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6 Methods to Measure The ROI of Employee Training Programs
When you invest in employee training programs, you're investing in the success of both your company and your employees. Training can help your team develop technical and soft skills that help them do their jobs more efficiently, safer, more successfully, or with more effective interpersonal skills.
We've talked at length about keeping your employees engaged and motivated during training, which is essential for getting the best possible ROI from your training programs.
How can you measure the return on investment from your employee training programs, though? There are real costs to pulling your employees away from their work to undergo training, and the programs themselves can require a significant investment. So what methods are there to calculate the ROI of employee training programs?
The Challenges of Measuring Employee Training ROI
When you invest in an employee training program, you likely have an outcome in mind that you expect will result from implementing the program. For example, if you're introducing a new piece of software for your sales team, you might expect that it will increase efficiency and boost product sales. If this is the case, you can calculate your ROI in a reasonably straightforward way.
However, other types of training courses have much less quantifiable goals. You can use many different ROI metrics to determine whether or not a training course gave you the results you were looking for in a way that outweighs the cost.
Some examples of training ROI metrics beyond sales numbers include:
- Customer service feedback
- Stakeholder expectations
- Workplace behavior
- Operational efficiency
- Increased employee retention
- Trainee satisfaction
These are only a handful of the training ROI metrics you might want to track and analyze to determine your training programs' efficacy. While the benefits of your training programs must positively impact your brand's bottom line, not all employee courses will be usefully analyzed by your direct financial ROI alone.
For example, let's say you choose to implement a training course for your customer service representatives about listening skills. While this could be a worthwhile investment, you aren't necessarily going to be able to directly correlate how much it has boosted your sales, separate from all other factors. However, you might find evidence of receiving a return on your investment in other places, such as in customer reviews and feedback.
Below, we have listed six different options you have for measuring the ROI of your training programs.
1. The Kirkpatrick Model
Today's most widely-used training evaluation model in businesses, the Kirkpatrick Model, was developed and introduced back in 1959. This model provides organizations with a way to evaluate training programs or courses they offer to employees. Becoming popular in the 1970s and 80s, Don Kirkpatrick continued to refine his model for many decades. In 1993, his Evaluating Training Programs: The Four Levels was published.
The four levels that are proposed in the Kirkpatrick Model are:
- Level One: Reaction
- Level Two: Learning
- Level Three: Behavior
- Level Four: Results
The first level, reaction, involves gauging employees' reactions immediately after training. At this part of the process, you can get feedback on how employees felt about the training, whether they felt it was clear and helpful, whether the provided materials were useful, etc.
The next step is the learning step. This is when you determine how successful your training was at the level of information retention. For example, did the training experience stick with your employees, or did it go in one ear and out the other? To assess how much your employees learned, you can either have them complete assignments and demonstrations, or you could choose to test them on their knowledge.
The third level is the behavior level. Once you have determined that the employees felt good about the training and that they retained the information you provided, it's time to determine whether they are incorporating what they learned into their work. You can use self-assessments, manager evaluations, or spot inspections to do this.
Lastly, there is the results level, also sometimes referred to as the impact level. This is where you can evaluate whether the desired results occurred from the training.
These first four steps in the Kirkpatrick Model are intended to measure what Kirkpatrick called ROE, or Return on Expectations.
In his view, any organization's stakeholders have expectations that need to be met for training to be successful. While ROE typically stands for return on equity, it's important to note that Kirkpatrick is here focused on whether or not the stakeholder's expectations were met. From his standpoint, this is the ultimate indicator of value.
Since the four levels of the Kirkpatrick Model have been proposed, the method has continued evolving in the following decades. In some circles, level five of this model is labeled as ROI. At this stage, you can determine whether or not what was gained from the training was greater than the cost of the training.
This fifth level isn't one that was put forward by Kirkpatrick, but instead by Dr. Jack Phillips. We'll look deeper into the Phillips Model of Learning Evaluation in the next section to help you understand how to draw from the Kirkpatrick Method to measure ROI.
2. The Phillips Model of Learning Evaluation
While the Kirkpatrick Model is an excellent way to measure what he called the "return on expectations," it stops short before actually calculating a true ROI cost-benefit analysis. While following the Kirkpatrick Model can help you analyze whether the training produced measurable outcomes, it doesn't directly help you compare those results with the training costs.
To help fill this void, the Phillips Model emerged. Jack Phillips took on the task of addressing some of the shortcomings of the Kirkpatrick Model while also adding to it. This method can have useful applications for small businesses, non-profits, and large corporations.
Levels one and two in the Phillips Model are fairly straightforwardly borrowed from the Kirkpatrick Model. In level one, you analyze how your employees reacted to the training. In level two, you're gauging how well your employees could retain the knowledge they learned during training.
In level three, though, Phillips made a bit of a tweak to Kirkpatrick's model. Rather than just looking for behavioral changes in employees and whether they are incorporating what they learned into their work, the Phillips Model also looks at external factors that might support or hamper progress in this way.
Level three in the Phillips Model allows space for you to consider factors outside of training that could be affecting employee behavior.
Phillips dubbed level four the impact level rather than results, implying that it is a more holistic measurement tool. Rather than just looking at the positive training results, the Phillips Model also considered the negative impacts. During this step, you'll compile all of the costs associated with training and the financial benefits that result from it.
