Return on Training Investment (ROTI)

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Framework Primer
Return on Training
Investment (ROTI)
Presentation created by
Choose
the
Performance
Measures
to Use
Gather Data
on Changes
Gather Data
on Costs
Calculate
ROTI
1 2 3 4

2
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Contents
 Overview
 ROTI
 Key Questions
 ROTI Calculation
 Templates
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This deck outlines the steps essential for the calculation of Return
on Training Investment (ROTI)
Presentation Overview
ROI is all about thinking what your options are and how you make your decisions based
on the data available on those options.
ROI is all about thinking what your options are and how you make your decisions based
on the data available on those options.
The concept of Return on Investment (ROI) originated in the Manufacturing sector, where it’s
simple to measure time and output. Next to adopt the concept was the Banking industry, where it
is used consistently. ROI calculation is now a common feature in every type, industry, and
function of business.
Training necessitates spending a lot of effort and resources. Deliberating if the Training Program
is going to be worth all its costs is a valid concern.
This presentation provides a detailed overview of the 4-step process for the calculation of Return
on Training Investment (ROTI). This method of ROTI calculation is simple yet effective to
ascertain the value derived—or failure to derive any financial benefits—from a Training Program.
The 4-step of the ROTI calculation process are:
The slide deck also looks at some guiding principles critical for collecting information regarding
an assortment of data, which is the basis for ROTI calculation.
The slide deck also includes some slide templates for you to use in your own business
presentations.
1 Choose the Performance Measures to Use
2 Gather Data on Changes
3 Gather Data on Costs
4 Calculate ROTI

4
Contents
 Overview
 ROTI
 Key Questions
 Templates

5
Return on Training Investment (ROTI) gives a sense of whether Investing
in Training is advisable
Return on Training Investment (ROTI) – Overview
ROTI analysis is used to gauge elements like Training budget, Training effectiveness,
or Change in Behavior.
ROTI analysis is used to gauge elements like Training budget, Training effectiveness,
or Change in Behavior.
Return on Training Investment (ROTI) is the comparison between Financial Benefits obtained from
a Training Program and the Total Cost of running that Training Program.
Source: Calculating Return on Training Investment (ROTI), TrainingCheck
The objective of ROTI analysis is normally to see whether the Benefits outweigh
the Costs i.e., to establish if the investment was worthwhile.
ROTI can be calculated dependably so long as:
 Measurement Data on changes
in Business Performance,
pertinent to Training, is reliable or
can be rationally estimated by
those who matter.
 Financial Values can be assigned
to the applicable Performance
Measures.
 Cost related to developing,
delivering, and handling the
Training Program can be
classified.

6
There are 3 types of Return on Training Investment (ROTI) calculations
that are more commonly used
ROTI – Calculation
The percentage of ROTI has the benefit of communicating to investors and stakeholders
in their language.
The percentage of ROTI has the benefit of communicating to investors and stakeholders
in their language.
There are 3 types of calculations that are relevant in ROTI analysis.
ROTI as a
percentage
An outcome of more than 100% or more
denotes that the Program has a Net
Benefit after accounting for all the Costs
connected with running the Program.
This calculation shows Net
Training Benefits as a
percentage of Training Cost.
The formula for this
calculation is:
Benefit:
Cost
Ratio
(BCR)
When BCR is greater than 1, the Benefits
exceed the Costs and the Program is
judged a success. When BCR is less
than 1, the Costs surpass the Benefits
and signify that enhancements or
alterations are needed to warrant the
continuation of the Program.
This ratio divides Total Training
Benefits by Total Training
Costs. The formula for BCR is:
Payback
Period
Monthly Training Benefits are calculated
by dividing Total Training Benefits over
12 months.
This calculation exhibits the
time in which the Training
Investment will be paid back i.e.,
when the Costs equal the
Benefits. The calculation is
usually done in terms of months.
The formula for Payback is:
100
Financial Value
of Benefits
(minus) Financial
Value of Cost
Financial Value
of Cost
ROTI%
=
BCR =
Total Benefits
Total Costs
Payback
Period
=
Total Training
Costs
Monthly Training
Benefits
1
2
3

