Build the Business Case for Training and Measuring ROI
By Tom Cooper

A training program with objectives linked to business results and backed with a solid business case is less vulnerable to spending cuts. To ensure adequate funding and organization-wide commitment to your training program, you must be equally committed to aligning its value to corporate objectives. The four keys to success involve PLANNING for the measurements that will define success, EXECUTING on the plan, MEASURING return on investment (ROI) in a credible way, and DELIVERING a business case and results that map to the company's goals.

Training departments are competing with other departments for budget dollars, and as such, must transform executive mindsets to see training not as a cost, but as an asset that drives business value. In order to change this view, a training program must be built around a solid business case and measured for effectiveness. This is a training program built to win and keep budget dollars.

Training leaders can and should justify, execute, and measure their initiatives the same way as other departments. Here are some best practices for each of these areas.

PLANNING

Building an effective business case and presenting it to an executive for funding requires credibility. It also requires hard dollar figures, which can be blended with the "softer" expected benefits (e.g., employee satisfaction). Together this means using sound methodologies for estimating the costs of a training program and the ROI.

Begin by defining the measures that will demonstrate success. What is the overall business objective of the project with which training is associated? What are the business results the training program can drive for that project? Is it to increase productivity to reduce the project's payback period? Then your mandate is to show the training program's effect on productivity and the subsequent reduction in the project?s payback period.

The key thing to know is that there are credible ways to demonstrate ROI using surveys, past project measurements, time requirement estimations, and hourly wage calculations. In fact, some solution providers, including PeopleSoft, can provide you with a template or service to plan for these types of measurements.

Defining business objectives and correlating measurements will shine a bright light on the information you must capture to set the baseline for these measurements. Once you have created the business case and expected ROI, the key differentiator between measurable success and failure lies in two places: the execution of your plan and making necessary adjustments to the expected ROI if and when there are deviations from that plan.

EXECUTION

The great opportunity for training program success lies in the execution stage. Creating an incredible plan with comprehensive content and superb delivery is your specialty. But success also rests squarely on sticking to that plan. The mistake that commonly blows up ROI calculations is not necessarily failure to stick to the plan, but rather failure to adjust the expectations based on deviations to the plan.

If the plan was to send Employee A to five courses, then do it. But if for some reason plans change and Employee A is only able to attend four courses (80 percent of the plan), then you must adjust ROI expectations accordingly.

Another key factor in execution success is ensuring that the education plan and measurement adapts to any changes to the overall business objectives of the project. Business plans are prone to change, naturally, to correspond to changes in market conditions and customer demands. Training and education must remain lock-step with those changes. Build room for this adjustment into your business plan and ROI estimates.

Also, build in leeway for employee turnover and consider investment in tools that capture the steps of the business processes your employees are learning. In this way, new employees, or even employees who have forgotten a particular step or entire process, can review the part they need without having to take an entire training course again.

MEASUREMENT

Just as other departments in your organization isolate and estimate the impact they have on the revenue of the organization, the key goal for your ROI calculation is to estimate and isolate the impact of your training program. To make this estimate even more conservative, companies often adjust the number for confidence.

Any training program worth its salt has a systematic approach for student assessment, typically based on Kirkpatrick's or Phillip's methodologies. However, knowing upfront that you need to measure training ROI gives you the opportunity to be strategic in this approach. Ask yourself, "If we were to take a before training/after training picture of our organization, what would the before look like? How should we quantify the before and the after?" One commonly used practice to isolate training?s effect on behaviors is to use a control group. The control group should be naturally occurring and not forced. Look at the performance of the trained group versus the non-trained group to see the differences.

During this process, it is important to try to measure or estimate at various points in time. For example, the process that PeopleSoft uses with its customers calls for assessment prior to training, when results are forecasted; immediately post-training, when impact is predicted; and then 60 days later, when students are back on the job.

Once you have gathered the appropriate data, you must convert the data to a monetary value to evaluate success against the desired business objectives. For example, if the objective is to improve productivity by 20 percent, that is saving an entire day out of the workweek. The monetary value would be one day's salary.

Be sure to count all costs for implementing the training plan and effectiveness measurements. ROI is the result of dividing the net benefits of the initiative by the costs of the initiative. Complete and accurate capture of cost is conservative and adds credibility to your case.

DELIVERY OF THE RESULTS

Building an effective business case for training, complete with ROI measurement, is possible through a combination of intelligent surveys, estimates, and forecasting. Just as with other departments and initiatives, executives are looking for this type of systematic, conservative, credible approach to measuring the effectiveness of your training program in achieving its business objectives. When the training initiative is in its middle stages and organizational budgets are getting trimmed, you will thank yourself for presenting and following a sound methodology for substantiating and proving the successful impact of your training program on the organization.

All of this being said, there may be times when the benefits of doing an in-depth ROI analysis may not outweigh just doing an evaluation using reasonable indicators. When a program is highly visible, strategic, or costly, it would be in your program's best interest to utilize additional resources to do a more in-depth ROI impact study using the above steps. However, if you are not a large training organization, you may not have the financial, physical, or human resources to do in-depth analysis. The key is to leverage automated technologies, data collection templates, and standard measurement processes to make analytics practical and scaleable. This means that you can get your decision makers the information they need in a timely manner and at a reasonable cost.

Taking a consistent and credible approach with your training programs will demonstrate the value to the business and prove training to be a wise investment and not a cost.

Reprinted from LTI Magazine