Return On Investment (ROI) for training services

1. Return On Investment (ROI) for training services Mr. Hatem Nabil Training Sector Chief Telecom Egypt

2. You meet your boss and he tells you…. We need to..... • Grow twice as fast as the market, increase our market share • Be a trend setter in innovative segments(Value Added Services, NGN / 3G support services) • Increase performance by adapting entrepreneurial service business • Have competitive advantages by • exploiting synergies • optimizing resources and skills

3. You present your training budget …. Your boss says .... • The training budget is too high • We need to decrease our Operation Expenses (OPEX) • There is no guarantee that this investment will lead to the result we are looking for • Sending al these employees to training will reduce the working force during the period • Can't they learn by practice while they are working?

4. You look for a solution…. You start thinking..... • Should I reduce the proposed training plan to please the boss regardless of the consequences • Or should I keep the plan as it is since its up to the management to accept it or not and stop the discussion because its useless • Or should I try to convince the management that the money and effort for this training plan are well spent and by investing in training we will increase our revenue or reduce cost significantly

5. You look for a solution…. You choose to convence your boss with the idea of calculating training ROI .....

6. Return On Investment…. What is ROI ? • Return on Investment (ROI) is a traditional financial measure based on historic data. • ROI is a backward-looking metric that yields no insights into how to improve business results in the future. • In education organizations, ROI has been used primarily for self-justification rather than continuous improvement.

7. Calculating Training ROI How to calculate ROI... (total benefit - total costs) total costs = ____           X 100 = ROI • Total benefits:include money saved by the organization, money made, and anything that adds directly or indirectly to the bottom line • Total costs: include all direct and indirect cost of the training program “fully loaded cost”

8. Calculating Training ROI Where do you start? 1- Define the reasons and goals for the training 2- Make the necessary measurement and collect the necessary data before and after the training 3- Convert such measurements and data to monetary value 3- Determine how much the training costs 4- Verify the amount of return

9. Calculating Training ROI Define the reasons and goals for the training Reasons to train workers: The reason to train workers and managers is so they will learn to do their jobs better or perhaps learn new skills or technologies that can be applied to the company's goals. Sometimes workers and managers are trained to satisfy government requirements, to ensure safety, or to prevent lawsuits or other forms of company loss. Managers are often trained in people-handling skills. Also, companies may allow workers to take training simply as a way to keep them happy in their jobs

10. Calculating Training ROI Define the reasons and goals for the training Reasons to train customers and suppliers: The reason to train customers is so they will understand how to use the company's products effectively. This can prevent problems and expensive service calls. companies may train their suppliers on the proper method to provide specialized items. This is to ensure the company gets the highest quality parts and supplies needed to make their product

11. Calculating Training ROI Make the necessary measurement and convert it to money • Measurements can be tangible or intangible and are frequently referred to as "hard data" and "soft data." • Hard data is quantitative, statistical, number oriented and easily translated into monetary values • Soft data is qualitative and refers to intangible benefits that are subjective and thus are more difficult to measure and translate into monetary values

12. Calculating Training ROI Sample of "Hard" Data: -Productivity measures (quantity or market value) - Quality measures (number of rejects or cost of rejects) - Materials costs (amount per unit of production or amount of waste or scrap) - Labor hours per unit of production - Labor costs per unit of production - Hours of "down time" due to equipment failure, etc - Workers compensation claims due to injuries or illnesses Number of grievances/legal claims/lawsuits- Time required to fill vacant positions- - Time required to fill an order; respond to a telephone call; resolve a complaint Number of sales or dollar value of sales per customer- Percent of market share- Customer satisfaction rating or index- - Number of repeat customers

13. Calculating Training ROI Sample of “Soft" Data: - Improved job satisfaction - Improved teamwork - Increased organizational commitment - Improved succession planning - Increased communication regarding career paths - More clearly defined promotion opportunities

14. Calculating Training ROI Determine how much the training costs Sample Training Costs: -Course Development - needs analysis, design, writing, illustrating, validating tests and evaluation instruments - Wages and Salaries of HR staff, Instructors and Trainees - Loss of revenue while trainees are involved in training activities - Cost of Instructional Materials - Cost of Equipment and Facilities - Administration - marketing, scheduling, registration, testing, documentation copying - Logistics - lodging, meals, tips, refreshment breaks, and shipping costs - Travel cost if the training is abroad

15. Calculating Training ROI Verify the amount of return The ROI formula or equation uses the benefits data and the incurred costs (total benefit - total costs) x 100 total costs For example : If Net Program Benefits are $120,000 and Total Incurred Costs are $100,000, then: ROI = ($120,000 - $100,000) x 100 or ROI = 20%            $100,000

16. Calculating Training ROI Calculating Training ROI Is it easy as it looks ?

17. DIFFICULTIES IN CALCULATING ROI A global analysis for ROI methodology usage made by British consultancy Lane4 shows: • Six out of 10 HR directors are convinced that measuring the return on investment of their employee training and development is not only crucial but possible • Just a fifth of businesses measure whether their employee training and development delivers an effective return on investment • More than two thirds of businesses dismissed ROI as difficult to calculate when it came to employee/people development initiatives, with a similar percentage saying they did not have enough resources to make it a reality.

18. Difficulties in calculating ROI Examples problems you might face while calculating training ROI: • It is difficult enough to get managers to send employees to training without imposing additional requirements to collect pre- or post-training data to document the effects of training • Some behaviors or skills may be useful for only short periods of time while others, such as time management, may continue for a lifetime and affect numerous workplace and personal activities • The presence of unions could also create data collection problems. Frequently, unions are concerned that the employees or union members are being evaluated

19. Difficulties in calculating ROI Examples problems you might face while calculating training ROI: • Measuring the impact of training for new products, technology, and services is difficult because no prior training existed or no prior performance measures are available, it is very difficult to ascertain the impact of training • Even if prior measures of performance are available, how does one determine the amount of improvement that is attributable to training as opposed to how much is attributable to the new innovation

20. DIFFICULTIES IN CALCULATING ROI Help !!!

21. ? ROI between Theory and Practice Consider the following before deciding to use ROI on your training investment … • Measurement of ROI has invaluable benefits beyond the bottom line including more bespoke people development for your organization, goal-focused interventions as well as the ability to predict effective investment • A company may provide training to their workers, managers, customers, and sometimes suppliers. The ultimate reason for training them should be to improve the profits and repeat business of the company. It is preferred that this improvement is measurable, so that an effective ROI can be determined • Measurement of training ROI starts with defining the reasons and goals for the training, determining how much the training costs, and verifying the amount of return. • Despite HRDs being fully aware of these advantages, few are measuring ROI due to a belief that it is too time consuming or difficult to calculate

22. ? ROI between Theory and Practice Useful tips for using training ROI…. • The most successful employee development programs ensured HR initiatives were aligned with business strategy by involving relevant stakeholders • Financial ROI could be calculated through the use of key performance indicators identified at the beginning of an initiative with relevant stakeholders • Keep an eye on costs and monitor any deviations from estimated or budgeted expenditures. Quick action or adjustments may enable the HR manager to curtail or reduce costs and keep the project within or near budget • Use the experience of senior managers and employees in estimating the results of training. Estimating requires a little math and lots of experience.

23. Thank you Mr. Hatem Nabil Training Sector Chief Telecom Egypt