7
Contents
 Overview
 ROTI
 Key Questions
 Templates

8
Non-monetary factors also play a significant role in decisions regarding
Training Investments
Key Questions – Why ROTI?
Many Quality and Efficiency methodologies consider ROI or utilize very comparable
ideas e.g., TQM, Baldridge, Six Sigma.
Many Quality and Efficiency methodologies consider ROI or utilize very comparable
ideas e.g., TQM, Baldridge, Six Sigma.
ROTI calculation and analysis
is significant when:
 Investment in Training
Program is viewed as a
substantial outlay.
 Attainment of explicit
Strategic or Operational
objectives is associated
with the Training Program.
 Financial Benefits and their
amount from the Training
Program is ambiguous.
It is pertinent to note that
although ROTI analysis is
important in evaluating a Training
Program, merely a ROTI
calculation will not typically be
adequate to make the business
case for a Training Program or
influence top management to act.
Reason being, ever so often,
ROTI analysis is one component
of the Total Value of the Training.
Subject to the approved
Objectives and Expectations of
the Training Program, factors
such as the following are also
of interest to decision makers:
 Trainee’s view of the
Program.
 Actual learning that takes
place.
 Factors influencing
application of Training to
actual workplace.

9
ROTI calculations are worth conducting if certain conditions are fully met
Key Questions – When?
If all these conditions are not met, then serious consideration should be given to
whether expending time, effort, and resources on performing ROTI analysis is
advantageous.
If all these conditions are not met, then serious consideration should be given to
whether expending time, effort, and resources on performing ROTI analysis is
advantageous.
Conducting a ROTI analysis is only worthwhile if all of the following conditions are met:
 Training Program entails a considerable
Financial Investment.
 Training Objectives are lucidly defined and
their attainment prospectively impacts areas
of Strategic or Operational significance.
 Number of Trainees is considerable enough
to have a notable impact on Business
Performance and draw financial conclusions.
 Likelihood of Trainees applying their learning
to the workplace is substantial.
 Obtainability of Data on related changes to
Performance is certain.
 Key stakeholders are in a position to ascribe
reliable financial values to changes in
Performance.
 Training elements can be separated from
non-Training elements and the Financial
Benefits allocated accordingly.
 Costs can be classified as Direct or Indirect.
 Program’s sponsor is likely to find ROTI
analysis consequential.

10
Time period over which ROTI is calculated depends entirely on the
requirement of decision-makers
Key Questions – What Period?
ROTI comes into play with every new Training event or with significant changes
occurring to existing events.
ROTI comes into play with every new Training event or with significant changes
occurring to existing events.
There is no hard and fast rule on the Time
Period over which ROTI should be
calculated. Some commonly used time
frames are:
 A period of 3 to 12 months post-culmination
of Training Program permits time for
transfer of learning to the workplace.
 A Product Lifecycle.
 A financial year—Audit period.
 Depreciation period—2 to 4 financial years.
 Average time Trainees remain in the
organization.
Customarily, a longer time frame increases
the likelihood of better ROTI figures. Reason
being that Training is increasingly applied to
the workplace by more and more employees
thus returning more Financial Benefits.
However, distinguishing changes in
Performance attributable to Training versus
other factors becomes a challenge over
longer periods. That is why, some experts
endorse that the maximum period for a ROTI
calculation should be limited to 1-year post-
culmination of Training Program.

11
Payback Period is influential in decisions regarding Investment or non-
investment in Training
Key Questions – What Payback Period (PP)?
The attractiveness of Training Investment is mostly connected to its Payback Period.
The attractiveness of Training Investment is mostly connected to its Payback Period.
Payback Period is a time-based ROTI
calculation, which specifies time in months it
will take to pay back the investment in the
Training.
When the Costs of conducting the Training
equals the Benefits in monetary terms, that
time period is called Payback Period (PP).
Brief Payback Periods boosts the chances of
increased investment in Training Programs.
Shorter periods ease management anxieties
on negative perceptions created by large
Cost outlays in financial reports.
For calculating Payback Period, the monetary
Benefit are divided by 12 (months) to get the
Monthly Benefit. i.e.:
Costs are then divided by the Monthly Benefit
to get the Payback Period, i.e.:
Monthly Benefit
Payback Period (months)
=
=
Total Benefits
12 (months)
Total Costs
Monthly Benefits

