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Measuring Training Programs: Cost Vs Benefit By Michele Webb

For decades companies have been struggling with the real costs, benefits and return-on-investment of training costs. With increasing online learning opportunities, organizations are finding their focus shifting from providing costly onsite training programs to the use of new tools and technology now available. Companies need to understand and apply the business analytics in order to fully appreciate the effectiveness and impact that e-learning and training offers.

Companies invest large amounts of money, resources and time in training. According to a 2002 ASTD State of the Industry Report where over 375 major corporations were surveyed, companies spent between one (1) and three (3) percent of their total payroll on training. This translated to a per-person basis of more than US $700 per employee per year. In cutting-edge companies that significantly increases to US $1400 or more per person per year.

If training expenses are viewed as a percentage of the company’s profits, then the training budget could represent as much as 5 – 20% of the total profit margin. With increasing costs associated with travel and lodging, as well as increasing costs and expenses to register and attend meetings or to develop in-house training programs, training budget costs are undoubtedly going to increase, which only underscores the need to justify its cost.

In order to effectively measure training programs, companies are faced with three critical issues: efficiency, effectiveness, and compliance. Every major decision made regarding training falls into one of these three areas. Fortunately, each of these three areas can be bench-marked and measured.

The ASTD 2002 study reported that only one-third of companies measured the effectiveness of learning and that 12% or less attempted to measure job and business impact of their training programs. Why? Interestingly enough the top reason why companies fail to measure training is that they lack the experience, tools and infrastructure to do so.

It is impossible to improve or effectively optimize the training program if it is not bench-marked or measured. Training should be measured and evaluated just as companies measure productivity, profit or quality. There have been many scorecards, dashboards, algorithms or metrics developed for this purpose.

If one considers the total training investment per person in the company (see above), the question is how much should they spend on measurement and evaluation? One, five or ten percent? Looking back at the ASTD 2002 study of best practices, we find that most companies spend 40-50% of their total training dollars on content development, 8-10% on infrastructure and the remaining resources on salaries and facilities costs.

For many development of measurement and evaluation tools sounds like additional costs and expense to the organization. Companies who allocate a small, but fixed percentage of the training budget to this purpose will find themselves able to effectively measure the effectiveness for their overall investment in training. One study found that organizations who adopt this model, and who spend US $2-10 per employee on learning analytics reported noticeable improvements in the measurability and return on investment.

Companies will need to justify the costs associated with measuring learning by identifying the business impact and risk of not training its employees. This could be quantified by fines, or profit loss as a result of being out of compliance with laws or standards. Often times this can result in fines levied against the company or even lawsuits or other forms of profit loss.

In healthcare, for example, lack of compliance with correctly collecting, coding and reporting cancer incidence could have far-reaching impact on budget dollars spent not only in the training and operational costs associated with the Cancer Registry department, but could also negate the costs associated with cancer program development and community outreach programs. Although program development and outreach programs have the ability to compete with the consumer’s dollars, all this could be for naught if the required reporting is not done accurately and in compliance with the State or accreditation program standards. Training programs for the Cancer Registry can ensure that the data management processes are appropriately managed.

So, in summary, companies should be focusing on the development and measurement of their learning programs. The investment in learning analytics will outweigh the risks of inadequate training. Success for any organization will directly depend on their employee’s understanding of their products, services, operations and policies. Employees must be thoroughly trained in compliance, standards, confidentiality, non-disclosure and other legally sensitive areas of the company. And, companies must be able to track and measure this using effective learning analytics.