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MARCH 2004

LITERATURE K EY FINDINGS

Practical Examples of Measuring Training
Effectiveness
TRAINING ROI CALCULATIONS
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Cost-benefit analysis—Vulcan Materials, a US building materials and construction
chemicals supplier, conducts cost-benefit analysis for many training programmes
through the following methods: 1
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Before training—Prior to the start of a training programme, the organisation’s training staff
asks middle managers to estimate the savings that will result from a proposed training
intervention in their departments.
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The managers also assess, on a scale of 0 to 1.00, their confidence that the training will
produce s avings.
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Trainers then multiply savings by confidence ratings to obtain an estimate of total savings
they can expect from the course.

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After training—Following training, evaluators review actual cost savings or revenue
increases.
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Line managers then estimate, by assigning a percentage, the extent to which they believe
the improvement(s) can be attributed to training.
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The organisation multiplies actual savings or increases by line managers’ estimates, and
compares the resulting figure to the forecast of total saving from the course.

To calculate the ROI of training
companies can use the following
methods:
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Cost benefit-analysis
Impact of training on performance
improvement
Revenue increases through
training
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Training ROI Formula—Merck & Company uses a unique formula, detailed below, to
measure the impact of specific training programmes. With this model, Merck determined
that its average ROI for training programmes is 84 percent and terminated 53
programmes that were not producing high enough returns.2
GAIN = D x SD\$ x JSI x N
D=shift in performance by average individual undergoing training expressed in standard deviations
from pre-training average
SD\$=the value in dollars of one standard deviation of performance shift
JSI=percentage of job skills affected by training
N=number of participants who underwent training

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Training expenditure calculations—Financial services companies profiled in past
Council research use the following metrics to evaluate their training functions:3
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Training expenditures as a percentage of total payroll—Indicates the amount of training
investment relative to labour costs.
Training expenditures per employee—Identifies the average dollar amount spent on training
per employee. Allows HR professionls to compare a company’s investment in human
development to industry competitors.
Training hours per employee—Measures the temporal amount of training each employee
receives on average. Provides organisations with a non-financial quantity measure, allowing
them to adjust for different uses of training investment while benchmarking.
Trainer-to-employee ratio—Measures the number of employees that each training employee
supports in the organisation.

Specific training metrics at profiled financial services companies follow in the table
below.
TRAINING STATISTICS AT PROFILED FINANCIAL SERVICES COMPANIES
Profiled
Company
A
B
C

Training
Expenditure as
a Percentage of
Total Payroll
2 percent
2 percent
3.9 percent

Training
Expenditure Per
Employee

Training Hours
Per Employee

Trainer-toEmployee Ratio

€1,515
€457
€1,355

n/a
31.5
131.6

1:200
1:144
1:88

 2004 Corporate Executive Board
CATALOGUE NUMBER: CLC11W5Y7H