Sometimes the numbers just get in the way
Return on investment (ROI) is a measure of the monetary benefits obtained by an organization over a specified time period in return for a given investment. Put in the point of view of employee training, ROI is the extent to which the benefits (outputs) of training exceed the costs (inputs) of what the training involves. Seems easy enough to calculate what your ROI would be for the case of training, simply plug your numbers into the equation and analyze what pops out.
But how do you effectively measure something with intangible outcomes (at least in the short term)? It's easy to include all the costs that go into training (i.e. development of courses, equipment and material expenses, the training program itself) but sometimes the benefits or returns aren't as apparent. This is something many organizations all over the world struggle with. And unfortunately, training for many is seen as an expense and not so much as an investment. There are however, certain areas in which the benefits of employee training can be ascertained in a qualitative view without the need of strict formulas and numbers.
Labor Savings
Savings on labor savings occur where, as a result of the training, less effort is needed to achieve current levels of output. It must be understood that savings means there is a reduction in the amount of labor applied to a particular job, not by using some newly available time to accomplish further output on the same job. Labor savings will only happen if the labor 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. Some examples of labor savings include:
- Reduced duplication of work and effort
- Reduction of mistakes on the job
- Less time spent correcting those mistakes
- Quicker access to information and ways to effectively use the gathered information to produce
Productivity increases
When training enables people to achieve more than what they normally would have done without it then the advantages are readily transparent. The organization experiences the desired result of more output with the same amount of personnel. Examples of productivity increases include:
- Improved methodology reducing the effort required to produce the same amount of work
- Increased skill levels which will lead to faster work
- Greater levels of motivation which in turn can mean increased effort
Other cost savings
Cost savings can be achieved in a many number of ways, not just through savings in labor, but in other areas as well. Examples include:
- Fewer system crashes and/or breakdowns, resulting in lower maintenance costs
- Lower staff turnover resulting in lower recruitment and training costs
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