What is ROI of training?

The return on investment (ROI) of training isn’t as difficult to calculate as you might believe. However, you will most likely need to consider it before implementing your training program. It all begins with strategy. If training is not the best answer, the goals are unclear, or it is poorly implemented, the ROI may be quite low. Learn five things to ask before establishing a training program in my previous blog post, “How to Get the Most Out of Your Training Program?”

Employees benefit from training in a variety of ways.

We know that training helps people advance in their careers by enhancing their job abilities. However, employers benefit from training in a variety of ways.

• Employees that work smarter and more efficiently benefit the company.
• It aids in recruiting since potential hires value the chance for professional development.
• Employees that are more satisfied are more motivated and productive.
• Employees have a stronger sense of loyalty and are more likely to stay.
• Employees that are well-trained make your organization more adaptable because they can fill in the gaps left by others’ temporary absences or during protracted talent searches.

Regardless of these excellent outcomes, your company’s leadership may request that you quantify the financial benefits or ROI of training. This is achievable because you launched your program with explicit goals, the correct delivery mechanism, and clearly stated measurements.

If you’re utilizing metrics that are already being tracked, make sure you measure them before and after the training program to document the difference. Then, at regular intervals, continue to monitor and quantify the change to document the long-term advantages of training.

To calculate your ROI, use the formula below:

                              Benefit
Return on Investment = ----------------------- X 100%

                          Cost of training

The method is simple, but you’ll need to go through a few stages to collect the numbers you need.

How to Calculate Return on Investment

Use these four stages to assist you in calculating ROI.

1. After training, gather information.
   Make every effort to evaluate and quantify the results. Has it boosted output, speed, or quality; decreased downtime; or increased sales? To isolate the effects of training, compare pre-training and post-training metrics, or compare findings with a control group.
2. Attach a monetary value to the “soft” data.
   Ideally, you will attach costs to training output or results in terms of profit, cost, or savings. Consider the cost of employee and supervisor time, based on hourly rates or salaries, when allocating costs.
3. Assign the charges of the training program.
   Track and monitor all training costs, including instructor fees, facility costs, travel expenses, and food, if relevant.
4. Calculate the ROI.
   Assume your counter staff isn’t selling many smart light bulbs because they don’t understand how they work or the benefits they provide to contractors or customers. You bring in a manufacturer who discusses the technology as well as the possibility of increased commissions, income, and profit from upselling. They also train employees on how to market to consumers, emphasizing the long-term cost savings and enhanced convenience of remotely controlling lighting.

Of course, you measured sales before to the training, so you know where you stand. You may now track sales one, three, six, and twelve months following training. Assume that after six months, your sales of smart light bulbs have climbed by $5,000. The training was free of charge.