HI guys, i am working on methods to calculate training return on investment. Do any 1 has any stuff regarding this topic. please help
From India, Pune
From India, Pune
RESULTS OR RETURN ON INVESTMENT
Most organizations today measure their training in terms of its return on investment (ROI), which is also sometimes referred to as the utility the firm gets for its training cost. A company’s ROI refers to the benefits derived from training relative to the costs incurred. HR managers are responsible for calculating and presenting theses benefits to the company’s top managers. The benefits can include higher revenues generated, increased productivity, improved quality, lower costs, more satisfied customers, higher job satisfaction, and lower employee turnover.
The following are the types of questions HR managers should try to answer as they calculate a training program’s benefits:
1. How much did quality improve because of the training program?
2. How much has it contributed to profits?
3. What reduction in turnover and wasted materials did the company get after training?
4. How much has productivity increased and by how much have costs been reduced?
To answer these questions, HR managers use various types of data such as sales data, human resources and financial data, and employee-survey and control-group data gathered from the various sources within the organization. Of course the cost of the training program needs to be measured, too. The costs of training include the various expenses incurred as a result of training, including the direct costs of the programs (materials, travel, meeting site, meals, equipments, trainer salary or fee, and so on) as well as the indirect costs of the programs (participants salaries, lost productivity while attending the training, and so on). The ROI formula can then be calculated fairly simply:
ROI = Results/Training Costs
If the ROI ratio is >1, the benefits of the training exceed the cost of the program, if the ROI ratio is <1, the costs of the training exceed the benefits. ROI can also be measured in terms of how long it takes before the benefits of the training pay off. This payback analysis is done by adding the cost and dividing the benefits realized in a single month. The result will indicate the overall time required for the training to pay for itself.
Calculating Training ROI: Examples
If the ROI ratio is >1, the benefits of the training exceed the cost of the program, and if the ratio <1, the costs of the training program outweigh the benefits.
Example 1:- A program to train new machine operator costs Rs. 15,000 to develop and implement. After completing the training program, the average number of parts produced each year increased by 3,000, and the profit on each new part is Rs. 10, producing a net result of Rs. 30,000.
ROI = 30,000/15000 = 2
# Indicates that benefits of the program outweigh its costs.
Example 2:- A safety program costs the company Rs. 25,000 to develop and implement. One year later, there had been a small decrease in accidents, saving the company a total of Rs. 10,000.
ROI = 10,000/25000 = 0.4
# Indicates that the costs of the program outweigh the benefits
Hope it might be clear...
For further query you can reach me at
Regards
Hemant Agarwal
From India, Faridabad
11Most organizations today measure their training in terms of its return on investment (ROI), which is also sometimes referred to as the utility the firm gets for its training cost. A company’s ROI refers to the benefits derived from training relative to the costs incurred. HR managers are responsible for calculating and presenting theses benefits to the company’s top managers. The benefits can include higher revenues generated, increased productivity, improved quality, lower costs, more satisfied customers, higher job satisfaction, and lower employee turnover.
The following are the types of questions HR managers should try to answer as they calculate a training program’s benefits:
1. How much did quality improve because of the training program?
2. How much has it contributed to profits?
3. What reduction in turnover and wasted materials did the company get after training?
4. How much has productivity increased and by how much have costs been reduced?
To answer these questions, HR managers use various types of data such as sales data, human resources and financial data, and employee-survey and control-group data gathered from the various sources within the organization. Of course the cost of the training program needs to be measured, too. The costs of training include the various expenses incurred as a result of training, including the direct costs of the programs (materials, travel, meeting site, meals, equipments, trainer salary or fee, and so on) as well as the indirect costs of the programs (participants salaries, lost productivity while attending the training, and so on). The ROI formula can then be calculated fairly simply:
ROI = Results/Training Costs
If the ROI ratio is >1, the benefits of the training exceed the cost of the program, if the ROI ratio is <1, the costs of the training exceed the benefits. ROI can also be measured in terms of how long it takes before the benefits of the training pay off. This payback analysis is done by adding the cost and dividing the benefits realized in a single month. The result will indicate the overall time required for the training to pay for itself.
Calculating Training ROI: Examples
If the ROI ratio is >1, the benefits of the training exceed the cost of the program, and if the ratio <1, the costs of the training program outweigh the benefits.
Example 1:- A program to train new machine operator costs Rs. 15,000 to develop and implement. After completing the training program, the average number of parts produced each year increased by 3,000, and the profit on each new part is Rs. 10, producing a net result of Rs. 30,000.
ROI = 30,000/15000 = 2
# Indicates that benefits of the program outweigh its costs.
Example 2:- A safety program costs the company Rs. 25,000 to develop and implement. One year later, there had been a small decrease in accidents, saving the company a total of Rs. 10,000.
ROI = 10,000/25000 = 0.4
# Indicates that the costs of the program outweigh the benefits
Hope it might be clear...
For further query you can reach me at
Regards
Hemant Agarwal
From India, Faridabad
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