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Performance Pointer

From the Penumbra Group - Your Complete Resource for Talent Management Solutions

February 2008
In This Issue - The ROI Rabbit Hole
The 3 Reasons Companies Fail To Prove Training ROI
Pre and Post-Training Fundamentals
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Greetings! 

ROI is a funny thing.  Sometimes it's as clear and tangible as "I will invest $15K in a new kitchen because it will return me $30K in resale value."  Or it can be as elusive as "I will spend $100 an hour on a private coach and hope I'm in a better place professionally this time next year." 

 
One of the more common rabbit holes of ROI is validating the return on investment that organizations make on employee training.  The question is, is training ROI hard to prove because it isn't impactful?  Or because we aren't using the right tools to measure it?  Or is it that we don't know what sort of ROI we want?  Yes, yes and yes. 

 

The 3 most common reasons companies fail to prove the worth of employee training initiatives are:
  1. They train on the wrong things.
  2. They don't know what outcomes they want to see as a result of the training.
  3. They don't decide in advance how to measure the success of the training and/or they measure the wrong things.

To the detriment of those in our business, there are training practitioners/vendors who claim that because of the nature of human dynamics, the difficulty in isolating the effect of soft skills, and the multitude of factors that impact productivity, there exists no true measure of the ROI of a training program. 

 
Tell that to one of our many clients who has proven an increase in profit (to the tune of $100 million) as a direct result of targeted training initiatives over a two year period.  Sounds more like an elaborate excuse to bypass the hard work of standing up to the scrutiny of budget approval and tedious metrics tracking.
 

Now, it is fair to say that calculating ROI for training is not easy.  However, it can, and must be done.  As with any other project, it requires forethought, preparation, consultation, research, common vision and committed follow-through. 

 
Most importantly, it requires the right partnership between the training sponsors (company leadership) and the training providers (outside/inside training specialists).  Both parties must agree and collaborate on certain pre and post-fundamentals before undertaking any performance improvement initiative. 

 

 

Identify Your Purpose

Many leadership teams have grown so accustomed to hearing the broad proclamation "we need training!", they no longer ask the most important question - why?  Training is not a cure all or a feel-good salve for the restless employee soul.  The only kind of training that produces a return on investment always begins with the end in mind. 

 
To help identify your purpose for training, consider these diagnostic questions:
 

What are the performance symptoms/ailments that generated this need for training?

Is there really a skill gap or do people know what to do, are capable of doing it, but just aren't being held accountable?

What are the soft costs associated with these performance challenges? (morale, innovation, customer satisfaction, etc.) 

What kind of training have you done in the past that was successful?  Not successful?

 

Are you looking for participants to leave with awareness and knowledge or new skills and a specific change in their behavior? 

 

What specific performance outcomes do you want to see as a result of this training?

 

What post-training reinforcement will you use to secure the ROI of this initiative?

 

What value will the participants walk away with as a result of this training (from their perspective)?

 

The role of your internal/external training provider should be to act as your sounding board, helping you dig deep with these questions and isolate the true purpose for your training investment.  The only (and really the easiest) way to calculate financial return is to determine at the beginning what the training is intended to accomplish.  The next step is to determine the how.

 

 

Identify Your Means and Measurement

A program designed to create just awareness should not have measures tied to behaviors.  Just as a program designed to change behavior should not stop at measuring the participant experience only (end of class evaluation sheets). 

 

Take for instance a 2-hour harassment awareness class for managers.  If the training were designed to increase awareness through the transfer of knowledge then a fair measure of the training would be a knowledge survey, both before and after the course.  This would create a baseline of each participant's knowledge - before the "awareness" and after. 

 

The next step is very important.  How much is an increase in knowledge worth?  If the reason for the training were compliance, how much would it cost the company to be out of compliance?  If the reason were to reduce the number of harassment claims, the company would need to identify how many of the prior claims were the result of a lack of knowledge on the offender's part. 

 
If it were identified that 40% of all claims were due to ignorance, the training would be worth the out-of-pocket costs associated with those claims.

 

Measures (like numbers of claims, types of claims, locations of claims) would need to be collected prior to the training (at least 6 months), and after the training (at least 6 months) to verify the desired outcome: a reduction in the number of harassment claims due to ignorance. 

 
In another example, if the purpose of a training program were to increase a skill set, say for example service level, and a company delivered a half-day service excellence class, it would be unrealistic to expect the elimination of most customer complaints. 
 

A half-day program would not be nearly sufficient to generate enough skill building to result in a change in behavior.  The desired return on investment must match the means the company is willing to provide to achieve it.

 

That doesn't mean that a big financial training investment (quantity) always means a large performance return (quality). 

 

Pre-training planning, selection of the right training partner, customization for the corporate culture, alignment to company goals, and post-training reinforcement are all quality indicators of training that produces ROI. 

 

Too often, a training program is constrained by time, budget or support - all of which impacts the quality of the training and saps the real potential of its ROI. 

 

It is this type of calculation - improper means used to accomplish unrealistic objectives - that creates the impression that training is a waste of money.  You would never expect to walk away with bigger biceps and toned abs after an appointment with your hair stylist. 

 

The Commandments of Training ROI

 

Know your needs.

 

Know your audience.

 

Know your capabilities (and delegate or acquire resources accordingly).

 

Know what you want and what it will look like when you get it (and the measurement you will use to prove it).

 

Know what you're willing to invest or sacrifice to achieve it (time, money, manpower, ruffled feathers, etc.).

 

Follow these commandments with each training initiative you embark upon and you'll soon realize that ROI is a state of mind first, and a matter of crunching numbers second. 

 
All the best,
 

Jennifer Shirkani and Faith Csikesz
Penumbra Group Inc.