A Handy Guide to Measuring ROI From Training

Calculating the return on investment is essential to every aspect of a business, and training is no exception. This is especially important, considering training is traditionally viewed as being repetitive, expensive as well as labor and time consuming.

If you’re wondering if your annual training budget is justified, here’s a quick and handy guide to measuring ROI from training.

What is Training ROI?

Training ROI is a metric used to assess the financial return gained from investments in employee training programs. It is calculated by comparing the benefits obtained from the training to the costs involved in delivering it. The formula typically used is:

Training ROI=(Net Benefits from Training − Training Costs ​/ Training Costs) × 100

Measuring training ROI helps organizations justify training expenditures, enhance training programs, and improve overall business performance by aligning training goals with business objectives.

Methods to Measure ROI from Training

Here are the most commonly used methods to measure ROI from training.

1. Use a Training ROI Calculator

Training ROI calculators simplify the calculation process by providing a structured format to input costs and benefits. These tools automatically compute the ROI, saving time and reducing the risk of errors. Various online calculators are available, each designed to cater to different types of training programs. 

These calculators often include fields for direct costs like materials and instructor fees, as well as indirect costs such as employee time. By ensuring all relevant expenses are considered, they provide a comprehensive ROI analysis. 

Moreover, some calculators offer features for projecting long-term benefits, allowing organizations to see the potential future returns from their training investments.

2. Supervisor Assessments

Supervisors play a pivotal role in evaluating the impact of training on employees. They can assess changes in employee performance, productivity, and behavior post-training. Implementing regular supervisor assessments helps in obtaining qualitative data, which complements quantitative metrics.

3. Impact Studies

Impact studies involve a detailed analysis of the business changes resulting from training programs. These studies focus on metrics such as increased sales, improved customer satisfaction, and enhanced productivity. By comparing pre- and post-training data, organizations can quantify the direct benefits of their training initiatives.

4. Phillips ROI Methodology

The Phillips ROI Methodology expands on the Kirkpatrick Model by adding a fifth level that involves cost-benefit analysis. This method includes:

• Reaction: Measuring participants' initial reactions to the training.

• Learning: Assessing knowledge and skill acquisition.

• Application: Evaluating the extent to which participants apply what they've learned.

• Business Impact: Analyzing the impact on business outcomes.

• ROI: Calculating the financial return by comparing the training benefits to its costs.

5. Training Effectiveness Measurement Platforms

These platforms automate the data collection and analysis process, making it easier to measure training impact. Key features include tracking learning progress, gathering feedback, and generating detailed reports. Using such platforms can enhance the accuracy and efficiency of measuring training ROI.

Steps to Calculate Training ROI

Here’s a step-by-step representation of how to measure training ROI.

Setting Clear Objectives

Defining clear, measurable objectives is the first step in calculating training ROI. Objectives should align with business goals and provide a benchmark for evaluating the training’s success. These objectives might include improving specific skills, increasing productivity, or achieving certain sales targets. Clear objectives ensure that both trainers and trainees understand the expected outcomes, making it easier to measure the training's effectiveness later on.

Gathering Data

Collecting data before and after training is essential for measuring ROI. Pre-training data sets a baseline, while post-training data helps in assessing the impact. Data can be gathered through surveys, assessments, and performance metrics. 

Pre-training surveys can capture employees' initial skill levels and expectations, while post-training assessments measure improvements and application of new skills. Performance metrics such as sales figures, error rates, and customer satisfaction scores provide quantitative evidence of training impact.

Calculating Monetary Benefits and Costs

Monetary benefits include increased revenue, cost savings, and productivity gains resulting from training. Training costs encompass all expenses related to designing, delivering, and evaluating the training. Breaking down these costs helps in accurately determining the ROI. 

For example, benefits might include revenue increases due to improved sales techniques, while costs could cover materials, instructor fees, and employee time spent in training. A detailed breakdown ensures that all financial aspects are considered, providing a precise calculation of net benefits.

Applying the ROI Formula

Once the benefits and costs are calculated, the ROI formula can be applied. Here’s a step-by-step example:

• Calculate Net Benefits: Subtract training costs from the total monetary benefits.

• Divide by Training Costs: Divide the net benefits by the training costs.

• Multiply by 100: Multiply the result by 100 to get the ROI percentage.

Consider Intangible Benefits

While monetary benefits are crucial, intangible benefits like improved employee morale, enhanced teamwork, and increased job satisfaction also add significant value. Though challenging to quantify, these benefits contribute to long-term business success. 

Surveys and feedback forms can help capture these aspects, providing a fuller picture of the training’s impact. High employee morale and job satisfaction often lead to better retention rates and higher productivity, indirectly supporting financial performance.

Benchmarking and Continuous Improvement

Benchmarking against industry standards helps in understanding where your training programs stand. Continuous improvement involves regularly updating training content, methods, and evaluation techniques based on feedback and performance data. 

Regularly reviewing training outcomes and comparing them with industry benchmarks can highlight areas for enhancement. Incorporating feedback from participants ensures the training remains relevant and effective, fostering a culture of continuous development.

Conclusion

Let’s end with something we said earlier in this blog. Traditionally, training is viewed as a repetitive, expensive, labor-intensive and time consuming activity. However, when you choose to train with UJJI, all those parameters are no longer valid. 

We at UJJI develop gamified, AI-powered micro-learning modules that are designed to be self-consumed. This means you no longer need a large training team or even a separate space for your staff to get trained. They can do it anywhere and at any time without any supervision.

We can transform your existing training materials into micro-learning pathways, or create entirely new modules for you. And in most cases, this is a one time expense. 

Our clients have been able leverage our AI-driven training expertise to upscale and upskill their teams in short periods of time, while experiencing unmatched retention and adoption rates. A great example of UJJI at work is the AYA data case study.

Explore our unique training methodologies and step into the future of learning and development. Book a demo with UJJI today!