Are You Getting a Return on Your Investment in Employee Training?

SMBs must weigh the benefits of training against time and money to get a return on investment. Find out how to determine the ROI for your company.

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Are You Getting a Return on Your Investment in Employee Training?

Here's what you need to know:

  • Businesses don't always know if the employee training they've invested in will produce the results they want
  • Calculating ROI is straightforward when based solely on numbers, but training has potential advantages that can’t be measured in dollars alone
  • Training can’t guarantee ROI but there are strategies for creating training programs that could result in ROI
  • Measuring how well a company is doing is always a best business practice, and that includes the employee training it offers

Businesses don’t always know if the employee training they’ve invested in will produce the results they want. Many simply believe that improving employees’ skills is worth the time and money, even when it doesn’t necessarily guarantee the results they want.

For small businesses (SMBs), the investment may be even more crucial. Among the top 10 concerns for small employers is finding and retaining the right hires. Employee training can be a remedy for an organization’s talent shortfalls by boosting engagement and, in turn, boosting retention.

But training can be a costly investment for many SMBs. According to the National Federation of Independent Business (NFIB) Research Center’s “National Small Business Poll: Employee Training Survey,” finding the time and funding to train employees and new hires was cited as a “serious problem” for 1/3 of the SMBs polled.

Also, finding training funds was considered a “serious problem” for 18% of employers in the study.

SMBs must weigh the benefits of training against time and money to get a return on investment, or ROI.

How do you calculate return on investment?

Simply put, ROI is the gain from an investment measured against its cost. ROI usually is calculated in percentages using this basic formula:

ROI = Net Profit ¸ Total Investment x 100

Calculating ROI is straightforward when based solely on numbers. But training has potential advantages that can’t be measured in dollars alone. In fact, employee training “costs” include both time and money.

Instruction and administrative expenses to include

A return from the dollar cost of training is an easier number to calculate. Here’s a list of instruction and administrative expenses to include in planning a training program that you can measure later for ROI:

Instruction expenses

  • Course materials, including digital and/or hard copies
  • Any software required
  • External trainer’s fee, if necessary

Instruction expenses should also include any revenue losses resulting from employees attending the training rather than being on the job.

Administrative expenses

  • Planning, setting up, and managing the training
  • An offsite training venue, if necessary
  • Any travel and/or hotel accommodations
  • Follow-up sessions

SMBs can apply the ROI formula to these dollar expenses.

Although it may be harder to put a dollar value on training incentives, their value is as important as dollar expenses.

What are the incentives for small employers to offer training?

As the NFIB study showed, the majority of SMBs aren’t letting time and money keep them from offering employees training. In fact, small employers have 3 key incentives for offering job training:

  1. Employees value training. A SurveyMonkey poll of over 600 employees found that 86% believe job training is important, and nearly 3/4 said they’re willing to learn on their own time to improve job performance.
  2. Employees want training and will stay onboard to get it. In LinkedIn’s 2018 Workplace Learning Report, 94% of employees surveyed said they would stay with a company if it offered career development opportunities, which includes training.
  3. The time and money invested in training can pay off. Employers that invest time and money in training reportedly earn ROI when the results meet or surpass their expectations.

Another incentive for offering training is the need to upskill employees. The growth of digital technologies, artificial intelligence (AI), and robotics demand that workers have the skills needed for what the global business services firm Deloitte calls the future of work.

Another incentive for offering training is the need to upskill employees.

In a joint 2016 survey by Deloitte and MIT Sloan Management Review, 90% of the organizations polled expected their industries to be totally disrupted by digital trends. And 70% didn’t think the workers they hired at the time had the skills to manage the disruption.

What are other ways that SMBs benefit from training?

Better performance is the purpose of training, whether it’s developing employees’ skills, improving customer service, increasing sales, or raising productivity. But for SMBs that are still wondering whether employee training is worth the time and money, here are other reasons why it can pay off:

  • Performance consistency. Providing service that’s always of the same quality is vital to a business’s success and its customers’ expectations. Training is the way to achieve consistent performance.
  • Company values. Employees, especially new hires, can learn a company’s values through a formal training program. Aligning performance with organizational values helps prevent unacceptable behavior or misconduct, whether it involves a company’s ethical standards or employment mandates covering issues like sexual harassment or discrimination.
  • Cross training. Teaching workers tasks other than those they regularly perform allows organizations to give them different assignments as needed without a work disruption. Also, trainees gain new skills, which can place them on a promotional track, earn them higher wages, or prepare them for a job change.
  • Productivity. Since trained employees seldom need to think about how to perform their jobs, they’re able to keep the workflow on track to maintain productivity.
  • Providing employees training in state-of-the-art technology helps keep organizations up to date on digital advancement and trends.

After considering the incentives training provides, SMBs can plan training programs that improve the chances of gaining ROI.

What are strategies for creating trainings that could result in ROI?

Can training guarantee ROI? No, according to training experts and planners. But there are strategies for creating training programs that could result in ROI, such as:

  • Deciding what employees should learn. Do they need digital, soft, or leadership skills? And what training do employees say they want or need?
  • Setting specific goals for the training. A goal can be to increase your flagship product’s 3rd-quarter sales by 30% or to have 75% of your staff certified in a particular software program by year’s end.
  • Selecting the type of training best suited to your organization. Training can be onsite, offsite, online, or conducted formally through a college or university. It can also be offered informally in a peer-to-peer format or set up in a structured mentoring program.
  • Assigning a qualified person or team to plan and oversee the training. Professional trainers and talent developers can be costly for SMBs. Therefore, whoever manages the training should have the right skills and knowledge.
  • Making sure employees retain what they learn. When training ends, employees may return to their regular work schedules without ever using or remembering what they learned. A training shortfall like this means ROI from your investment is unlikely. A possible preventive measure is to offer refresher courses for employees or have managers make the training curriculum a performance requirement.

Measuring for ROI will reveal how successful the training was.

The Kirkpatrick Model for measuring ROI in training

The Kirkpatrick Model is a 4-point metric system for ROI in training. The model is based on the following points, which are followed by questions to consider and measuring recommendations:

  1. How did employees respond to the training? Employers can use follow-up surveys to measure ROI.
  2. Did employees learn what they were expected to? Exams or interviews may reveal what they learned and retained from the training.
  3. Transfer. Are employees using what they learned on the job? Employers can use surveys, exams, and interviews to compare employees’ pre- and post-training performance.
  4. Did the training meet an organization’s objectives? Employers can use changes in services, sales, or productivity to measure the training’s effectiveness. Like most digital platforms, online training generates analytics to use for measuring ROI.
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The takeaway: Measuring ROI is always a best practice

Measuring how well a company is doing is always a best business practice, and that includes the employee training it offers.

The ROI that’s possible from training employees can be an incentive for making it a business priority.

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