The ROI of Training Your Employees

roi of employee trainingNothing strikes fear into a training manager’s heart quite like the term “ROI.”

Trying to prove to leadership that a training program is paying off financially is a daunting task — direct evidence may be scant, company leaders might not understand training, and your budget may be on the line. But what if there were a non-financial way to measure the success of your training?

What is ROI?

ROI stands for Return on Investment. Simply put, it’s proof that your training — which your company is likely putting time and dollars into — is paying off financially. Unfortunately, many organizations tend to see training as a cost, rather than as an item that will indirectly increase revenue, and they often want proof that their employee training programs are increasing their bottom line.

The problem with this is that it’s difficult to prove the ROI of an internal program like training because other factors — decisions made in other departments, or the economy — have a more direct effect on a company’s success. Also, it often takes time for training to pay off, so it’s hard to point to a direct increase in the bottom line that correlates to training.

Rather than thinking of your development program as an investment in learning, it may help to think of training as an investment in your workforce.Then you can point to specific improvements demonstrated by your team as proof your training is working.

Instructional designer Diane Valenti calls this Return on Expectations (ROE). In a piece she wrote for ATD, Valenti talks about the value of setting behavioral targets for your training program. For example, maybe the goal of your training program is to improve your team’s ability to nurture customer relationships, or to demonstrate better etiquette on the phone.

Measuring ROE is a more accurate way to know if your training is meeting goals because you can measure a specific behavior.

And, if that goal-based behavior has improved, chances are it’s having a financial impact as well (such as lower turnover or happier customers.)

Below are some goals you can tie to a return on your expectations.

1. Job performance

One of the easiest ways to prove the effectiveness of your training is by measuring a specific job activity. If there are specific tasks you want your team to be better at, you can design training specifically for that activity and measure improvement.

Let’s say you want your team to get better at following your organization’s sales process. First take a baseline measurement before training, noting how well everyone is following the process.

You may collect hard data, like the number of deals closed, and you may also collect anecdotal information, like sales managers’ observations on staff’s performance. After training, gather information again and compare your team’s performance. If they’ve improved, you’ll have proof your training is working.

2. Retention

According to Gallup, businesses in the U.S. lose a trillion dollars annually to employee turnover. What might that mean to an individual business? The cost of replacing an individual employee can range from one-half to two times the employee’s annual salary, so Gallup estimates that a 100-person organization paying an average salary of $50,000 could have turnover and replacement costs of approximately $660,000 to $2.6 million per year.

Fortunately, training goes a long way to keeping employees around. Many workers — particularly younger workers — value training because they link it with opportunity. In fact, a LinkedIn study found that 40 percent of workers 24 and younger would talk to their manager before making a career change if they were offered “access to access to additional opportunities to learn and grow within the workplace.”

3. Career growth

While employees see development as a perk — millennials as well as Generation Z have also been cited as finding training and development opportunities attractive in an employer — training is not just a benefit for workers. It’s also good for the company when employees’ talents are nurtured. Take leadership training, for example.

There’s a lot of merit in growing your own leadership. Homegrown executives mean that a company is retaining institutional knowledge. Leaders who are promoted from within don’t need to spend as much time learning how an organization works since they’ve been working in that organization, and they’re also automatically a good cultural fit, whereas a CEO who is hired from another company might not be.

Despite this, about half of senior leaders don’t think their leadership training is up to par, according to the Harvard Business Review. It’s a long game, but by investing in good leadership training, you will eventually be able to show that more managers and (eventually) executives are being promoted rather than hired.

4. Customer Experience

Are you getting complaints from customers, or worse, are they complaining about your organization on social media? If so, you may need to train for customer experience.

A way to do this is to offer soft skills training. Soft skills are people skills; they’re the skills that make your team pleasant to work with: time management, empathy, good listening and communication are all soft skills that customer service reps need to provide exceptional service. While you may think that people are born with these skills and that they can’t be trained, that’s not the case — soft skills are skills. People skills may come naturally to some reps, and others may have learned them on their own, but the rest of your team can learn.

The effectiveness of soft skills training can be measured by looking at customer experience metrics. If your customers are happier after your team has been trained, your training is working.

5. Course completion

Sometimes it’s not the content of your training that needs to change. It’s the way you deliver it. If your team isn’t taking or completing your training, it may be time to look at the technology you’re using to provide training.

For example, if you’re not offering mobile training, you may want to consider it. Mobile training makes learning more convenient for your employees because they can take it whenever they have a moment, no matter where they are — especially if your learning has been designed to be consumed in small chunks. Mobile learning can also help remind your employees to train.

Deloitte finds that Americans check their phones an average of 52 times a day. That means the push notifications on your team’s smartphones will remind them about new modules, unfinished learning, and — if you’re using gamification — how close they are to earning their next badge.

The great thing about changing your course delivery is that the effects are easy to measure and compare; simply measure course completion before and after you change the way you offer learning.

Your training’s ROI doesn’t have to be about the bottom line

Training often doesn’t affect a company’s bottom line directly, but it does have an immediate impact other areas — like customer satisfaction, employee happiness, and job performance, and those things often can be measured financially.

When you have other metrics to offer, you can give leadership a more accurate assessment of your training program’s effectiveness, and a better idea of the return they’re getting from learning and development.