After reading a post from SquareJawMedia.com “What Is Your Training ROI?” I sat down and started to really evaluate how companies evaluate the ROI of training. Brian gives an excellent example, from a user’s point of view, of how valuable and relevant training can be.

I know how valuable training is. Working at ASPE has shown me how it can get people jobs, become more productive and raise salaries. I see everyday how crucial training is to employees. But how does a company judge the ROI of training?

Managers look at measuring the ROI of training in two ways. The first is very scientific; with graphics, excel sheets and a ‘tried and true’ formula.

((Monetary Benefits of Training – Training Costs)/Training Costs) * 100

If one can assign a monetary amount to the benefits received by training, then this formula can work wonders in getting funding for training.

Example: If someone needs to learn the newest version of a crucial software program that was known to improve job performance and efficiency, then this equation can be very helpful. This article by Henry Astorga of suite101.com explains the concept in depth. One would need to calculate how much time is taken to deal with the inefficiency of the current software, and project the time saved with the newer version. It’s a very calculated way of looking at training, and what direct benefits can be found. However, just because there is an established formula does not guarantee results. Let’s take our new software training example. Many software manufacturers offer training on their products. This is great… right? Go to the ‘expert’? Well these companies live in ideal worlds, where their product always works, and nothing is ever their fault. We all know that every software program, no matter how great, has problems. Those problems will not be addressed by an employee of the manufacturer. The ROI of investing in biased training will be lower then what the formula predicts. Solution? Find unbiased training, by real experts, who use the software everyday, and have already tested to see what works and what doesn’t. They will tell you what the manufactures won’t, what’s wrong with the product and how to deal with it.

The second way of evaluating training ROI looks at the bigger picture. There are some skills that are harder to evaluate into dollars and cents. Project management skills, or business analysis skills for instance are extremely valuable to companies, but rely heavily on a variety of factors that are difficult to track. This is not the only thing that must be taken into consideration… it’s also a little buzz word going around right now called Employee Engagement.  I won’t get into this subject too much because it’s not the focus of this article. Bottom line, high Employee Engagement = a more productive and lucrative organization. Quality employee training = higher Employee Engagement. Note that I said quality employee training. If a company expects a high ROI from training, then they need to make sure it’s valuable training. If you have hated training sessions in the past because they weren’t valuable or interesting, then they were a waste of your time and your company’s money. (DnB.com expands on this subject for any managers who maybe reading this.)

If you want to see the real ROI of training, weather it’s through a formula or through the bigger picture, find valuable and relevant training.  The true ROI of providing employees with training is simple: they continue to be your employees, only happier, with more skills by which to do their jobs and make you more money.