Most organizations ask two questions when they allocate budget for employee training needs:
- How much time and money are we spending on training?
- What’s our return on the investment?
The first point is a lot easier to measure than the second, but the second is more meaningful.
Time and Money:
When budgeting for training, measure both the out of pocket costs of training AS WELL AS the time that the employees spend attending (or delivering) training. If you don’t know how to allocate a rate to your internal people, contact us. We’ll send you something to get you started.
If you are particularly averse to spending a ton of extra cash on external training classes, but have more elasticity in your workforce plan, then check out a few of the subscription based programs where training is online and essentially DIY. Lynda.com has a great, very cost effective subscription offer and is particularly suited for IT skills and Office productivity tools (think MS-Office). Coursera announced recently that they will step into the realm of corporate L&D, so keep your eyes peeled for new offers.
Return on Investment:
Measuring ROI in Training has always been sticky. If the employee performs better after attending a course, was it because of the course or was it something else? Is success corollary or consequent? So here’s the short story:
- You have to measure it
- It’s really hard to measure
- You’re probably measuring the wrong thing.
First, you have to measure. In a world where we all seem to live and die by our budget reviews, showing that you are actually tracking training spend (time and money) against your plan is the first step. For more information on how to categorize your training plan, read our article on The Training Mix and Remix.
From there, look at the spend per category. For Skills training, your ROI is all about technical capability after the class is completed. If your team does an online tutorial on the latest version of MS-Excel, they should know how to use the product by the time it’s completed. Most technical training courses will have some sort of exercise based assessment where participants can test their knowledge. At the other end of the spectrum, leadership development courses cannot really be measured by quantitative assessment. Instead, look to the leader to self-assess their competence before and after the course, and then again 6 months later. Ultimately, the ROI will be defined through succession readiness, meaning that the people who complete this course are more ready to take on the next role in their career development plan and they are more successful once they are in the new role. The issue with this, and really all attempts to measure ROI on training, is that we’re trying to quantify something that is qualitative in nature. Moreover, there are so many other factors that impact the success measure, that it’s hard to define that causal relationship. There’s a great article from McKinsey, “Putting a Value on Training“ that takes a closer look at how one organization puts a value on training.
So, are you measuring the wrong thing? Maybe. Here’s some food for thought. There’s an opportunity cost to NOT investing in your people. Companies that do not invest in employee development and succession plans, on and off the job training, tend to have higher turnover and trend lower in overall business results. They also may not be perceived as an employer of choice when recruiting, particularly among candidates who are in the high growth stages of career development. This survey from PWC highlights training as one of the top 3 reasons an employer is considered attractive. Candidates are getting more savvy in the interview process. If they are asking you how to develop your people and you don’t have a great answer, you may lose them before you even have a chance to make an offer.