The Importance of Assessing the ROI for training


Fortunately in South Africa, legislation such as the South African Qualifications Authority Act (SAQA) Act, Skills Development- and the
Skills Development Levies Act has had a positive impact on the way
organisations view training. Training budgets are growing and
additional training and development programmes are being implemented as
part of organisations’ employment equity plans and workplace skills
plans. But instead of just viewing training as a compliance matter,
companies should be aware of the factors they need to look at when
measuring the effectiveness of the training and the return on their
investment to make sure they get their money’s worth.

There is thankfully a scientific method to evaluate the return on investment
(ROI) in training. ROI is a measure of the monetary benefits obtained
by an organisation over a specified time period in return for a given
investment in a training programme i.e. it is the extent to which the
benefits (outputs) of training exceed the costs (inputs).

Please see the calculation below:

ROI Calculation

To calculate ROI you must first make estimates or obtain measurements of
the costs and benefits associated with a training programme. These
costs of a training programme can include:

  • Design and development costs of the training programme: internal days of design and development, costs of external designers
    and developers, other direct design and development costs (purchase of
    copyrights, travel, expenses, etc.), outright purchase of off-the-shelf
    materials.
  • Promotional costs:internal days of promotional activity, costs of external agencies, other direct costs of promotion (posters, brochures, etc.).
  • Administration costs:hours of administration required per student, direct administration costs per
    student (joining materials, registration fees, etc.).
  • Faculty costs:the number of students who will be going through the programme, hours of
    group training (whether classroom-based or delivered in real time,
    online), hours of one-to-one training (typically face-to-face, but
    could conceivably be conducted by telephone, video conferencing link or
    in real-time, online), hours of self-study training, additional faculty
    hours (preparation time, the time needed to review or mark submitted
    work or the time needed to correspond by email or bulletin boards with
    online students), faculty expenses (travel, accommodation, subsistence,
    etc.).
  • Materials:cost per student of training materials (books, manuals, consumables, etc.), license cost
    per student for use off-the-shelf materials.
  • Facilities:training rooms, open learning / self-study rooms, equipment used.
  • Student costs:Estimating the amount of travel and training that is undertaken in productive work
    time, any direct student expenses – travel, accommodation and
    subsistence.
  • Evaluation costs:The time spent evaluating the training.

The benefits of a training programme can include:

  • Labour savings: Reduced duplication of effort, less time spent correcting mistakes, faster access to information.
  • Productivity increases: improved methodologies reducing the effort required, higher levels of skill
    leading to faster work, higher levels of motivation leading to
    increased effort.
  • Other cost savings: fewer machine breakdowns, resulting in lower maintenance costs, lower staff
    turnover, reflected in lower recruitment and training costs, a
    reduction in bad debts.
  • Other income generation: a higher success rate in winning competitive pitches, leading to
    increased sales, sales referrals made by non-sales staff , new product
    ideas leading to successful product launches.

Here’s an example of the final results for a ROI analysis:

Duration of training

33 hrs

Estimated student numbers

750

Period over which benefits are calculated

12 months

Costs

Design and development

R40,930

Promotion

R4,744

Administration

R12,713

Faculty

R86,250

Materials

R15,000

Facilities

R40,500

Students

R553,156

Evaluation

R872

Total cost

R754,165

Benefits

Labour savings

R241,071

Productivity increases

R675,000

Other cost savings

R161,250

Other income generation

R0

Total benefits

R1,077,321

Return on investment

143%

Payback period

8 months

Evaluating your company’s training interventions in terms of ROI is something that
can be done by your human resource department in conjunction with a
training company such as Compuscan Academy. Our experts will review all
implemented skills development initiatives to determine what return on
your investment was so you can be sure you got your money’s worth.

To learn more about Compuscan Academy can help you, you are welcome to call us at Tel: 021 888 6000, e-mail us at info@compuscanacademy.co.za to visit our website at www.compuscanacademy.co.za

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