. Their employees spend an average of 10.3 days/year in training At the associate level, employees in Infosys spend an average of 37 days/year in training With new age industries like the ecommerce and start-up sectors coming into the market and more activities like M&As happening now, several of these emerging giants, Flipkart for example, are making huge investments into training across their hierarchy in order to develop their workforce and to be able to better retain them. Organizations are feeling the need to retrain and reskill their employees to face the growing demand of digital services as well. With companies such as HCL revamping their training programs entirely, there is very little doubt that the investments in training is set to rise and steeply at that.
- This brings us to the end of our webinar. For more information on how to identify your training program and justify it, reach out to us at info@kelphr.com