In this blog we look at the Return On Investment (ROI) in Change Management and Training from the people angle not the monetary aspect. The financial benefits of training are not measured in terms of learner reactions, or the amount of learning that has been achieved; nor even the extent to which behaviour may have changed. The real benefits come from improved performance – traditionally the hardest training outcome to forecast or measure. It is not as easy to quantify the people benefits as the monetary aspect, for example calculating the % benefit using a cost and revenue figures.
There is always a need for a greater investment in training, particularly when major changes need to be made in direction, when performance needs to improve, when times get tough and when that investment in training needs to pay off.
People as Assets
Why do companies look to being accredited Investors In People? The current Investors in People framework reflects the latest workplace trends, leading practices and employee conditions required to create outperforming teams. The latest framework focuses on three key areas: leading, supporting and improving. Within these sit nine performance indicators based on the features of organisations that consistently outperform industry norms and organisations are assessed against these indicators using a performance model.
Similarly the ISO 9002 accreditation has a section entitled Resource Management where the importance of competence, awareness and training for human resources is emphasised.
There is also Lean Six Sigma, developed primarily in the manufacturing industry, this is a problem-solving methodology used to improve business processes, and create a culture of continuous improvement. It works by first identifying the root cause of issues, before designing a solution based on these findings — in other words, it is problem-driven rather than solution-driven. If you can reduce wastage, be it time or product, and errors then you can increase the overall quality, efficiency and effectiveness which in turn lead to higher profits and lower costs.
It has become something of a cliché for senior management to claim that ‘people are our greatest asset’. Yet, much to the dismay of trainers, the effort they put in to developing this ‘human capital’ continues to be seen as an expense and not as an investment. It’s time to turn this around. Start to analyse your training programmes as if they were capital investments – using techniques like ROI – and senior management may start to change their attitude to training. At a time when there are so many exciting new developments in training – not least online learning (see our course How to Deliver Training Online) – you’re going to need management’s co-operation.
First of all we will take a look at the major categories of benefits from the people aspect. The main benefit is of course that employees are more highly skilled and competent which leads to greater confidence and self-worth, and a happier workforce. Note that these categories are not necessarily mutually exclusive – in some respects they provide alternative ways of looking at the same underlying benefit.
Labour savings occur where, as a result of the training, less effort is needed to achieve current levels of output or possibly greater levels of output. Labour savings will only be realised if the labour applied to a job can really be reduced, whether this comes as a result of redundancies, transfers of staff to new positions or re-allocations of work. The savings are achieved by a reduction in the amount of labour applied to a particular job, not by using the newly available time to achieve further output on the same job, but this does not always mean reduction in the workforce numbers. If 3 people carry out a task that 2 people could do, the 3rd person can be utilised elsewhere. The 2 who do the task will feel that they are contributing a greater amount to the job.
- reduced duplication of effort
- less time spent correcting mistakes
- faster access to information
Result – Employees with an improved attitude to the task because they feel they contribute more and are valued and have an improved quality of output.
Productivity increases occur where, as a result of training, additional output can be achieved with the same level of effort. This implies that the organisation requires or desires more output in this particular area. If it does not, then it might be better to express the benefit as a cost saving.
- improved processes or equipment reducing the effort required
- higher skill levels leading to faster work
- higher levels of motivation leading to increased effort
Result – Employees with high motivation levels because they can do their work quicker, confidentlyand with less effort!
Other cost savings
Cost savings can be achieved in a variety of ways, not just through savings in labour, and this category allows you to take account of these.
- fewer machine breakdowns – resulting in lower maintenance costs and employee frustration
- lower staff turnover, reflected in lower recruitment and training costs
- less down-time because knowledge sticks
- reduced number of help-desk queries
Result – the frustration of working with old or difficult to maintain equipment is reduced, better training and use of the skills that have been learned leads to greater motivation and less reliance on colleagues for assistance and fewer demands on their time.
Other income generation
In some job positions, it may be possible for new income to be generated as a direct result of training, for example in a sales team.
- higher success rate in winning competitive pitches
- sales referrals made by non-sales staff
- new product ideas leading to successful product launches
Result – increased negotiation and sales skills lead to a high conversion rate of leads to concrete sales which all gives a competitive edge to a sales team and satisfaction with their own performance (especially if targets are reached and a bonus is paid)! Being part of a team and contributing to the success of that team is great for the self-esteem of your employees.
As mentioned earlier, measuring the success in the sense of people terms is not such an easy task as measuring cost benefits. So how can we do this?
Efficiency is a measure of the amount of learning achieved relative to the amount of effort put in. Efficiency has a direct relation to cost – the more efficient a training method is, the less it will cost.
Reducing wasted time is one way of measuring. Firstly you need to have measured the time and effort it takes to complete tasks. Take a measurement for individual tasks and for a mix of levels of ability. This way you will see if the training investment achieves the results by bring the novices up to the standard of the experts.
The extent to which trainees mix – a justification often made for training, particularly group events, is that it provides an opportunity for students who work in different departments or regions to meet with each other, share experiences, make contacts and find additional sources of expertise to utilise in the future. This coming together and sharing knowledge encourages more self-reliance in a team or the workforce, which is very beneficial. Remember though that the experts need to be recognised and rewarded in some way – perhaps a Super User Network is developing? (See our course Planning a Super User Network). There will always be an element of people who regard training as a perk, a benefit of some value, even if this is not directly related to learning.
Reactions are what you measure with the ‘happy sheet’. They are important because, if students react negatively to your courses, they are less likely to transfer what they learned to their work and more likely to give bad reports to their peers, leading in turn to lower student numbers for the future. They are also more likely to create an atmosphere that is not conducive to collaborative working and create unrest. Ensure that your courses encourage active participation for all, at all levels to help avoid this phenomenon. (See our course Training Skills For Better Performance).
Learning, in terms of new or improved skills, knowledge and attitudes, is the primary aim of a training event. Learning can be measured objectively using a test or exam or some form of assessed exercise based on Course Aims and Objectives. If a student has to achieve a certain level of learning to obtain a ‘pass mark’, then the number of passes may be used as an evaluation measure. Another important aspect of learning is the degree of retention – how much of the learning has stuck after the course is over. This can be evaluated using quizzes with a mix of pre-learning and post-learning quizzes. If you can inject an element of fun and competition into the learning experience, both on the course and the resulting application of the learning, you will encourage attentiveness and who knows, points may mean prizes! Incorporate some fun using ideas from our course Icebreakers and Games.
If a student has learned something from a course, you hope that this will be reflected in their behaviour on the job. If a student employs what they have learned appropriately, then their work behaviour will meet desired criteria. Behaviour can be measured through observation or, in some cases, through some automated means. To assess behaviour change measurements need to be taken before and after the training, observation and video recording may help achieve this.
This is what it all boils down to – if, as a result of training, students are using appropriate behaviours on the job, then you would expect that to have a positive impact on performance. A wide variety of indicators can be employed to measure the impact of training on performance – numbers of complaints, sales made, output per hour and so on. It is hard to be sure that it is training that has made the difference without making comparisons to a control group – a group of employees who have not been through the training. It may be possible to use the last group to be trained as this control group and assess the first group to be trained as the maximum gain.
An enthusiastic and well trained workforce will bring rewards that contribute to the overall ROI based on cost, but equally as important they will feel rewarded themselves. By learning new skills or improving existing ones, our ‘feel good’ factor is fuelled and we start to outperform expectations. And as employers, we have the responsibility to ensure our employees feel valued and to prove that they indeed are our greatest asset.
Other blogs on this subject –
13 May 2019