Demonstrating ROI Training

by | Dec 4, 2013

Demonstrating ROI Training

After reading a recent article on the  CIPD website I can’t help but think that the issues around Demonstrating ROI Training (Return on Investment) is not about cost, but about value, and the HR community needs to grasp the tangible and commercial realities of a business function rather than a support function or face an inevitable cull!

“Most importantly, despite two in five claiming that people management issues caused financial growth losses, 77 per cent of CEOs say their firm will cut spending on training and development in the next 18 months. Only 18 per cent of HR directors agreed with these measures.”

If training and development is not delivering business performance improvement then the question must be asked sooner or later by all MDs and FDs as to why they are spending company money on it, and as a result training spend and HR spend will be cut.  The mistake however is not whether you agree or disagree with the statement, but whether you can evidence your opinion.

HR is so often ill-equipped to answer, justify or challenge back on the value add question, so there is no surprise to me when Training or Learning Managers complain that they have had their budget cut…after all, what did you expect?

Should HR Directors agree with the CEO cutting spend on training and development?

In the statistic above from the CIPD research only 18% of HRDs agree…which means at least that they are realistic. The more worrying statistic is that the other 82% do not, which means that either they do not understand business, or are fighting a losing battle when communicating operational tangible value.

To demonstrate ROI Training you must show that a course or intervention adds tangible value to convince the operators or finance department that the investment is worthwhile, and in hard times if it is not worthwhile then it should be cut.

By tangible value I mean real numbers, not silly feel good stats that mean nothing to business people.

If you are working with sales, then how many more sales will the team get after the training/intervention? If the answer is; nothing, I don’t know, or, I can’t possibly guess, then go back to the drawing board and work it out. I know it is harder, and it takes longer, but the quality of your work will be far higher if you take the effort now, to work out the estimated value at the end.

Demonstrating Training ROI with Evaluation

Evaluation has valuE in it, albeit a little mixed up, so when it comes to the training cycle (Needs – Design- Delivery – Assessment- Evaluation) I always start with Evaluation first.  If you understand the value to the business, you can then work out the need (or gap), and then design the course etc.

Here are some useful tips to prepare  to consider when determining value to Demonstrate ROI Training:

Tip 1 – Your annual budget review is not what it seems anymore!

Imagine you are pitching to the Dragons on Dragons Den. When they ask you for your numbers do you collapse in a heap?

They are not asking you how you feel, or if people are motivated, or if the engagement score has gone up…

They want to know how you are going to increase margin!

When you turn up for your budget review, you are supposed to be arguing your case for investment that will grow the business.  If you fail, it will be cut.  If your budget has been cut recently it is not because the work you do is not important it is totally and completely because you were unable to justify the investment in your cost center. If you accept this hard hitting brutal fact then it will completely change how you approach the next one, so you are ready for it!

Tip 2 Before you start designing, proposing or pitching for your spend , consider how you will measure ROI

Remember this:

 “If you can’t measure it, you can’t manage it” Peter Drucker

In training terms, if you can’t measure it don’t train it!

This is where most training falls down. I have seen countless examples of training spend on courses or interventions that add no tangible return. In these times of austerity my advice to you is if you can’t demonstrate ROI then cancel it, the business will thank you in the long run and it will start to demonstrate that you are cost aware!

Tip 3 Training Evaluation Happy Sheets are a complete waste of time. They are hard to collate, administer and difficult to make meaningful sense out of, so if you are planning spending time doing this then stop it now! Happy Sheets are there to make HR and Training people feel happy, they hold no business significance whatsoever!

Instead, look at measurable returns from performance or behaviour changes. Anything can be KPI’d, you just need to spend some time linking the training to the intended business output.  Use existing operational statistics or KPIs, you do not need to use your own!

Examples:

  • Delegates will generate 1 more sale per day as a result of this sales training
  • Delegates will impact customer service scores positively after this customer service training
  • Delegates on the management training course will increase their team profitability by 10%
  • Delegates on the leadership training will be retained in the business 18 months longer than those that do not attend

(I didn’t say it would be easy to design a course that delivers this, but see below for the “Panic Button” on what to do)

Tip 4 – Time Cost Quality

If you think operational KPIs are too difficult to align to, then try exploring a simple project management triad – Is it Time, Cost, Quality that your training is designed to target. Time and Cost are easy to measure (reduce cost per business unit, reduced time to deliver items etc) and quality is usually measured by subjective opinion polls (if you really must).

Tip 5 – Be realistic with your timescale, most investment takes 3 years to give a return

The Dragons never look for a 12month return on investment, it is not realistic for a business to deliver. Sometimes they ask “How are you going to give me return on investment in 3 years”.

3 years is a reasonable operational timescale for Demonstrating ROI Training. If you are thinking in terms of this financial years spend then you are probably being unrealistic about training and learning value before you even start.

Tip 6 – Track and monitor

If you have a way to keep track of changes then use it, if not, build it. You could work on a project to implement a tracking system that then measures the return of your training.  It is not as expensive as you may think and for the price you get a guaranteed way to demonstrate tangible value and operational know-how.

Panic Button

We have all been in those awkward meetings where a MD, FD or Operator has asked us quantitative questions to qualitative issues, but what if you could answer them all at the touch of a button…what if there was another way to report commercial value add through HR, what if there was another way to design courses that delivered operational return on investment and enabled you to Demonstrate ROI Training!

This is what we do, we work with you to find out those answers so you are fully equipped to argue your case, and represent yourself as a professional business function. If you would like to know how, contact us today!

Martin Knowles

Martin Knowles

Director

About the author

Martin Knowles has worked in a variety of sectors in Learning and Development roles and Contracts for nearly 20 years (DSGi, PCWorld, Capital One, Linklaters, Veolia, Severn Trent, Rolls-Royce, Diageo, Selfridges). He has authored content, books and articles for managers and aspiring leaders, published work in multiple media and won awards for Best Training and Development in Europe.

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