training return on investment roi
TRANSCRIPT
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Training Return on
Investment (ROI)
Pitfalls & Problems
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Cost vs. Investment
Cost: An
amount paid,price; a loss,sacrifice or
penalty
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Accounting Questions
How are fixed costs allocated &distributed?
Which variable costs are included? Over what time frame is the measurement
made: Quarterly, Annually, Longer?
How is lowered productivity measuredwhen people are being trained?
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Accounting Questions
Discounted Cash flow Rate of Return(DCFROR) depends on discount rate, time
frame, cash flow, etc. Internal Rate of Return-depends on a
management established threshold
KEY QUESTION: Should training decisionsmeet the same investment criteria asother capital investments?
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Accounting Questions
Break-Even Point is a simpletechnique
KEY QUESTION: When is thecost of training not worth the
benefit?
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ManagementFocus
Cost vs.Investment
philosophy Training costs
get cut or
eliminated duringeconomicdownturns
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ManagementFocus
Some skills areperishable;trainingeffectiveness maydecline over time.
Dangerous
Oversimplification:trainingisthe onlyinfluencingvariable.
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ManagementFocus
Identify theexpected
outcomes fromthe beginning
Know the rules
of the gamebefore you start
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The ex-post facto calculation
Done after thefact
Lack ofproactivestance
Reproduceoriginalbaselines
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The ex-post facto calculation
Justification of anoutcome with noinfluence or controlof the variables
Variables outsideorganizations
control Questionable
conclusions aboutmeasured effects
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Reliable & Valid Measures
Valid:measures what
it is supposedto measure
Reliable:consistent andreproducible
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Reliable & Valid Measures
Simple forphysical output
Somewhat easyfor Psychomotor
More difficult for
cognitive domain Most difficult for
affective domain
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If you are going to use ROI:
Know your accounting system.
This analysis approach is complex,
time consuming & costly: Is it worthit?
Determine the organizational
philosophy about cost versusinvestment.
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Final Advice
Using ROI as the bottom linemay not be the best criteria for
determining the value of training.It can be a good indicator, but itmay not be the indicator.
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