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Contents
 Overview
 ROTI
 Key Questions
 Templates

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ROTI calculation involves a 4 sequential Step process—each step with its
own requirements
ROTI Calculation – Overview
The 4 steps give Data that can be used to do various ROTI calculations i.e., in monetary
terms, percentage-wise, and in terms of time periods.
The 4 steps give Data that can be used to do various ROTI calculations i.e., in monetary
terms, percentage-wise, and in terms of time periods.
 Sometimes we have
to consider non-
monetary Benefits
to Training, such as
a change in attitude.
 When monetary and
non-monetary
Benefits are
combined, these
deliver additional
Benefits such as
reduced absenteeism,
lower turnover rates,
and more promotions
from within.
Calculating ROTI is a 4-step process.
ROTI Calculation involves selecting Performance Measures, gathering data on
those measures as well as data on Costs—both Direct and Indirect—related to
Training, and lastly calculating the Return On Training Investments.
Key steps in the ROTI calculation are:
Choose
the
Performance
Measures
to Use
Gather
Data
on
Changes
Gather
Data
on Costs
Calculate
ROTI
1 2 3 4

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DETAILS REQUIREMENTS & CONSIDERATIONS
STEP .
Choose the
Performance
Measures to Use
Choosing Performance Measures mostly depends on the requirements
of decision-makers
ROTI Calculation – Step 1
Important information can be gained from each group of Stakeholders to help determine
Performance Measures.
Important information can be gained from each group of Stakeholders to help determine
Performance Measures.
 Assessment of who the stakeholders are, what they need
to know is the initial step.
 Stakeholders and the analysis of their information needs
will determine the Performance Measures to be chosen.
 A few examples of Performance Measures are:
– Productivity/output rates
– Sales volumes
– Employee turnover rates
– Customer satisfaction and retention rates
– Number of customer complaints
– Wastage rates
– Non-compliance
– Rate of accidents per year
– Number of sick-absence days per month
– Number of cancelled training days/sessions
– Recruitment costs
 Relevant, i.e., changes in them are
attributable to Training. Stakeholders
may need to apportion changes in
Performance Measures between factors
attributable to Training and non-Training.
 Measurable or be reasonably estimated
by Stakeholders.
 Assigned a monetary value.
Performance Measure need to be:
Source: Training and Development: Instructor’s Manual, Kaminski & Lopes, SHRM, 2009
1

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Data gathering is a complicated process requiring meticulous planning
New Attitudes and Behaviors can take a while to appear thus the correlating Benefits
Data may have to be collected after a pause.
New Attitudes and Behaviors can take a while to appear thus the correlating Benefits
Data may have to be collected after a pause.
 Financial Data on changes in Performance needs
collection.
 Estimates of the proportion of influence of Training on
changes in Performance Measures compared to other
possible influences need to be done by stakeholders.
 Stakeholders need to apportion Total Financial Benefit
attributable to Training according to the following formula:
 Data collection plan needs to be in place
i.e., What Data, When to be collected,
and How to be collected.
 Some new information may not be readily
available. Planning and coordinating with
other people may be required.
 Data can be collected in any number of
ways; accuracy, completeness, and ease
of collection need to be considered.
Total Financial Benefits due to the Training
Total Financial Benefit of Performance Change X %
Influence of the Training
Gather Data on
Changes
STEP .2

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Classification and apportionment of Costs is tricky but an essential step
for ROTI calculation
Collection of Data on all types of related Costs is necessary for ROTI analysis.
Collection of Data on all types of related Costs is necessary for ROTI analysis.
 Costs connected to a Training Program may fall under
the undermentioned general categories:
– Management
– Development Costs (e.g., developer fees, design,
printing).
– Delivery Costs (e.g., facilitator fees, venue, learning
materials).
– Attendance Costs (e.g., employee release costs,
travel, accommodation).
– Overheads
 Costs may have to be classified as either
Fixed Costs or Variable Costs in addition
to being bifurcated as Direct or Indirect
Costs.
 Fixed Costs continue to be the same
regardless of the number of participants
in the Training. Examples may be the
Trainer’s salary.
 Variable Costs vary based on the number
of participants. Examples include
Training Manuals, meals.
 Direct Costs are directly attributable to the
Training Program e.g., Renting a Training
facility.
 Indirect Costs are related to Training but
not directly attributable to Training e.g.,
compensation and benefits of an employ-
ee otherwise engaged in performing other
duties now deployed to help in Training.
Gather Data on
Costs
STEP .3

