September 2010

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).

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:

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.