RETURN ON INVESTMENT (ROI)

OF TRAINING & DEVELOPMENT

ROSHIDAH AHMAD
822660
• https://youtu.be/L0HTTKhCn6w
 ROI
• “Refer to comparing the training’s monetary benefits
with the cost of training” (Annen and Tiemann, 2017)
• The process of determining the economics benefits
of a training program
• Important training outcome
• There is an increased interest in measuring the ROI
of training & development programs because of the
need to show the results of these program to justify
funding & to increase the status of training &
development function (Ezekwugo, 2017)
 ROI
• Most trainers & managers believe that there
is a value provided by training activities such
as productivity, customer service,
improvement, cost reduction, time saving @
decreased employee turnover (Gurav, 2016)
• How to calculate ROI through Cost Benefit
Analysis (CBA)
 COST BENEFIT ANALYSIS (CBA)
• The process of determining the economics
benefits of her training program using
accounting methods which involves
determining training cost & benefits
ROI (worth)
What we give (investment)

COST BENEFITS

What we get (return)

 TRAINING COST INFORMATION IS
IMPORTANT
• To understand total expenditure for training
including direct & indirect costs
• To compare the costs of alternative training
programs
• To evaluate the proportion of money spent
on training development, administration and
evaluation, as well as to compare money
spent on training for different group of
employers
 TYPES OF COST IN TRAINING
PROGRAMS
• Development Cost
• Direct Cost
• Indirect Cost
• Overhead Cost
• Participant Compensation
• Evaluation Cost
 MEASURING BENEFITS
• Direct
• Indirect
– Reduction in the number of grievances
– Improvement in punctuality & discipline
– Better appraisal reporting & feedback
– Improvement in organizational climate
– Improve in customer complaints
• Immediate benefits
• Long term benefits
– Creative & problem solving skills
– Team & leadership skills
– Improved human relations
– Better communication ability
 EFFECTIVENESS OF ROI
• Kirkpartick’s model, namely the ROI methodology (Jack
Philips, 1991)
– In terms of money, and then compare the estimated profit figure
with the expenses the training program incurred
– Information about the projected costs of the training program before
giving it the green light, especially if the budget is tight
– Assessing the results of training & personnel development
– Estimate the potential profit from conducting a training program &
to make sure that the projected costs would fit the budget
– Estimate the cost of a training program & make a prediction
regarding whether conducting the program will be cost-effective
– Demonstrate a direct relationship between the company’s
productiveness & the training of employees
– Evaluate a training program as a business tool
(Sachdeva, 2014)
 ADVANTAGES & LIMITATIONS OF ROI
Advantages Limitations

1. Can compare large & small units 1. Goal congruence issues

2. Easily understood
- Comparable to interest rates and
the rates of return on alternative
investments
3. Widely used & reported
- Might intent managers to
make decisions not in
company’s best interest
2. Comparability across
investment centre's

4. Measure contribution

5. Set priorities

6. Focus on result

7. Alter management perceptions of

training
RELATED CURRENT INDUSTRIAL
REVOLUTION 4 (IR 4.0)

https://youtu.be/mPUfwX4Nqy8
 CONCLUSION
• Training results must be measured against costs
• HRD must justify itself repeatedly as a revenue
enhancer, not a revenue waster
• Helps promote the role of training in the development
of the company’s employees, as well as the company
itself
• Focused on the company’s business goals & improves
the design, development & delivery of trainings
• Changes how the company management & those in
charge of approving training program view training as a
whole

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 REFERENCES
• Annen, S., & Tiemann, M. (2017). Educational pathways and decisions–
Comparing the returns to investment in Germany and Canada. International
Journal of Technology and Inclusive Education (IJTIE), 6(1).

• Ezekwugo, K. C. (2017). Human Resources Training and Development in the

Central Bank (Doctoral dissertation).

• Gurav, P. (2016). The Role of Employees in Successful Service

Delivery. Reflections-Journal of Management, 2.

• Sachdeva, S. (2014). Effectiveness evaluation of behavioural training and

development programmes. The SIJ Transactions on Industrial, Financial &
Business Management (IFBM), 2(4), 218-226.