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ROI is a key financial metric of the value of training investments and costs.
It is a ratio of net benefits to costs, expressed as a percentage.
The formula can be expressed as:
[(monetary benefits cost of the training) / cost of the training] x 100
If the ROI from a training programme is calculated at 335%, it means that for every
rand spent, there has been a return of R3,55 in net benefit, after all costs are factored in.
The exact form of that benefit depends on the objectives of the learning programme, i.e.
better telephone technique application and communication skills after training. The total
cost of the employee to the is calculated including floor space, p.c. rental, etc. If the
employee answers 3,000 calls per month divided into the cost of R7, 000. to the, the cost
would be R2.33 per call cost to the. After training the employee answers 3,180 calls per
month. The cost of the employee to the is now R2.20. The value of the training programme
is then calculated as per the above formula to determine the monetary value of the benefit.
A business ROI focus is based on a benefit/cost analyses to determine the business
value as a result of training. ROI assist in achieving such values as accountability,
justification of the money spent on training, and the allocation of resources for training.
ROI measurement entails the three cs of ROI; cost, change and calculate, i.e. determine the
cost of learning, measure the change as a result of learning, and calculate the benefits as a
rand value.
The business rationale for investment in training includes the following:
Legislative compliance
Legislation has an impact on the way s view training; the purpose of training, and the
value of training delivered. South Africa has been investing vast amounts of money in
training. More so over the past eight years as a result of legislation in the form of the SAQA
Act, Skills Development- and Skills Development Levies Act. Training budgets are growing.
Additional training and development programmes are being implemented as part of s
employment equity plans and workplace skills plans.
Specific measures used when measuring ROI demonstrate the link between training
and tangible measures in the form of increased output, fewer mistakes, better quality or
higher level of customer satisfaction. Positive behaviour as a result of training could be
reduced absenteeism or lower staff turnover.
A % reduction in staff turnover translates to the having to recruit and train for
example eight employees less, as opposed to no training and a higher staff turnover.
Questions to ask when an employee is scheduled to attend training:
How does this training relate to the aim of the organization, of the division or
business unit, and to the individuals developmental plan?
Why is it important?
What is the link between the training and the day-to-day activities?
Tel: 011 447 7470 Fax: 086 686 8425
Website: w ww.a lusa ni.co.za Po st: PO Box 2844, Sa xonwold, 2132
What is the link between the individuals job, the and the customer?
Some of the constraints to measure ROI are the difficulty to collect data and the lack
of sufficient training records. A business approach to ROI highlights other issues such as the
linking of training to thes strategic objectives. These objectives are indicated amongst
others, on the Workplace Skills Plan. Individual performance and the relevant training needs
required to achieve strategic objectives should be linked to the Performance Management
system of the. One integrated process is then applied to identify individual competencies
needed to achieve al effectiveness and record these on a Personal Development Plan. This
ensures that learning is integrated into the overall business strategy.
To ensure that training achieves what it aims to achieve, the training needs that are
identified needs to be aligned to al goals as an integrated process between the different
levels.
Level
Aim
Measurement
Employee
Personal development
Individual performance
Training manager
Individual measures
Business measures
Executive management
Shareholder value
Measuring the impact of training forms part of an integrated business process and is
done according to a scientific process and specific ROI formula. A comprehensive framework
for measuring ROI starts from a needs analysis to determine the current competence and
gap in performance, determining the required outputs, the sourcing, design and
development of learning material, data collection, measurement and reporting. ROI bottom
line is achieving measurable business objectives. Training becomes an integrated and
focused learning experience.
Tel: 011 447 7470 Fax: 086 686 8425
Website: w ww.a lusa ni.co.za Po st: PO Box 2844, Sa xonwold, 2132