Resources Industry Skills Association’s Rod Ramsay assesses the return on investment of training in the resources sector.
Training needs are often determined by regulatory process and operational requirements. However, how often is training actually evaluated to the extent of being able to determine an actual cost benefit, or actual return on investment? This paper is an overview of what can be achieved.
Clive Shepherd, a renowned British speaker and writer about learning and ROI explains: “if people really are your greatest asset, isn’t it time to look at your training programmes as investments in your organisation’s human capital and not just as an expense?” He argues the case for return on investment and explains the steps involved in conducting an ROI analysis.
When measuring the success of training, the evaluation of training, as Shepherd states, “like motherhood and apple pie, is inherently a good thing. But, because short term priorities always crowd out their longer term competitors, it’s typically something we plan to do better next year – after all, we’ve got away with it so far, so another year won’t hurt!”
Even when training evaluation is undertaken, it is usually at the easiest and lowest level – the measurement of student responses through feedback sheets. These sheets are important and they serve a purpose, but will they be enough to support your case when there is a need for a greater investment in training, and when there is fierce competition for resources?
VALIDATE TRAINING AS A BUSINESS TOOL
Training is one of many strategies an organisation can implement to improve its performance and profitability. And yet training is often undervalued in our industry. Only when training is properly evaluated can it be compared against other strategies and valued for its contributions to the success of the organisation. When expenditure is tight, training budgets are amongst the first to be cut. Only through quantitative analysis can training departments make an informed argument against these cuts.
ASSIST IN IMPROVING THE DESIGN OF TRAINING
Training programs should be continuously improved to provide better value and increased benefits for an organisation. Without formal evaluation, the basis for changes can only be subjective. Some of the critical criteria for evaluation are listed below. Costs have not been included though as this is always required to be budgeted in all situations
Learning, in terms of new or improved skills and knowledge, is the primary aim of a training event. Learning can be measured objectively using a competency assessment. One important aspect of learning is the degree of retention – how much of the learning has “stuck” after the training program is over.
If a student has learned something from a training programme, you hope that this will be reflected in their behaviour on the job. If a student applies what they have learned appropriately, then their work behaviour will meet the desired standard. Behaviour can be measured through observation or, in some cases, through some automated means. To assess behaviour change requires that the measurements are taken before and after the training.
If as a result of training, students are using appropriate behaviours on the job, then you would expect that to have a positive impact on performance. A wide variety of indicators can be employed to measure the impact of training on performance. It is hard to be sure that it is training that has made the difference without making comparisons to a control group – a group of employees who have not been through the training.
THE PROCESS OF CALCULATING ROI
Return on investment (ROI) is a measure of the monetary benefits obtained by an organisation over a specified time period in return for a given investment in a training programme. When calculating ROI, you must first make estimates or obtain measurements of the costs and benefits associated with a training programme. What do we do when faced with this difficulty – back away and focus our evaluation efforts on easier measures? No, we work through it, because all other measures fail to reflect the financial reality that training must pay off in hard cash. Trainers are not alone in finding it difficult to calculate the benefits of what they do.
Productivity increases occur where, as a result of training, additional output can be achieved with the same level of effort. This implies that the organisation requires or desires more output in this particular area. If it does not, then it might be better to express the benefit as a cost saving.
MAKING ROI WORK FOR YOU
It has become something of a cliché for senior management to claim that ‘people are our greatest asset’. Yet, much to the dismay of trainers, the effort they put into developing this ‘human capital’ continues to be seen as an expense and not as an investment. It’s time to turn this around. Start to analyse your training programmes as if they were capital investments – using techniques like ROI – and senior management may start to change their attitude to training.
If you would like to find out more about how to manage your training for measurable outcomes, attend the RISA Conference in Brisbane on the 26th and 27th October 2016 where the content covered in this article will be covered in detail by a range of industry experts who will share their insights.
CEO, Resources Industry Skills Association (RISA)
RISA has a vision to engage with industry partners to achieve leading practice in workforce development. Rod has been working in the training sector of the industry for over 30 years and is passionate about ensuring there is a Vocational Education and Training system that works for everyone and ensures competent people are on the job.
RISA plays an important function in working with industry and regulators to maintain a vigil on safety and training in the industry, and to highlight areas where improvements and innovation are needed.