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Training Return-on-Investment (ROI)

Training return-on-investment (ROI)

There is widespread skepticism that a quantifiable return-on investment can be calculated for training/education programs. Executives want this training ROI calculated in terms such as a business contribution, business alignment, business value, and a direct connection to the business.

"Picking the right metrics is the key to creating real value from training," says McKinsey and Company. Today companies around the world, both large and small, are doing just that.

There are many ROI methods now available to employers for such in-depth quantitative evaluation of training/education programs. Many of these ROI measures use evaluation software.

Imperial's "Human Capital ROI Nine-Step Worksheet" estimates the business monetary returns both before and after most skill, training or education programs. This method can also be used to make comparisons between in-house training versus potential outside training vendors.

It also addresses three serious issues that until now have compromised accurate financial training measurement:

  1. Training effectiveness versus other business variables: Did the results come from the training program or some other business factor?
  2. Training transfer: Unless you have a way to calculate the "average" training transfer back on-the-job, you will inflate the training's ROI.
  3. Depreciation of training: Even the best training programs do not permanently improve a business. You need to depreciate a training program's benefit over time.

This worksheet was designed by an interdisciplinary team consisting of: Kevin Hollenbeck, Senior Economist, The W.E. Upjohn Institute for Employment Research; Robert M Naiman, CPA, J.D., Boyd Owens, Business Process Improvement Lead, Motorola; and Ed Gordon, Imperial's President.

Practical Considerations

To use Imperial's Human Capital ROI Worksheet, data on profit margins, gross revenue and other operational data must be obtained. This assumes the cooperation of other business units within an organization. They may include the accounting, engineering, and marketing departments as well as general management.

Imperial's ROI worksheet is a file to be used in an Excel spreadsheet. It can be downloaded free of charge in two forms from this site. The example worksheet takes data from a Kaizen training program to illustrate how the ROI is calculated. The blank worksheet allows you to enter your own training data to make ROI calculations.

To aid the design team in our continuing research on ROI measurement of training or education programs, a registration form is the first step in obtaining the ROI software.

Let Imperial help assist your organization in striking a balance between meeting short-term profit goals and investing in its long-term sustainability. We can coach you on developing the five basic strategies aimed at achieving your talent creation and management goals:

  1. Using internal/external continuous education, training, and development programs for achieving core business requirements
  2. Offering a blend of classroom and technology-based learning
  3. Collaborating with community partners to broaden the local education-to-employment talent pipeline
  4. Measuring the return-on-investment of both these internal and external learning programs.
  5. Budgeting investments in human capital and physical capital to achieve the goals and objectives of the business.

Imperial can assist you in developing more highly talented people and enhancing their innovation capabilities. We help fill in the blanks for an organization's winning formula

Highly Talented People

Increased Performance and Innovation
+ High Tech Workplace

Advanced Technology Raises Productivity and Lowers Fixed Costs
= People Performance
& Productivity Increased
+ Profits Increased

Press Contact Us to inquire about obtaining Imperial's assistance in the areas of human capital development and training ROI.

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