Navigating the training ROI dilemma

Many organisations tend to consider training a waste of money simply because they have no way of measuring the return on investment (ROI) of training interventions. The adage of "you have to spend money to make money" isn't taken lightly, and investments, especially those directed towards employee training, are meticulously scrutinised for their returns.

Businesses need to measure the ROI of training programmes to be sure that the training programmes they invest in will pay off and improve employees' skills. ROI doesn't just mean instant financial returns; it also means bigger effects on factors such as work quality, operational efficiency, employee morale, and retention, all of which influence a company's bottom line. Tangible ROI gives people who make decisions an objective way to decide how to build strategies and decide where to put resources.

The effects of training are often vague and subjective, like increased happiness among employees or a more positive work environment. It can be hard to turn these effects into hard numbers without clear ways to do so. Furthermore, the benefits of training often take time to fully show.

A financial review that isn't thorough enough could miss these delayed effects and undervalue the real impact of training. When trying to closely link financial results to a specific training programme, external factors like changes in the market, staffing or training happening at the same time can make the results even less clear.

There are several ways for businesses to determine the financial ROI of training. These could include conducting a cost-benefit analysis that compares the cost of the programme to the additional revenue generated or reduced production costs due to fewer mistakes.

Forecasting models use predictive analytics to make accurate financial projections based on how performance factors change after training. Time tracking indicates time saved on processes or jobs after training, which leads to lower costs or increased revenue. Turnover and retention metrics calculate the savings on hiring and training new employees by tracking how long employees stay with the company after training.

Productivity metrics help you calculate the increased productivity by comparing output before and after training.

By putting the effects of training programmes into monetary terms, companies can get an objective picture of how effective training really is. In today's highly competitive market, it's important to set clear financial ROI metrics to ensure training programmes are not simply unnecessary expenses, but smart investments that benefit the employee and the organisation.



Dr Rowan van Dyk is the head of academics and programme development at the Business School of Excellence (BSE).