!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Evaluating a Proposed Training Investment

Wednesday, January 10, 2007

Evaluating a Proposed Training Investment

Usually, though not always, it is possible to pull together a meaningful quantitative analysis of the likely return on a proposed training investment.

Back in 1992, Training magazine published a widely cited article by James Hassett that offers a practical approach, an approach Hassett embodied in a Training Investment Analysis Work Sheet (pdf, p. 27).

The work sheet begins, as you would hope any training investment analysis would, with space for you to spell out the objective of the proposed training. You then list the audience and the period of time (e.g., one year) over which the impacts of the training will be measured.

The actual calculation of the anticipated return is carried out in either of two ways:

Option A — If it is feasible to quantify specific areas of impact on revenues, do so either by projecting a "most likely" scenario, or by projecting a likely range for each estimated impact. Hassett suggests looking at:
  • Increased sales

  • Higher productivity

  • Reduced errors [or other relevant quality measure]

  • Client retention

  • Employee retention

  • Any other expected impacts

  • Once you have estimated the individual revenue impacts, add them up to arrive at the revenue produced by training.
Option B — If disaggregated impacts cannot realistically be estimated, prepare a summary analysis in which you project revenue after training and then subtract revenue without training in order to estimate the revenue produced by training.

After using Option A or Option B to calculate the revenue produced by training, substract the cost of training to arrive at the estimated total return on training investment.

Note that this same template can be used to evaluate the ROI on training that has already taken place.