Leaders and employees alike desire training and development programs. They are frequently recognised as some of the best methods to help professionals gain new skills and move their careers to meet their personal goals.

Just look at the statistics. LinkedIn’s 2024 Workplace Learning Report shows that career development rose from 9th place to 4th in employee priorities. However, many workers feel like their employers do not care about their training initiatives, nor do they feel like they are offered adequate opportunities to further their goals on their own.

Nevertheless, there is plenty of evidence to back up the value a training program can deliver to employees. Measuring training ROI (or return on investment) shows whether training courses are effective and can be useful in dictating future training initiatives the company may wish to use.

What is training ROI?

Training ROI looks at the precise monetary value that an organisation has received as a result of investing in training for staff. This can be done for employees at any level; we simply wish to focus on training courses and ROI for leaders in this blog.

Attending a training course should translate into new skills and experiences that will then be returned in a monetary form thanks to new contracts or deals acquired through putting those new skills to good use.

What shouldn’t be included in training ROI?

Several metrics shouldn’t be included in training ROI. These include training summaries or reports, and attendance or completion rates. Training ROI serves to justify the expenses generated by leader or employee training, and these metrics won’t address that.

How do we calculate training ROI?

Calculating ROI is incredibly important as it can help to justify the expense of one training course and can also justify sending other leaders to it in the future. Using a training ROI calculator is the easiest and fastest way to determine the monetary benefits of any training programs you wish to implement.

ROI in general can be calculated with the following formula:

Though this formula is for general ROI, it can be modified for training by using the costs and values of the training specifically. If the percentage gained is greater than 100%, you are, of course, receiving more for your investment than the initial training costs, and they have proven to be effective.

The Kirkpatrick model

Dr Don Kirkpatrick established the Four Levels of Evaluation framework in the 1950s and this is still used to evaluate training today. Kirkpatrick’s work does not explicitly address ROI but it does break down evaluation into overall training effectiveness into four levels:

Level One: Reaction

The degree to which participants enjoy and engage with the training and find it relevant to their jobs.

Level Two: Learning

The degree to which participants acquire the intended outcomes of the training, be it new knowledge, skills, confidence, or some other factor.

Level Three: Behaviour

The degree to which participants make use of knowledge gained during training in their everyday role.

Level Four: Results

The degree to which organisational outcomes occur due to the training initiative and support given.

This is a brilliant framework for measuring the holistic value of the training but it doesn’t acknowledge the monetary value of the training. A particular program might meet all the needs of a leader, but if the cost of the program exceeds their allocated training budget, they may be reluctant to send other personnel to it.

The Phillips Model

The Phillips model was developed by Dr Jack Phillips as a response and expansion of the Kirkpatrick model. This includes measurement and analysis of ROI to bring new understandings that the Kirkpatrick model doesn’t necessarily include. The breakdown of the Phillips model is as follows:

Level One: Reaction & Planned Action

Similar to the Kirkpatrick model, the Phillips model first asks us to consider participants’ initial reactions to their training. This does not require any cost-benefit analysis or ROI tracking, it is purely just targeted towards the participants’ enjoyment of the training. It also lays out specific plans for implementation in the future.

Level Two: Learning

Again, like the Kirkpatrick model, Level Two of the Philips model looks to the information that the participants have learned and the degree to which their behaviour has changed as a result of the training.

Level Three: Application & Implementation

Level Three is where there is first a difference between the two models. The Phillips model wants to collect data on the effectiveness and application of training like the Kirkpatrick model. However, it also wants to expand upon this to include qualitative data about the reasons why the training did or did not work.

Level Four: Impact

The Philips model again expands the impact of the training as initially designated by the Kirkpatrick model. Rather than simply looking at unilateral results, the Phillips model encourages analysis regarding impact across multiple areas of the business. This allows leaders to look at both the deliberate impact of the training content but also other factors that could affect the outcome.

