Learning to Measure Learning

By Anna Maria Virzi Print this article Print

Companies are slashing their training programs because they can't forecast potential returns. Learn how to measure the ROI of training your employees.

As one Fortune 500 chief information officer puts it, training for employees is like plumbing. "It's the cost of doing business. You need to keep your skills up to date," he says.

PDF Download But financial belt-tightening is forcing human resources and corporate training professionals to pay attention to assessing the return on investment.

"ROI is probably the hottest thing in the technology learning business. Training managers are being forced to run an effective business, and ROI is clearly a part of it," says William Vanderbilt, director of operations for information technology training at CompTIA, an association with 10,000 corporate and 10,500 individual members.

Many programs offer clear benefits. Penny Gelb, former training manager at Genuity, says her department started an "IT boot camp," a one-day program for new employees. "That cut down calls to the help desk by 30% from new hires," she says.

But companies have taken an axe to training programs in part because managers are unable to forecast potential returns, says Vanderbilt. "Most training managers are ill-equipped to start doing an ROI analysis. People looking for benchmarks are having a hard time finding anything to take to executives."

Jack Phillips, a consultant and author who helps companies assess the ROI of training, says the task requires lots of information gathering. The first pieces involve measuring employee reaction to the training and determining the new skills that are acquired.

Next, employers should identify related changes in employee behavior. For example, what is the employee doing differently? Then the company can assess the business impact of the change, such as whether a developer is able to write code faster or more efficiently, resulting in savings to the company. The savings can then be compared with the cost of a program to determine the actual return, says Phillips.

An ROI review—estimated to cost 5% of a program's overall budget—is worthwhile for some but not all training activities, according to Phillips.

"We suggest doing this type of analysis for programs that are very expensive, strategically focused, involve a lot of people, a lot of time, or are controversial; and finally, those that interest the management team. They often want to know the value of training," Phillips says.

Background Reading Training may seem too intangible for an ROI assessment, but consultant jack Phillips believes that if a program is worthwhile, its effects can be measured. The example in the PDF download above, developed by Baseline, looks at return on sending developers to a certification course. It follows the basic steps recommended by Phillips in his book, Return on Investment in Training and Performance Improvement Programs. which can be found at www.franklincovey.com/jackphillips.
Take Our Quiz The cost of assessing the ROI for training may be more than the exercise is worth. This quiz helps you calculate the return of, well, calculating return.

This article was originally published on 2002-05-15
Executive Editor
Anna Maria was assistant managing editor Forbes.com. She held the posts of news editor and executive editor at Internet World magazine and was city editor and Washington correspondent for the Connecticut Post, a daily newspaper in Bridgeport. Anna Maria has a B.A. from the University of Rhode Island.
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