Companies invest huge amounts of money in employee training and development. These days, it is essential to understand and measure the impact of all activities so they can be tweaked if necessary, to guarantee a profitable investment. But how should companies evaluate training plans to find out if they have been effective?
Although most company training programs already incorporate an evaluation step, here we’ll explain the key considerations and the evaluation methods available.
The importance of calculating the ROI of training
ROI is the metric used to find out how much a company earns relative to the investment made. That is, how many pounds have been generated from each pound invested. In simple terms, the ROI tells us if training has been profitable or not.
Why should you measure the ROI of training? Well, there are a number of reasons:
- To assess whether the knowledge and skills gained by employees have an impact on business results.
- To justify the training spent internally.
- To compare the results of one course against another.
- To demonstrate the importance of continuous employee training.
- To monitor the effectiveness of training.
- To encourage a policy of transparency.
There is a simple formula to measure the ROI of employee training:
👍👍(Benefit obtained - investment) / investment x 100
Do companies evaluate employee training?
According to Nolan Hout, ineffective training plans can cost up to $13 million per year for every 1000 employees. However, the ones that invest well can obtain profits 24% higher than those who don’t.
So, bearing this in mind, evaluating employee training, and measuring the subsequent impact on the company, is an indispensable step that should not be neglected. And most companies are aware of this. As Peter Drucker says: You can’t improve what you don’t measure.
Many companies use performance reviews to measure the direct effect of training on their employees’ performance and skills. This is an objective way to find out if the course has delivered the expected results.
What methods are there for evaluating training plans?
How do you evaluate an employee training plan? There are a multitude of suggested methods for evaluating company training. However, we’ve chosen the four most common and useful models to discuss here.
1. The Kirkpatrick evaluation model
This model was created by Professor Donald Kirkpatrick with the aim of measuring the impact of training programs. It comprises four levels: reaction, learning, behaviour and results. Let’s look at each level in turn:
- Reaction: assesses the students’ response to the training. Normally, this is done immediately after the training session, by asking participants to complete a feedback form on their satisfaction with the learning experience in general.
- Learning: measures what has been learnt during the training. Carry out assessments before and after the training to determine how much employees’ knowledge or abilities have changed.
- Behaviour: assess if staff behaviour has improved or not (and how much) following the training. The best way to do this is through observation, 360 Degree Feedback, etc.
- Results: the final and most important step is to evaluate the impact training has had on business results. We can observe key metrics such as productivity, quality, and efficiency, etc.
2. The Phillips ROI model
This model is exactly the same as the previous one, with the addition of a fifth step which evaluates the return on investment (ROI). Phillips’ model answers the growing need for accountability in terms of monetary investment. He argues:
“Most training and development budgets have continued to grow year after year. As expenditures grow, accountability becomes a more critical issue. A growing budget creates a larger target for internal critics, often prompting the development of an ROI Methodology. The function, department, or process showing the most value will likely receive the largest budget increase.”
His model therefore measures the difference between the training costs and training results.
When the results are equal to or greater than the investment, the ROI is positive. This is a good result, which signposts the way forward. However, a negative result means that something is not right.
3. Kaufman’s five levels of evaluation
Kaufman also uses the Kirkpatrick model as a reference and makes it his own. He proposes the following:
- Measure the investment in training program resources, including the time and the cost involved in developing the materials. In parallel, evaluate the students’ reaction to the training process (just like step 1 in the Kirkpatrick model).
- Decide if the training goals have been achieved or not. Did they learn new skills?
- Measure the impact of the training from a practical perspective. Are the employees putting their new skills into practice?
- Calculate the business benefits, paying attention to metrics like profitability or cost reductions.
- Evaluate the effectiveness of the program in relation to the social benefits gained. Did the training have a positive effect on customer value or society?
4. The Anderson Evaluation Method
The Anderson model encourages companies to focus training evaluations on the program’s objectives, or even the organisation’s strategic goals. We can only assess the true success of a program if the objectives are aligned. This is a two-step process:
- Evaluate current training programs and observe whether they are in line with the business objectives. For example, if a medical centre offers training on how to treat a greater number of patients, but its business objective is to focus on delivering quality service, the objectives are not aligned in this case.
- Measure the contribution training has made to strategic results. For example, a program that helps nurses to reduce wastage could be measured by looking at the reduction in material costs.
Finally, we can calculate the ROI and decide if it is necessary to make improvements.