Level Five: Return on Investment (ROI)

The fifth level is unique to the Phillips model but delivers that all-important cost-benefits analysis to correlate the impact of the training with its monetary value. This is then a full data set that training managers and other key figures can use to communicate the success of the training to stakeholders and other interested parties.

Why is measuring training ROI important?

Knowing your training ROI is important for several reasons. This is just one of many metrics you need to measure within your business, and it can help you to interpret other types of business data in ways you might not expect.

What are the benefits of determining training ROI?

As with any business strategy or evaluation planning, we need to be aware of the benefits that can be gained from putting in the legwork to determine training ROI. Benefits can be wide-ranging, but the most common benefits can be:

Justification

There’s no way around it; training programs can cost a lot of money. Taking the time to determine training ROI can help justify the cost to stakeholders and decision-makers who might be reluctant to pay more for learning and development without concrete evidence of success.

Evidence of the success of one program can also help to establish a cause for further training and courses, whether this means you are sending other leaders to the same course or you find a new one for them to attend for additional development.

Employee promotion

Remember, decision-makers are not the only ones who need to be convinced of the success of a training program. The leaders and employees themselves also need to be convinced that the training is worth their time. Not everyone is thrilled about the idea of stepping away from their desks and workloads to spend all day at a training event. Finding ways to measure training ROI and really showcase the value gained from these events helps employees buy into them and work towards increasing key metrics like engagement and motivation.

Business alignment

Business goals are not only defined by sales targets and marketing metrics. They should also be defined by investment into staff and plans for long-term retention and development. Calculating training ROI can help a company align the training outcomes of their chosen courses with their overall business objectives to support both.

Resource allocation

Training ROI calculations show where value is being driven within a company. Resources are finite, after all, and if one area of learning and development is not delivering expected results or a good ROI, it may be better to reallocate resources to a program that delivers better.

Improvement

Finally, calculating ROI helps to highlight the areas that need improvement. If a particular training program is underperforming, its ROI should highlight this. Likewise, if a class appears to be popular but doesn’t actually deliver workable results, it might not have the expected ROI. The company can then go in and re-evaluate the program, deciding whether or not they want to keep it going or try something new.

What else do we need to do to calculate training ROI?

Having a formula is only half the approach needed to accurately calculate what the ROI of training could be. Ideally, we also need to have a systematic approach that helps to firmly define our approach.

Interpreting the formula is only half the equation. Ideally, to measure ROI, we also need to:

Set clear objectives

Determining the value of training is something that cannot just be felt out and followed with vibes and approximations. Unfortunately, we are focused here on the monetary value of the training, so we need to be specific. Choosing distinct and measurable objectives for any training investments will help to show how they can best align with business outcomes.

Consider intangible benefits

There will be some intangible benefits to any training program. Though the agenda may not focus on areas such as creativity, productivity improvement, or employee engagement, they nevertheless may be impacted by any work undertaken during the training. They cannot always have a monetary worth applied to them, yet they will still have an impact on proceedings.

Communicate and benchmark your findings

When you have your results in front of you, it is not enough to consider them in isolation. First of all, share your training data with participants and stakeholders so they can have a taste of the value. Showcasing training impact is a great way to build support for future programs. Again, don’t look at the scope of impact within your company alone.

Benchmarking your data against industry averages or similar companies in your area can provide fantastic insight that can help you assess the worth and competitiveness of the training investment and ROI.

Find leadership programs that deliver real values with ChangingPoint

Given the cost and importance of training programs, establishing ROI should be a must. Companies need to know if the money they invest in their leaders is delivering the value they expect. ROI helps to determine this.

ChangingPoint works to transform leadership and give management real and actionable tools that they can use to bring and manage lasting change within their companies. We understand that positive work does not happen in a vacuum, and we strive to show the methods and value in our work at every turn.

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Written by Jayne Ruff

Jayne Ruff, Occupational Psychologist & Managing Director at ChangingPoint. To find out more about how ChangingPoint can help you align minds to transform your business, get in touch.

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