Return on Invetsment HR.ppt

Return on Investment:
Training and Development
Session 1
ROI and Evaluation

Objectives
• At the completion of this unit, students will
be able to:
> Discuss the importance of determining ROI
in training environments.
> Identify stakeholders and develop questions
to determine their views and needs.
> Write training goals and observable
objectives based on stakeholders’ needs.

Objectives
> Describe the importance of the
assessment of learning for ROI.
> Recognize the differences between
short-term and long-term assessment.
> Identify items that belong on a training
budget sheet to determine ROI.
> Calculate expenses and ROI.
> Write a report on training that includes
all relevant data.

Return on Investment
• Rooted in manufacturing.
• Advanced to banking, health care, non-
profit, public and education sectors.
• Part of quality and efficiency
methodologies.

ROI Is Used To:
> Quantify the effectiveness of training.
> Manage the training budget.
> Provide evidence to management
and other stakeholders.
> Build trust and respect for ourselves
and our unit.
> Earn the ears of senior management.
> Identify areas for improvement.
> Provide data requested by senior
management.
> Keep our jobs.

Models
• Benefit/Cost Ratio
• ROI (%)
Costs
Program
Benefits
Program

BCR
100
(%) x
Cost
Cost
Benefit
ROI



Evaluation Levels
1. Reaction and Planned Action
2. Learning
3. Application and Implementation
4. Business Impact
5. Return on Investment

Stakeholders
• Who are they?
> Anyone who pays for, participates in,
benefits from, or has decision-making
responsibility for HRD and training.
• What should they know?
> The need for training.
> The results from training.
> The costs of training.

Needs Assessment and Task Analysis
• Needs assessment: identifies gaps
between what is and what should be in
the organization.
• Task analysis: investigates the specific
skill(s), knowledge or attitudes and at
which point there is a breakdown in use or
performance. If the analysis uncovers a
lack of knowledge, skills or attitude, then
training is required. If it reveals faulty
equipment, poor work conditions or lack of
incentive, then another solution is needed.

Session 2
Goals, Objectives, Assessment

Goals
• Organizational Goals
These goals are typically targeted
toward the organizational level and
include such things as productivity, net
income, inventory and cash cycles, and
customer satisfaction.
• Learning Goals
These goals typically focus on the
individuals in the organization and their
performance, knowledge and skills.

Writing Objectives
Easy as A, B, C, D
Audience: Who?
Behavior: What do “they” do?
Condition: What is the setting and
method of evaluation?
Degree: Measurement to be met.

Example Objective
Audience
Behavior
Condition
Degree
At the completion of the course the learner
will be able to score 85% or better on a
written multiple choice 25 question test

Example Verbs
• Verbs to Use:
> Discuss
> Explain
> Demonstrate
> Identify
> List
> Perform
> Compare/Contrast
> Score (on an
assessment)
• Verbs to Avoid
> Understand
> Comprehend
> Know
> Do

Objectives in ROI
• Course objectives: What is it that the
learners will be able to do upon course
completion?
• Application objectives: What goals do
the HRD/training practitioner have for the
application of the skills gained in training?
• Impact objectives: What effect will
accomplishing the application objectives
have on the organization?

Example Objectives
• Course objective: Learners will
be able to make 15 entries in a
customer database in 15 minutes
with no more than 1 error.
• Application objective: Learners
will be able to reduce the data
entry error rate by 50 percent over
the next 6 months.
• Impact objective: Employee time
spent correcting database errors is
reduced by 25 percent from last
year’s rate.
Increasing
Scope

Learning Assessment
• Alignment between assessment and objective is
paramount.
> Easy to do with well-written objectives.
• Cognitive, psychomotor and affective domains
are assessed in different ways.
> Cognitive: written and oral tests; discussion;
compare/contrast exercises.
> Psychomotor: demonstration; performance.
> Affective: longitudinal observation and/or
discussion.
• Be sure to use the right type of assessment for
each objective of the learning event.

