Sometimes organizations will ask a trainer to calculate the ROI of a training initiative to justify a training budget. In this case, the benefit may need to be estimated if actual data is not available. Calculating ROI can also help training and development professionals recognize areas where they can streamline their efforts. This allows them to present a more cost-effective solution that is more likely to get stakeholder buy in.
This is hard stuff to communicate to executives. That’s why Mindflash’s CEO, Donna Wells, will be presenting on the subject of training ROI at this year’s Association for Training Development (ATD) conference. Her presentation End the ROI Void: What You Should Measure Come Monday will give you tips on how to determine which training efforts require measurement, and which metrics are meaningful to stakeholders. Additionally, Donna will share three specific categories of measurement that every trainer should know. This session is a must for anyone in the field of training and development who creates or runs training initiatives.
To boost the ROI of this already great session, all participants will be entered for a chance to WIN AN IPAD MINI!
Make sure to head over to the ATD website to sign up for Donna’s session on Wednesday, May 25th.
Training and development professionals use the ROI formula to calculate the financial impact a training initiative has on an organization. For example, a call center associate takes a training course to enhance his or her business knowledge. As a result, he or she is able to resolve caller issues in 20 percent less time per call. The time savings can be multiplied by his or her hourly rate to determine the actual cost savings to the organization.
You may not realize it, but you are constantly calculating the ROI (or return on investment) of purchases you make every day. Think about the last time you purchased a cellphone. You probably had to choose between several different options, including an older phone that was free or a newer phone that was more expensive. You could take the free phone, but it might be missing features that make communicating easier. A newer phone might allow you to communicate more easily, but is it so much more efficient than the older phone that it justifies the much higher cost?
Calculating the ROI (or return on investment) of each option could help you make a decision. The ROI compares the cost of an investment to its benefit. First, you’d need to know how much time you’d save with the new phone versus the old phone. Then, multiply that time by your hourly rate. Next, you can calculate the ROI of each option by dividing the wage-based value of time saved (benefit) by the cost of the phone (cost), multiplied by 100 [(benefit/cost) x100]. ROI is always expressed as a percentage which makes it easier to compare different options.
Organizations also use the ROI calculations to determine the effectiveness of training or to find areas or improvement. If you are trying to pitch a training program, you may want to determine the ROI as a way to support the need for the program. Providing an ROI calculation will illustrate to stakeholders the financial impact that the training program will have on the organization.
Interested in learning more about calculating ROI? Sign up for Donna’s session today!