Measuring Return On Training Dollars Increasingly Possible
Measuring employee training and development's impact on the bottom line and establishing return-on-investment (ROI) for a training program has long been thought to be akin to "counting water"-just about impossible. That is until now, according to three employee development experts.
"We looked and we saw that there just wasn't any good research out there on this topic," said BAI Executive Director James McNeil during a workshop entitled "Measuring The Impact of Employee Development On The Bottom Line" at BAI's Retail Delivery Conference. "And yet 85% of banks surveyed provide nine to 80 hours of paid training, and 60% train at least 60% of their workforce each year, so it's a major investment, and the question has to be, are you spending it on the right things and getting a return on that investment?"
BAI set out to answer those questions by conducting a survey on training and development. One surprise that surfaced immediately was that contrary to popular belief, top management really does care about training.
"The most startling thing was that two-thirds of the responses came from senior executives or heads of retail instead of the HR people who live and breathe this stuff," McNeill offered. "There's clearly a strong consensus that employee development does impact business performance-it's just that so many top-line executives don't know how or why. If senior management knew more about training and development they would do more."
Another surprise: it was the senior executives who felt the training budget was inadequate, much more so than the HR people who responded to the survey. The good news, then, is that senior management would appear to be amenable to allocating more money to training-but only if they knew how best to spend that money.
"There was a common theme around, 'Are we training for the right thing,' and 'Are we measuring [the results],' " he said, noting that the "top performers" who responded to the survey were those who measured the results of training and reported those results to senior management.
Chip Cleary, VP-advisory services for Cognitive Arts and one of McNeill's co-presenters, paraphrased John Wannemaker's famous line: "I know half the money I spend on advertising is wasted, I just don't know which half."
"Part of the problem is that you've got the business line people and the HR people trying to have a conversation about this, and they don't speak with the same vocabulary," Cleary suggested. "It's like trying to order dinner in a foreign country. At some point you decide, 'I've got to eat, so I'll just order something,' but you know you're not getting the best meal you could if you understood the language."
The first step is linking training to business outcomes. "Most often, when people design a training program, they identify the desired performance they wish to get out of employees and then train for that," Cleary explained. "But you need to go deeper. People learn from their mistakes, so you also have to identify the variances, the mistakes that people make."
The next step is sizing those mistakes, which allows you to focus on the ones that are most important to your business, because you can't solve everything. To size a mistake, determine how much such a mistake costs on average, how often the mistake is made, and how much it would cost to train employees not to make that mistake. This allows the credit union to determine where it can save the most money or make the most money by putting in place a training program that addresses the top performance issues based on ROI.
One of the common downfalls of training is that even if you make a training program enjoyable and easy to learn or understand, that's no guarantee that the employees will actually apply what they've learned.
Jeffrey Berk, director of products and services at KnowledgeAdvisors noted that a number of technology-driven tools exist to help measure the effectiveness of training. "Trainers and HR are often concerned about providing senior management with any numbers related to training because they think those numbers have to be perfect, they don't want to provide unreliable data," he advised. "No, the data's not going to be perfect, but senior management can understand that. These tools can help you provide reasonable indicators that will help management make informed decisions."