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Complex process of ROTI calculation can be conducted successfully
by keeping to the Guidelines
ROTI Calculation – Step 3 (Guiding Principles)
Each organization has its own method for calculating Costs linked
to a Training Program.
Each organization has its own method for calculating Costs linked
to a Training Program.
 Include all benefits in Salary Costs—typical range is between 25% and 50% of the base salary. The rule applies to both
Program participants and all others concerned with the management, administration, delivery and evaluation of the Program.
 Calculate employee Release Costs by calculating the salary per day initially.
 Per day salary is calculated by adding the salary and benefits per year then dividing by the number of work days per year.
 Release Cost is then calculated by multiplying the salary per day with the total number of days the participant is attending
the Training.
 When the number of Trainees is considerable, using Average Hourly Rates rather than Actual Rates may be more
appropriate.
 Costs linked to ‘backfilling’ jobs of participants and any overtime required should also be incorporated.
 Consider adding Costs associated with supporting the employees in applying their learning to the workplace (e.g., on-the-job
training).
 Costs related to equipment, e.g., laptops and computers, should be apportioned if other Training Programs also use them.
Depreciation Cost relating only to the ROTI period should be included.
There are certain guidelines on how to treat Costs and collect Data on them that are helpful in the ROTI calculation
process.
The guiding principles are:

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ROTI calculation can be a rational way to make decisions on Training
Investments
Obtaining early concurrence from Training Program Sponsors regarding the Target
Level of ROTI is advisable—ROTI levels below 20% are typically thought to be low.
Obtaining early concurrence from Training Program Sponsors regarding the Target
Level of ROTI is advisable—ROTI levels below 20% are typically thought to be low.
 When Data on Financial Benefits and Costs associated
with the Training Program has been collected it is time to
do calculations such as ROTI %, Benefit to Cost ratio,
Payback Period.
 For example, a ROTI of 150% means that the program
generated $1.50 for every dollar that was spent as Cost
on the Program.
 An outcome of less than 100% signifies that the Program
was unable to recover its Costs after accounting for the
Benefit.
 In scenarios such as above, viewing
hidden or social Benefits that are not
quantifiable—such as a boost in employee
morale—needs to be taken into account.
 Occasionally, the purpose of Training is to
change attitude. Changes such as this are
often desired to achieve objectives such as
reduced turnover, greater productivity and
better teamwork.
 If the Training must be done regardless of
the ROTI then stakeholders and decision
makers must determine if the scale of loss
is reasonable, given the money spent. For
example, 3% of several thousand dollars
as loss may be justifiable to achieve a
happier workplace, but 3% of several
million dollars may not be.
 ROTI surely becomes useful in decision-
making such as above. Used correctly, it
can be an unprejudiced method to com-
pare the Benefits and Costs for Programs.
Calculate ROTI
STEP .4

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Contents
 Overview
 ROTI
 Key Questions
 Templates

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Insert headline
ROTI Calculation Process – TEMPLATE
Insert bumper.
Insert bumper.
Choose the
Performance
Measures
to Use
Gather Data
on Changes
Gather Data
on Costs
Calculate
ROTI
1 2 3 4
 Insert filler text, filler text,
filler text. Insert filler text,
filler text, filler text, filler
text.
text.
text.
text.
text.
text.
text.
text.

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Insert headline
ROTI Calculation Process – TEMPLATE ALTERNATE
Insert bumper.
Insert bumper.
Gather Data
on Changes
Gather Data
on Costs
Choose
the Performance
Measures to Use
Calculate
ROTI
1 2 3 4
 Insert filler text, filler text, filler
text. Insert filler text, filler text,
filler text, filler text.
text. Insert filler text.

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