Calculating Your Workplace Training’s Return on Investment (ROI)

 

Training can save lives and livelihoods, so there is a lot of merit in formulating the best training system you can. However, it does more than that. Studies have found direct correlations between training and decreased costs from incidents or lost time injuries. That’s a prime reason to calculate your training program ROI. When you can calculate just how much you can save with the proper training program it can open opportunities on platforms you may not have considered before. And some learning management programs even have additional benefits that can save you on administration costs, so it’s a good idea to calculate an ROI before you choose your training methods. Knowing where you stand opens the door to more efficient opportunities.

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What is training Return On Investment or ROI?

Training ROIs can measure how much an organization gains from investing in training. It looks at the benefits and business results of a training program. The ROI focuses on numbers only unfortunately, It’s simply about cost benefits. Other aspects of a training program can be measured through more social measures like interviews, and post-training questionnaires.

You don’t have to measure the ROI for all training programs. It’s actually suggested to do this for only 5% of them. Which ones to measure depends on how complicated and important the training is.

For instance, your company might want to measure the ROI for a two-year leadership training, but not for training on the new code of conduct. Also, not all training can be directly connected to ROI. To link to training ROI, you’d collect data like sales, customer satisfaction, productivity, and any business metric tied to the organization’s purpose. You’d also look at training costs like instructor fees, materials, facilities, travel, trainees’ productivity loss, and more.

Choosing Your Training System and Classes

Our first step is brainstorming the training you need. You need to ask questions like:

Training Return on Investment (ROI) Equation

Training Costs

Course fees + time it takes your employees to complete the course = total cost of training

Costs of Incidents

Direct costs previous year + lost productivity previous year = total cost last year

Direct cost current year + lost productivity current year = total cost current year

Yearly Gains in Safety

Total cost last year – total cost the year you buy the training (current year) = yearly gains in safety expenditure

Training ROI Sum

Yearly gains in safety expenditure / total cost of training = training ROI decimal

Training ROI Percentage

Training ROI decimal x 100 = your training ROI percent return on investment

Examining Our Training ROI Percentage  

Next, we need to consider what our sum will mean. The training ROI calculation above will provide you with a percentile if done correctly. If your end sum exceeds 100 percent then you have chosen your training wisely, this would mean you get a positive amount back on every dollar you invest in your required training.

If your percentage is less than 100 then this doesn’t necessarily mean you will lose money, you should always relate your findings to preceding years. And don’t forget there are always incalculable variables with everything training related.

An Example of Workplace Training Return on Investment Equation

For an example, let’s consider a small roofing business (10–15 people) that spends $1,250 on safety training over the course of a year and experiences two safety incidents that result in $600 in first aid and ambulance expenses (1850 in total)

To get workable results, we should compare the roofing business’s year with the previous one. We need to compare the results to past data to determine the training course’s return on investment. So, let’s look at the preceding year.

Preceding Year

The business experienced three incidents the prior year, costing a total of $1,900. These included two minor lacerations that required $400 in first aid supplies and treatment, and a fall requiring $1,500 in physical therapy sessions.

This means that the annual difference is $50.

Direct costs, such as medical bills, property damage, and emergency services, are at the top of every manager’s list, but indirect costs, like missed productivity during the incident and during training, can have an equal impact on the bottom line. 15 employees lost a day’s worth of work during training (15 x $20/h x 8h = $2,400), costing the organization $2,400. The incidents also caused a 5-hour total work halt (15 x $20/h x 5 = $1,500).

Therefore, we need to consider a: the time and costs it takes for the classroom training ($2,400) and b: the time lost due to the incident (1,500).

• Course Fees ($1,250) + Lost productivity ($2,400) = $3,650 = total cost of training
• Direct Costs Previous Year ($1,900) + Lost Productivity Previous Year (12h x $20/h X15 men = $3,600) = Total Loses Last Year = $5,500
• Direct Costs This Year ($600) + Lost Productivity This year ($1,500) = Total Loses This Year ($2,100)
• Total Loses Last Year – Total Loses This Year = $5,500 – $2,100 = $3,400
• Yearly Gains in Safety Expenditure ($3,400) / Cost of Training ($3,650) = .93 = 93% return on investment (ROI)

As you can see, including all the measurable costs gives us a sum of .93, making it a 93 percent return for every cent invested in safety. In this instance, the training looks like it cost the company money.

However, not only does training help in hard-to-track metrics that aren’t considered in this equation but there are cheaper methods of training your staff. This company went with classroom classes which often take considerably longer compared to their online counterparts.

An Example of Online (Workplace) Training ROI Calculation

Online courses are often cheaper due to less time being spent on the travel and time off required by in-person classroom courses, and they are also slightly cheaper in course fees. You can get the same fall arrest training, and it only takes your employees 3 hours to perform. So, you save at least 5 hours of lost work and you and your team gain the required training.

With online safety training, your training return on investment (ROI) would look like this:

• Course Fees ($1,200) + Lost productivity ($900) = $2,100 = total cost of training
• Direct Costs Previous Year ($1,900) + Lost Productivity Previous Year (3h x $20/h X15 men = $ 900) = Total Loses Last Year = $1,800
• Direct Costs This Year ($600) + Lost Productivity This year ($1,500) = Total Loses This Year = $2,100
• Total Loses Last Year – Total Loses This Year = $5,500 – $2,100 = $3,400
• Yearly Gains in Safety Expenditure ($3,400) / Cost of Training ($2,100) = 1.61 = 161% return on investment (ROI)

Although a 161% ROI appears impressive, we must remember that our example only compares the prior year, which might have been a particularly bad year. Therefore, it’s crucial to use as much data as you can to obtain the most precise results. If you use an average of 5 years of incident costs to compare with the year you invested in training, it will give you a better estimate. 

Now, obviously, there’s a roof on safety expenditure gains. Training is only equitable when the training is pertinent to the trainee. That being said, this ROI isn’t even considering many incalculable benefits to employee awareness training.

A training ROI can’t give you the whole picture, but it is a great place to start. 

 

Simple Tips for Measuring Training Success

• Figure out why you’re measuring training success. Are you trying to show that the training was worth the money or find out which training had the biggest impact? Knowing this helps you decide how to measure success and what information to collect.
• Plan ahead and decide what information you need. Start gathering the data early or at least know where to get it from.
• Set benchmarks by comparing current data to data from before the training. For example, if you want to increase sales by 5%, know what the sales were like before the training so you can compare the results.

Separate the effects of training from other factors:

• Use a control group by comparing a group that had training with one that didn’t.
• Ask participants or their supervisors to estimate the impact of the training.
• Analyze trends; for instance, project what sales would be without training based on past trends and compare it to actual numbers.

Be patient and give it time. Training results take time to show, so decide how long you’ll wait before measuring success to get meaningful results.