The CEO’s Guide to the Business of Training, Part 2 asks what you already know is the most difficult question to answer. What return on investment (ROI) is your training giving you?
You may recall that in our last article in this series, we asked you to consider the alignment of your people’s skills with the strategic direction of your business.
If you gave that serious thought, did you determine what are your indicators of success? Defining the return on investment on your training relies on you knowing the answer to this question.
Can we define Return on Investment in training?
This is an area of some debate. It is debatable for a simple reason: Every program is different, and every organisation is different.
Even though writers like Phil Seely provide a calculation (which you can see here), the truth is that training isn’t strictly a numbers game. Training is a people game, and sometimes the change you are seeking is very hard to measure.
Start by knowing which numbers you’re measuring
As you’ll recall from our last article, the key to achieving your strategic outcomes is knowing which skills your employees will need to maximise in future.
You also need to know the existing variance: How far are they right now from demonstrating those skills?
The return on investment calculation, then, is working out whether not your people – once trained – are doing what they’ve been trained to do.
Whatever measure you seek when looking for your ROI, know you have to measure it before you train. To obtain your variance, and create a training program to close the gap, you have to know what is required. You can’t know the return unless you have a baseline measure to start with.
Training responsibly as a CEO requires you to make good decisions about training. The hard truth is that if you don’t create the right framework in which to do this, you won’t be able to make good training decisions. Likewise, if you’ve trained previously without doing the work before, during and after to lock down your ROI, there’s a very good chance that your past training decisions may have been poor ones.
Why don’t organistions measure training effectively?
If you are starting to think that perhaps you haven’t been measuring effectively, you are not alone.
This is reflected in research by McKinsey. In the results of one of their studies, they found that
… despite their changing needs, executives tend to say their organizations rely on the same methods to deliver learning and build skills as they did four years ago. (Source.)
There are some significant barriers to measuring training and training effectiveness. Much of the time, those barriers exist at an executive level. What many executives see is the failure of their people to apply it; but it’s much harder to see your own role in that failure. Measuring training and training effectiveness can be challenging to conceive and apply, it’s true. But also, sometimes people just don’t want to do it.
In this study from 2014 the authors found that senior executives are unwilling to measure training and training effectiveness for a number of reasons. Some of these include barriers like:
- Time: Good measurement is time consuming
- Knowledge: They don’t know how
- Entitlement: They don’t want to justify their own existence
- Leadership role definition: They feel like it isn’t their job.
The good news is that many of these barriers dissolve once the ROI measures are clearly established andare being used. The authors of that study noted that when clear ROI measures that are being used, it’s has a positive waterfall effect, because those measures contribute to executives successfully gaining budget approvals, and collaboratively setting priorities.
ROI results once obtained may be used to establish its place as an investment yielding positive utility and, based on the degree of such positive utility, to further market training and development programmes by their providers in future. ROI calculation of training and development programmes makes the mangers realize that the training function is providing viable contribution to their objectives. (Source.)
At Training x Design we regularly see a number of other barriers to measuring training. This includes an unwillingness to measure customer service, because it is confronting. It also includes situations in which organisations have used cheap or unspecific, off-the-shelf training, without knowing how to embed it correctly, which may have returned lukewarm survey results. It’s a disincentive to measure properly, or to invest in training in the future.
How you can create an effective measurement framework to understand Training ROI
I’m going to show you some of the components that you need to consider when thinking about your training program. Then, I’m going to show you some ways to measure it.
First things first: Get clear on success indicators before building the program
This will depend on:
- The strategic outcomes you want to achieve
- The specific skills required to achieve those outcomes
- The changes in behaviour that you expect to see as a result of training.
By following the first three steps, you will be clear on your business need. Defining the need first will tell you very clearly whether what you need is training, or something else entirely. This will also indicate to you whether or not your existing Key Performance Indicators are sufficient.
For example, if you are looking to improve sales, you might be tracking numbers closed but not how many conversations lead to a sale. Or, if you’re keen to improve productivity, and you’re only tracking teamproductivity, you may not be able to show how much discretionary effort each individual puts in. Similarly, with innovation measures, you might be tracking how many ideas are created, but not how many are actually implemented (or how many improve your business in a meaningful way).
Secondly, work out how to measure your indicators
Some training measurement indicators are qualitative, and some are quantitative. Which one is right for your training program?
Remember, not all measures are equal. Just because you get a feedback survey done at the end of a training day, it doesn’t mean that the feedback is useful or that it is a viable demonstration of the effect of the training.