Session 3
Costs, Budgets, Accounting

Costs, Budgets, Accounting
• Quantifying ROI means accounting for all
the costs of the program.
> Fixed costs: independent of the number
of participants.
> Variable costs: Dependent on the
number of participants.
• There are costs at every step – make sure
to account for them all.

Output Measures
Outputs are product-driven and include
data that are not performance-based but
rather outcomes of changes in
performance or investment in equipment.
Examples include:
> Units built.
> Time it takes to build the units.
> Income from sale of units.

Benefits and Soft Skills
• Change in:
> Attitude, work climate, leadership,
teamwork.
• We desire these changes because they
ultimately effect productivity.
> Allow time for change in attitude or
behavior, then measure these changes
and report qualitatively.
> Allow time for change in productivity,
then measure for data and report
quantitatively.

Karen Kaminski
Tobin P. Lopes
Models
• Benefit/Cost Ratio
• ROI (%)
• Phillips – See Figure 2-2 in text.
Costs
Program
Benefits
Program

BCR
100
(%) x
Cost
Cost
Benefit
ROI



Benefit/Cost Ratio Example
• Data entry clerks’ average wage: $9.50/hr.
• Five hours per week were spent correcting errors before
training.
• 20 percent less time correcting errors saves one hour each
week.
• 40 clerks.
BCR = .076 for one week. What about 13 weeks? 26 weeks?
076
.
$5,000
hr
9.50x40x1


BCR

Now with ROI%
• Data entry clerks’ average wage: $9.50/hr.
• 20 percent less time correcting errors saves one hour each
week.
• 40 clerks.
• When clerks use their skills for 26 weeks, ROI% is almost
100%!!
%
4
.
92
100
5000
4620
100
5000
5000
1
380
(%) 




 x
x
x
ROI
%
6
.
97
100
5000
4880
100
5000
5000
)
26
380
(
(%) 


 x
x
x
ROI

Create a Data Collection Plan
• What?
• New information that needs to be
recorded?
• Who?
• When?
• How?

Additional Thoughts
• Access to learners after training:
> Do you have access to learners to
follow up on application and use of the
knowledge and skills developed during
the training?
• Isolating training effects:
> Consider what else may have occurred
at the same time as the training that
may have made a difference.

Trend Line Example
Trend Line
35
Y axis: 30
Number of
Customer Complaints 25
Projected Value 20
Before Training
15
Training Intervention
10
New Projected Value
After Training J F M A M J J A S O N D
X axis: Months

Session 4
Reporting Your Findings

Review of ROI
> Justify the training budget.
> Quantify effectiveness of training.
> Provide evidence to management and
other stakeholders.
> Build trust and respect for ourselves
and our unit.
> Earn the ears of senior management.
> Identify areas for improvement.
> Respond to management directive.
> Keep our jobs.

Stakeholders: Review
• Customer
• Employee
• Supervisor
• Subordinate
• President
• Board of Directors
• Stockholders

Reporting
• Needs to be:
> Timely, targeted and unbiased.
• The purpose is to:
> Illustrate success.
> Secure approval.
> Gain acknowledgement/agreement on
solutions.
> Build credibility.
> Enhance marketing.

Reporting
• Who needs to know?
• What do they need to know?
> How will you inform them?
• Presentation.
• Briefing paper.
• Detailed report.
• Letter.
• When and where?
• Who will present?
• Feedback?

Items to Include in a Report
• Executive summary.
• Title of training.
> Goals and objectives.
> Who participated, when/where, length.
• Assessment and outcomes.
• Evaluation.
• Budget.
• Recommendations.

Summary
• Know your audience:
> Who, existing and desired skills,
knowledge and attitude (audience
analysis).
• Expectations of/from organization:
> Goals and objectives, stakeholders.
• Assessment and evaluation:
> Budget, data collection.
• Reporting.

Finally
Take action on the data collected.
Use it to enhance your training and
therefore your organization.

Return on Invetsment HR.ppt

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