Training ROI - Explanation

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What is this? The ROI calculator calculates cost savings as a result of a training intervention, and so enables you to set out an investment case for training. The calculator has been designed specifically for communication and language training courses. The ROI calculator spreadsheet enables you to: - quantify savings due to a reduction in staff turnover, - quantify savings due to an increase in staff productivity, - calculate the simple ROI of a training investment. The ROI calculator is a tool to help companies evaluate and choose training projects on the basis of effectiveness and cost, but should be used only as a rough guide and can not guarantee the success or impact of the training course.

How do I use it? The calculator already contains some data as an example. The numbers you need to change are those in blue. Substitute the sample data with the data you have collected, or consult the benchmark data provided.

Feedback If you have any comments, feedback or suggestions for improvement, you are very welcome to contact us. Our contact details, including telephone number and email address, are available on our website www.tjtaylor.net/english I hope you will find this tool useful, and if you believe a colleague or friend would also find it interesting you are welcome to forward or distribute this file, with the only condition that the copyright, logos and attribution remain intact and are not changed in any way.

TJ Taylor Language Training

www.tjtaylor.net/english

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00 € 25.00 € 2.000.Time Savings Average total cost of employee per year Average total cost per hour Period of improved performance Value of time saved Return .00 20 € 1.237.Calculator Survey results: EXAMPLE: In a random sample survey of 1000 students 71% of respondents who completed the study recommendations reported saving 1 hour or more per week due to their improved English skills Calculations Investment Cost of course Number of students Cost per student Return .625.00 10% € 1.tjtaylor.10 113% € 6.132.60 Salary.000.Training ROI .Staff Turnover Savings Average cost of recruitment & induction Average cost of other training & warm-up period Impact on staff turnover as proportion of all benefits Value of reduced staff turnover Summary Total Investment per student Total Return ROI % € 1. other benefits.00 12 € 894.750. administration & management Months 71% save 1+ hours per week according to survey TJ Taylor Language Training www.net/english .50 From desired qualities of job / questionnaires / appraisals data Notes € 20. tax.000.00 € 5.000.00 Prices given in quotation Numbers given in quotation € 45.

fees and specialisation Estimated ramp-up period to full productivity 3 months.tjtaylor.net/english . prospects & other remuneration TJ Taylor Language Training www.24 months depending on course length and intensity Weighted internal data 15-80% of first year salary depending on position. €80.000+ employees.000+ managerial Estimated 12 .Benchmarks Weighted internal data €30. skills. linear from zero to 100% over period Benchmark 10%-40% depending on position.

to then re-survey post-course. if not 95%) as the actual ROI will never be exactly the number you have calculated. contributing to the final figure.tjtaylor. so hiding any variance e.when presented with outlying feedback.Assumptions & Considerations Before you attempt a serious calculation of ROI it is strongly recommended to read and take into consideration the following . but assumes all extra work is equally important) Data collection is accurate and sample size is adequate and randomised Survey results create a valid and workable hypothesis for productivity calculation Problems Survey data collection . Error margins . this type of analysis will show you how the result changes according to the range of ACTUAL LIKELY numbers for each of the variables. neutralising assumptions and 'declawing' problems. As an extra step you may also want to consider performing a Monte Carlo analysis .the periods of improved performance and ramp-up have not been studied scientifically or in detail for this study. but will lie in a range around that number. This is the best method to eliminate from the calculation other external effects that were not due to the training. These are business benefits. larger productivity boost for a higher cost employee will produce larger savings Estimates .for example. which have a higher probability of a successful outcome Weighting .an error margin should be calculated (with at least 90% confidence. in the same way that no one number or metric can satisfactorily create an entire business case . each with their own error margin. The following are some issues to take into account (or of course you can contact us). possibly producing an average of more than 1 hour for the group. often included as or contributing to strategic objectives.71% of respondents reported saving more than 1 hour per week.the considerations to take into account when moving beyond the free version of the ROI calculator Assumptions Participants work for 40 hours a week and follow training outside of working hours Job performance is rational and linear (valid given large sample. or numbers in a range. Pre.Training ROI . a deeper pool of resources to create multinational teams. For large programs or pilot programs it is always a good idea to have a control group (who are unaware of this fact) in order to compare the results between those that receive training and those that don't. In order to improve the accuracy of survey data you should consider extending the data collection to include also the participants' supervisors/peers. but based on conversations with HR Considerations This free version of the ROI calculator can calculate a simple rough ROI figure.net/english . Relying on hindsight or memory increases the error substantially. improved customer service feedback and response times due to more English speaking staff available.g. and ignoring the <1hr productivity boost from the remaining 29% Quality benefits .with a number of variables.the information required should be decided on and the data collection performed before the start of the intervention in order to create a benchmark. but in order to create a credible business case you will need more rigorous analysis and better quality data. Soft benefits and other intangibles do have a place in a business case for training. including calculating error margins. it is normally better to ignore/round down/take the lower number.the problems inherent in the calculation (so that you can build credibility in the figures with the audience) . so reducing the element of subjectivity in the data.the assumptions that were made in the calculator in order to simplify and clarify the results .and post-course data .it is not feasible to quantify savings produced by the course in terms of more confident and fluent negotiations and presentations. and TJ Taylor Language Training www. but it is not feasible to calculate the exact time savings above or below 1 hour. The prudence principle .the employee and recruitment & induction costs are averages.

You may want to consider allocating a portion of the fixed HR costs to the total training cost depending on your company's internal budgeting and cost centre procedures. the effective period of the training used in the calculation should be kept to a reasonably short duration. Following the prudence principle. organisation and co-ordination of the training. the financial benefits also need to be amortised over that period. The costs of training normally include only the cost of the actual course itself and any accommodation/travelling etc. but not the fixed costs of any internal resources that may have contributed to the marketing. TJ Taylor Language Training www. An ROI analysis can not logically be used for any training that forms part of an employee basic skills portfolio policy or contributes to compliance training.net/english . but.can be highlighted in the business case even though they cannot satisfactorily be included in an ROI calculation. as with any training investment.tjtaylor.

net/english .TJ Taylor Language Training www.tjtaylor.

net/english .tjtaylor.TJ Taylor Language Training www.

Use the most credible sources 4.Training ROI . Report intangible benefits 12. Report the complete story . Explain how the evaluation framework monetises 3.in context 2. Use first year benefits for short-term programs 10. Isolate the effects of the program 6.tjtaylor. Communicate results to all stakeholders TJ Taylor Language Training www. Choose the most conservative alternatives 5. Throw out the extreme and unsupported 9. Include fully-loaded costs 11.net/english . No data no improvement 7. Adjust estimates for error 8.Guidelines General Guidelines for Calculating and Reporting ROI 1.

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