Finally, we get to Phillips' major addition to the Kirkpatrick Model: level five. This is the ROI level mentioned previously. This step aims to identify how the impact of training translates into dollars and cents.
Level five of the Phillips Model involves doing a cost-benefit analysis. Through assembling all of the potential costs of the program and its financial impacts, you can figure out the ultimate value that the training program offered.
3. Use a Training ROI Calculator
One of the most straightforward ways to measure the ROI of employee training programs is by using an online training ROI calculator. If you're trying to measure ROI for a highly structured job where the financial benefits are simple to quantify and isolate, this is a quick and easy way to measure ROI.
Online training ROI calculators have you input information about the training program's cost and the program's results, both in financial benefits and in time savings. It can then leave you with a ratio that displays the benefits received from the training in proportion to the cost.
This can be an easy way to analyze your employee training programs' success if the metrics are simple to measure, such as sales figures. However, when you are training employees engaged in work that produces less quantifiable results, using a training ROI calculator likely won't give you all of the information you need.
4. Use Performance Reviews
Another option for measuring the ROI of employee training programs is using supervisor assessments or performance reviews. As mentioned above, not all of the teams in your company will have easily measurable results such as sales figures. In these instances, determining ROI can mean digging in at a more subjective level.
For example, let's say you want to have a group of middle managers engage in a training program to help them improve their management skills. Unfortunately, whether or not your training program gives you a positive ROI isn't something that will be easily determined using an online calculator. Ultimately, it isn't easy to separate the measurable information you have, for example, improvement in the teams' sales below each middle manager, from the countless other variables that could produce this outcome.
In these instances, it can be helpful to use supervisor assessments. For example, when you have your team undergo employee training, you can assign a senior manager to assess and observe the employees and write a report about where improvement has occurred.
To effectively use this method, you'll need to have the senior manager observe the employees undergoing training before and after the program. To make your calculations even more scientific, you could utilize a control group of employees that don't attend the training program.
While this might seem pretty subjective, you can have the senior manager quantify the impact of the training in a way that allows you to arrive at a true ROI ratio.
For example, let's say that the senior manager identifies that the performance of the middle managers improved in the areas of teamwork and customer service. Suppose the observing manager finds that they improved by 10% and 5% in these areas, respectively. In that case, you can determine the ROI by adding the percentages together and dividing them by the number of inputs to find the average. In this instance, the overall average improvement would be 7.5%.
5. The CIRO Model
The CIRO Model is not as well-known as the Kirkpatrick or the Phillips Model, and it has more specific uses than these more popular models. Developed in 1970, this model focuses on evaluating the effectiveness of management training courses.
The four stages of the CIRO Model are broken down into context evaluation, input evaluation, reaction evaluation, and outcome. Rather than directly measuring ROI, this model focuses more on how effective the management training is. However, you might find that the CIRO Model is a cost-effective way to analyze whether or not your management training is providing the results you're looking to see.
6. Kaufman's Model of Learning Evaluation
Here is another evaluative model that is built off of the Kirkpatrick Model. One of Kaufman's significant changes to the Kirkpatrick Model is breaking down level one into two subcategories. Level 1a is the input level, which identifies whether the training materials and resources were appropriate and suitable. Level 1b is the process level, which looks at whether or not the training was well-delivered.
Levels two through four in the Kaufman Model are named acquisition, application, and organizational results, which are steps that are similar to those used in the Kirkpatrick Model despite their different names. Finally, level five is what Kaufman calls the societal/customer consequences model, which explores how the training impacted your brand's customers and society as a whole.
Praise for the Kaufman model often comes concerning its division of the first level into the subcategories of input and process. However, measuring the ROI in terms of customer experience and impact on society is often considered impractical for most businesses.
Measuring the ROI of Employee Training Programs
When you employ a training program at your business or office, you want to ensure that you're getting a positive return on your investment. If a training program isn't producing the return you're looking for, you'll want to know as soon as possible so you can pivot in your approach. Finding an effective way to calculate the ROI for your training courses can ensure that you aren't spending any longer than necessary using programs that simply don't fulfill the needs of your brand and employees.
Setting up a training system for your employees only to find that it isn't giving you the required ROI can be frustrating. However, that doesn't mean you should continue using that training program just because of the cost of implementation. You'll likely find that switching programs to find one that works for your employees, while it might cost more money and time, will ultimately provide an ROI that makes it worth the expense.
Investing in training for your employees is an investment in the future of your workers, your team, and your brand. Our training library is full of customizable training materials to help you build training programs that fit your company's unique needs.
With more than eighty soft-skill programs for self-study learning and instructor-led training (whether virtual or classroom-based), you can tailor your employee training programs to ensure they are filled with relevant, engaging information. After all, the more applicable your training programs are to the needs of your business and employees, the more positive an effect they will have on your company, your customers, and your community.
Do you have any questions about measuring the ROI of an employee training program? Are you in need of any additional explanation about any of these specific methods to measure the ROI? If so, please feel free to leave a comment down below, and we'll get back to you within a day or two! We make it a point to reply to every comment or question we receive and would be more than happy to assist you however we possibly can!