Your method of measurement must measure the right indicators. It must also be able to be applied beforetraining, immediately after training, and eight weeks after training. It’s only by staging your measurementthat you will be able to understand both the immediate and long-term impact of the training program.
Realistically, long-term impact, arising from long-term change, is the only real indication of a positive return on your training investment. Capturing it helps you to understand whether or not you’ve just burned a hole in your budget.
Learners forget 90 percent of what they’ve learned in just two weeks unless it is reinforced; that’s an expensive proposition! (Source.)
Secondly, work out what kind of measure you need
There are two types of measures: Quantitative and qualitative. Which one is right for you? Here is a list that will get you started.
Types of quantitative measures
- Number of sales
- Number of new cusotmers
- Number of calls placed
- Number of emails handled
- Number of contributions made by an individual to a team
- Number of improvements implemented
- Number of meetings held to achieve an outcome
- Number of conversations (applicable in situations like leadership coaching)
- Number of ideas generated
- Number of visits made to clients
- Amount of money spent, save, or made
- … and so on.
Types of qualitative measures
- Customer or supplier feedback
- Levels of confidence
- Levels of competence
- Wellness ratings, including how supported people feel
- Actions taken by individuals
- Feedback from team leaders, managers, and other team members
- Happiness ratings
- Skills audits
- Quality of individual contributions
- … and so on.
The combination of measures that you use will vary depending on your desired outcomes, skills, and behaviours.
Aren’t qualitative measures pointless?
You may be one of those who find qualitative (opinion-based) measures unappealing, because they are harder to demonstrate or analyse. If so, it’s worthwhile considering their impact. For example, according to Dr Christina Boedker, who presented a speech on measuring wellbeing at the 2017 CEDA Healthy Workers conference, one point of increase on a self-rated wellbeing question roughly equates to a 4% increase in productivity.
… while intangible “work culture” components may seem elusive, the research shows that they are the true drivers of health and productivity – according to employees. (Source.)
Thirdly, run a trial before you deploy the program
Once you have defined your success measures, understood and built your specific metrics, then you can create a program and run a trial.
Running a trial is the fastest way for you to see whether or not you are going to get a return on your investment when you roll it out across the organisation. It allows you to create a minimum viable product, in a sense. If you need to train 100 employees, take 10% of them and see what impact your training makes.
** Using trial training sessions gives you a concrete ROI.** It:
- Tells you exactly what it’s going to cost in terms of time away from work, replacement employees, time spent in adjusting rosters, trainers’ fees, stationery, rooms, catering, etc.
- Gives you an opportunity to understand what it will take to obtain your measures before you train
- Gives you an opportunity to measure immediately after and to support, embed and measure training effectiveness for more than two weeks afterwards – and know how impactful that is.
If the outcome of the trial is positive – and if the changes in your employees stick – then you know that rolling out the program will be a good decision. If for some reason the response isn’t great, then you know that it’s either the training itself, or the support afterwards, that needs work. Sometimes, the poor long-term results of training isn’t because of the people trained, but because their leaders aren’t coaching them effectively.
To ensure success, reinforce the training
Maximising your leaders’ efforts in helping employees to retain knowledge is really what is going to result in positive training returns. One way that you can ensure the knowledge sticks is to create an ongoing learning reinforcement plan.
There are also other ways that you can do this, such as by ensuring your leaders understand how and why to exhibit the behaviours that make your training stick. If your leadership is not already reinforcing this change, perhaps it is an indication that your leaders also need training in how to be good coaches and mentors.
If one of the links in the training and business transformation chain is weak, then it will break down. Research tells us that the most important link in any network is its local link.
In summary: To get your training ROI, create specific, strategically aligned measures and apply them effectively.
Before you, as the CEO, sign off on the next training program, make sure that you have the answers to the following questions:
- What are our target employees’ existing skills and behaviours?
- What change do we expect to see in their skills and behaviours?
- How are we measuring it, and when?
- Is a trial being run first so that we can determine whether or not it will be beneficial on a broader scale?
Once you know these answers, which build on the questions from article one, you will be in a better position to advocate for employee training to become one of your priorities. Once you know the impact, you will be better able to advocate for budget, and to make smart, long-term training decisions. And, long term, your business will transform to support your strategic goals much more effectively.
Next in the CEO’s Guide to the Business of Training: Evaluation
Join us for our next article in The Business of Training, in which we will teach you how to evaluate the long-term impact of training. You will finally be able to answer, How effective is our L&D program in driving our business forwards?
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