Measuring roi of training

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Measuring
ROI of Training

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You can download these
excellent slides at :
www.HR-Management-Slides.com

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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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Training
Need
Analysis
Training
Objectives
Training
Delivery
Training
Evaluation
Training Process
What are
the training
needs for
this person
and/or job?
Objective
should be
measurable
and
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 Levels
of 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

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What final results were achieved in terms of the
training objectives previously set? Did the number
of 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 store’s complaint
department more courteous toward disgruntled
customers than previously?
Level 3 –
Behavior
Application
Level 4 –
Business
Impact

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Value of
Information
Frequency of
Use
Difficulty of
Assessment
Level
I. Reaction
II. Learning
III. Behavior
IV. Results
Least
valuable
Most
valuable
Frequent
Infrequent
Easy
Difficult

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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

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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

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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 Good
c. 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 of
Reaction
Form

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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

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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

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Experimental Group Control Group
Pre Test Score 45 46
Post 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 3 –
Behavior
Application

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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 Motivating
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
Instruction:
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 4 –
Business
Results

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2. Allow time for results to be achieved
3. Measure both before and after the program if practical
4. 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
200.00
Program : 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
organization’s 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
Collect
Data
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 Costs
X 100
Return on Investment Formula
ROI =
Example :
• 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
Collect
Data

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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 cost
reduction
• 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 to
Isolate the
Effects of
Training
Using
Control Group
Trend
Lines
Participants
Estimate
Supervisors of
Participants
Estimate

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Using
Control
Group
• 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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Trend
Lines
• Trend lines are used to project the
values of specific output variables if
training had not been undertaken.
• The projection is compared to the
actual 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
VolumeofSales
The
difference
represents
the estimate
impact of
training.
Trend Projection
Actual sales performance

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Participants and
Supervisors of
Participants
Estimate of
Training’s 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 and
Supervisors of
Participants
Estimate of
Training’s Impact
• Typical Questions to Estimate :
• What percent this improvement
can be attributed to the application
of skills/techniques/knowledge
gained 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 Participant’s Estimation
The confidence percentage is multiplied by the
estimate (50 % x 70 %) to produce 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 Participant’s 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 unit
improvement
• One grievance reaching step two in the
four-step grievance resolution process
Steps Illustration
2. Determine a
value of each
unit
• Using internal experts, the cost of an
average grievance was estimated to be $
6,500 when considering time and direct
costs (V = $ 6,500)

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3. Calculate the
change in
performance
data
• 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 an
annual amount
for 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 the
annual value of
improvement
• Annual value = 84 x $ 6,500 = $ 546,000
Steps Illustration

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Tabulating
cost of the
program
• 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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Tabulating
cost of the
program
• 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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Tabulating
cost of the
program
• 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 9,698
2 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 participants were still in job after 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 for
new skills
Trainee Trainer
Trainer designs and/or
delivers learning experiences
Trainee Trainer
Manager supports learning
and application on the job
Manager

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The Transfer Matrix
Before During After
Manager
Trainer
Trainee
Time PeriodsRolePlayers

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Manager
Before Training
• Build transfer of training into supervisory
performance 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's
strategic 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, Evaluating Training Programs : The Four
Levels, 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 Action : Measuring
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, Transfer of training: Action
Packed Strategies to Ensure High Payoff 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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End of Material

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You can download these
excellent slides at :
www.HR-Management-Slides.com

Measuring roi of training

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