In the News: Measuring return on investment on training

As we all know, this question of measuring ROI on training is often asked but an incredibly tricky one that’s almost impossible to answer. I often pose the question “how capable do you think a workforce would be after an extended period of time with NO training?”. Most execs seem to agree that the answer is “not very!”.

We use a system we call SMART learning that uses a simple measurement to compare capability before and after training – this doesn’t provide a definitive $ return but shows clear positive change.

Here’s a fantastic article that offers an interesting view of the subject.

Have a great weekend!

Cheers, Sam

Return on Investment on Training Programs

I Want To Develop My People, But I Can’t Prove It’s Worth The Money’

By: Stephen J Meyer – Forbes Magazine – August 2014

Why would anybody spend a ton of money training employees if there’s no way to actually prove it works?

Many would answer, “I wouldn’t.” But that’s the wrong question.

Can you quantify the benefit of your elementary, middle or secondary school education? Probably not.

Would you say, “I’m not going to buy a six-figure education for my kid to go to college unless I can prove it’ll get her a six-figure job”? Not likely.

The reason is that we know, thanks to numerous studies, that education is good for people and is correlated to higher incomes.

Well, workplace learning is good for people, too. Most of us would agree that, broadly speaking, when employees are trained and developed effectively, they perform better and are more promotable.

The problem presents itself when you look at training narrowly and ask the wrong question. For example, “Will spending $30,000 on a sales training program increase my sales by $30,000 or more?”

Recently I heard an interesting story from a training professional who’d worked for GE during the Jack Welch era. He said that while working at the company’s famed Croton-on-Hudson training center in the early 1990s he met a rising executive named Jeffrey Immelt and suggested the now-CEO of GE might consider sending his people to a leadership workshop. Immelt replied, “If you can prove to me that eight hours in your workshop will contribute more to the bottom line than eight hours working their job, I’ll send them.”

Immelt had good intentions. He was right to remind a trainer who teaches soft skills (e.g., leadership, sales) that the cost of such training can’t exceed the benefits it brings to the business.

But he might as well have asked the poor fellow to prove unicorns don’t exist.
At large companies, learning professionals have been schooled in the discipline of “demonstrating training ROI.” But they struggle mightily to correlate training to business results. At small and medium-size businesses (SMBs), most executives have no clue how to do it and often conclude that if they can’t prove a positive ROI on training they should do nothing at all.

My message to all of them is this: “Stop trying to do the impossible.”

Consider a study conducted by the American Society of Training and Development. It revealed just how bad companies are at quantifying training ROI. The researchers based the study on training guru Donald Kirkpatrick’s “Four levels of learning evaluation” model, which is so simple even senior executives can understand it. It says that to see if training works you need to evaluate four things: Reaction, Learning, Behavior and Results. The study evaluated how often companies used each level of the Kirkpatrick model to evaluate training effectiveness. Here’s what they found:

  • Reaction: 95% of the time respondents said they conducted a post-event survey asking participants how they felt about the training program
  • Learning: 37% of the time they made some attempt to verify that people learned something
  • Behavior: 13% of the time they followed through to make sure people were correctly deploying the skills they learned
  • Results: 3% of the time they were able to map the training to a positive resul

hat says it all, doesn’t it? Even the best of the best fail miserably 97% of the time. The only thing I’d add is that I don’t really believe the 3% could actually prove there was a connection between the training and the result.

The notion that we can quantify training ROI, especially for soft-skills, simply doesn’t pass the smell test. Imagine you brought in a consultant who delivered a great sales training program and a month later sales started improving. Everyone would love to believe the training caused the boost. But maybe it was the economy. Or efforts to fill the pipeline during the months before the training. Maybe it was luck – a couple big fish swam into your net. Or it was the Hawthorne Effect, a temporary productivity improvement triggered by the reps’ perception that the company cared enough to train them, not by the content of the training itself.

I recently got powerful validation for my skepticism. My colleague at the Rapid Learning Institute, Michael Boyette, recently attended a talk at the ASTD International Conference and Exposition delivered by a couple training professionals from GE. And guess what? They said that today GE doesn’t even try to correlate training with quantifiable business results. Instead, they’re satisfied if they can correlate training to changes in behavior. Behaviors are, of course, inputs that theoretically should lead to better results. That’s soft and squishy compared to hard outcomes, but it’s much more realistic, isn’t it? Read Michael’s blog post about that if you’d like to learn more.

In the world of training and development, GE has long been the shining city on the hill because they view creating a learning culture as a core business strategy. A 2012 study by the HCM Advisory Group showed just how powerful that attitude toward employee development can be. The researchers broke companies into three categories based on how they viewed employee development. The most enlightened companies, like GE, viewed it as a “strategic enabler.” The least enlightened viewed it as a “cost center.” And a group in between viewed it as a “necessary but costly contributor.”

Take a look at the chart below and you’ll see that the strategic enabler group outperformed the cost center group by a wide margin. Employee productivity was 50% higher.

Training Return on Investment

So next week you go to your boss and say: “I’d like to invest $30,000 in a training program for my team.”

What will you say when he replies: “Will it add $30,000 to the bottom line?”

Assuming that you know how to train people and make learning stick – training is a waste of money if you do it wrong – I suggest you answer with a simple question of your own: “What kind of workforce do you want? A trained one, or an untrained one?”

If the boss wants more detail, ask, “Do you want a salesforce that consistently deploys selling best-practices that lead to strong results, or an untrained salesforce that lapses in to bad habits that lead to mediocre results?”

Or, “Do you want a trained management team that executes the daily blocking and tackling required to engage and retain our top performers, or do you want untrained managers whose behaviors cause people to disengage and leave our company?”
Ask your questions with the firm conviction that people who are well trained, and who practice solid fundamentals day in and day out, perform better.

That’s reality-based common sense. The pipe dream of quantifying training ROI is not.

Click here to go to the original article and for more from Forbes

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