Making Money While Training Employees
Employee training is an investment. We all say it, we all mean it, and we all know how much we spend on it – but an investment signifies return, not just cost. What’s your company's return on its training dollar?
Most companies track how much they spend on employee training in a line item on the budget. Few track it per employee. Even fewer track it by the individual time an employee is learning a procedure or piece of equipment, and even fewer track the amount of money they make on employee training! That’s right, make! Why do we talk about training as an investment if we aren't planning on making money on it?
We say “training is an investment” (a good investment, we believe) and then we plunk down our company’s cash. Would you ever give $2000 of your own personal money to someone who said “this is a great investment”? No way, we’d all want to know how much we’d get back for this $2000. In other words, how good an investment?! But we put money and time into training without planning the exact return. I surely hope, and so do your employees, that our companies aren’t making retirement investments in this manner!
We all need to be tracking the return on investment of our training dollars. To do this, you simply need to be a bit more structured in your training. For formal, group training, most companies use an evaluation form that asks trainees what they learned in the training, what they liked, what they didn't like, what else they need to do their job. This is called Reaction Evaluation.
There are 6 ways we evaluate and therefore determine the return on our training investment:
Reaction Evaluation (described above) is the one you’re probably familiar with. Reaction, while valuable for how the training was conducted, isn’t a good predictor of whether the employee can actually do the skill they’ve just been taught. They said they learned certain things—but did they, and can they use them in practice and will they remember them? Can they perform on the job is, after all, the only the thing we care about, and the reason we're spending the money and time. So, we need to go on to Planned Actions, Actual Learning, and Application of Learning Evaluations to determine whether the employee can actually perform after the training.
Planned Actions Evaluation helps the trainee plan to apply the skills, knowledge, and attitudes they learned back on the job. Having them write an Action Plan and discuss it with their supervisor or someone else is like goal setting (we all know that people who write their goals are more likely to achieve them). The learner can use the Action Plan as a “To-Do” list and evaluate how quickly they’re achieving.
Actual Learning Evaluation can be done during the training using demonstrations, role plays, application projects, and answering processing questions. It can also be measured after the training by tracking how they implemented their Planned Actions.
Application of Learning Evaluation is where you actually measure the employee’s performance after the training. It can be done by a hands-on post-test on the job with an observer – the supervisor, a co-worker, the trainer, or even a customer, or with a video. It can also be done by a self-report questionnaire or you can use already existing performance measures (number of calls, number of mistakes and the performance appraisal process). Deciding which one of these to use depends on the performance you’re measuring. You also need to determine how long after the training you’ll measure. It will be different depending on the skill. If the performance to measure is completion of a mail merge of 25 names and a letter in 5 minutes – you can measure that at the end of the training. If the performance to measured is delegation of work to their team members so that the team members can actually complete the work successfully — you should measure that about 2 months after the training because part of the training will be the on-the-job practice.
Now you know if they can do it, but why did you want them to be able to perform this job, at this level in the first place? Of course, you’re ultimately looking to make money, but how, specifically? Do you need fewer errors, increased sales, lower turnover, less cycle time? This is why you need to do an Organization Results Evaluation.
Organization Results Evaluation is where you actually measure the change in quantity or quality (this could be increased production, shorter shipping time, fewer customer complaints, anything you need to achieve!). You set the measure, which obviously has to relate to the business needs of the organization. After you set the measure, all you have to do is set up a tracking system. It can be a paper log completed by the employee, already existing reports, or a special survey of employees or customers (depending on what you’re measuring). When should you conduct an Organization Results Evaluation? Determine a reasonable time after the training that you’d expect to see these changes.
Now you have some really cool information, all you have to do is put dollars to your Organization Results Evaluation information and you have Return on Your Training Investment Evaluation.
Return on Your Training Investment Evaluation is where you add up all your costs for training - materials, designer’s, facilitator’s, reviewer’s, content expert’s time x salary and overhead, space for training, travel if applicable, lost production (billing, sales time x dollars, product manufacturing x dollars) and anything else spent. Then you attach a dollar amount to what you measured in Organization Results - fewer customer complaints, increased sales, reduced employee turnover, reduced cycle time, etc. This is not an exact science, but putting a dollar amount on something like fewer customer complaints can be done by determining the average cost of a lost customer, staff time, or replacement of service or product, etc. Other things are more exact to measure but even approximate numbers are a lot more than you have now! The final step in the Return on Training Investment Evaluation is to multiply the dollars by the changed quantity or quality amount and match the cost and the income or dollars saved numbers. If the income or dollars saved are bigger than the cost, you have a winning investment and you now know that helping Betty learn didn't cost you $3000, you actually made $2000 because the company earned or saved $5000 as a direct result of her training - net $2000!
Does this sound hard, time consuming, a lot of paper work? No one who does Organization Results and Return on Training Investment Evaluations pretends it's quick, easy or free—but without these numbers how do you know you're spending your money wisely? How will you know when a particular kind of training isn't cost effective for your company? How many times have you cut some training that could have made your company more than the amount you just saved by cutting the cost of that training?
We use our Ten Steps to Determining the Return on Your Training Investment to guide us through not only tracking the costs and the return, but creating the training so we get the return we want!
Let us know what your organization is doing to make money by training employees. Are you measuring so you know how much you made by evaluating the effectiveness of each training?