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July 10, 2006
Is Your Training Investment Paying Off?
Why It Matters...

Workplace training:
  • Minimizes accidents, lost workdays, and workers' compensation costs
  • Promotes regulatory compliance and avoids costly fines and lawsuits
  • Improves productivity and the quality of products and services
  • Keeps your organization on the cutting edge, which gives you the edge over the competition

But you have to be able to convince the people at the top that it's worth the cost--and that's when ROI analysis can be your best ally.

Prove it! One of the biggest challenges trainers face is a resistance to training from both middle and upper management. Supervisors and managers are frustrated at taking time away from work to train, and top management isn't convinced that time spent on training is time well spent. You can convince both groups that training is crucial by proving to them that training doesn't take employees away from their work; training is, in fact, a crucial part of their work. In order to prevent accidents and remain competitive in today's global marketplace, it is vital that your workforce maintains the best skills and know-how to safely produce the best products and services. The question is how to convince everybody of that fact.

Check the ROI. Return-on-investment (ROI) analysis gives you the specific information you need about the financial impact training programs have on the organization.

It answers the vital question top management wants to know: "For every dollar we invest in training, how may dollars are we getting back?" Since you want to be sure employee training is seen as beneficial to the organization, you have to be able to answer that question with hard data. In other words, you need to know the percentage of profit made or savings earned for every training dollar spent. And that's exactly what calculating training ROI can do for you.

How to measure training ROI? Here's the simple formula for measuring training ROI:

ROI (%) = (Monetary benefits - training costs) ÷ Costs x 100

EXAMPLE: Assume that as a result of a new safety training program, an organization's accident rate declines 10 percent, yielding a total annual savings of $200,000 in terms of lost workdays, material and equipment damage, and workers' compensation costs. If the training program cost $50,000 to implement, the ROI would be 300 percent.

 

ROI = (200,000-50,000) ÷ 50,000 x 100 = 300%

 

So in this example, for every $1 spent on training, the organization gained a net benefit of $3.

To get the figures for ROI analysis, keep track of training costs, including the cost of design and development, promotion and administration, delivery (staff or technology), materials and training facilities, trainee wages, and training evaluation. And after training, keep track of monetary benefits, including labor savings, reduction in lost workdays and workers' compensation costs, productivity increases, and lower turnover costs.

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