Enterprise return on a training investment

In this study, a training evaluation process is developed to assist organisations in identifying the financial returns from training investment decisions. This evaluation process uses a wide variety of statistical techniques dependent on the quantity and quality of the data available. The process enables the determination of the value to an organisation from various training projects.

There are three major objectives driving this report. The first objective is to present detailed examples or case studies of actual training programs undertaken by Australian organisations and to illustrate how training programs can be evaluated, what data are necessary for evaluation and what techniques can be applied as part of the evaluation process.

The second objective is to quantify the net gains derived from training programs. This includes identifying the costs and benefits associated with training and determining the net financial impact of the training. While training programs often generate benefits beyond financial considerations, an organisation's stakeholders frequently need to know what the impact of training is on the 'bottom line'.

The third objective of this report is to develop a simple and practical process for training evaluation. Such a process should be general enough for use by most, if not all, organisations, whether they are profit, non-profit, private or government-owned.

An important feature of the case study organisations in this report is that their organisation profiles vary. For example, QR (Queensland Rail) is a government-owned transportation company, while AustraliaNew Zealand Direct Line is a privately owned company. Mission Australia is an important non-government charitable organisation. Target is part of the Coles-Myer group, which is a publicly listed corporation. Kodak and Franklin's are Australian subsidiaries of large multinational corporations. The aim of investigating such a diverse group of organisations is to emphasise the point that training has a role to play in all organisations, and that significant returns from training are not dependent on industry, ownership structure and nature of business operations. Significant returns can be derived when training is well designed, expertly delivered, when the transfer and acquisition of skills and knowledge is facilitated, and when organisations employ the new skills and knowledge productively.

Given the diversity of the case study organisations, it is not possible to compare the organisations, and specifically it is not possible to compare their rates of return because the training programs are so diverse. There is no benchmarking undertaken in this report.

The two main forms of data used are time series and matched pairs, pre-and post-training. In addition, both subjective and objective data are used in a number of the case studies, illustrating the diversity of data sources available to organisations and the use to which such data can be put. The evaluation process covers a range of projects and a range of trainees, from operators to managers.

The main findings arising from our analysis of the evaluation of various training programs for our case study organisations are as follows:

First, the financial and other returns from a well-designed training program are substantial. For commercial-in-confidence reasons, the evaluation results for the various training programs are presented in the form of percentage or level changes but represent substantial dollar returns. The return on investment (ROI) from training ranged from 30 per cent to 7000 per cent.

Second, even though the estimated ROI varies substantially from training program to training program, there is a remarkable consistency in the positive ROI achieved by these programs. The training programs involve a range of occupational groups and employment levels.

Whether training involves new inductees or senior managers of companies, significant financial returns can be generated through training. All of the case study organisations received a positive ROI on their training program. Some rates of return are very large, indicating the possibilities open to organisations. However, the respective rates of return are not comparable as the firms are not operating in the same industry or different training programs are being evaluated.

Third, a simple four-step methodological framework, in which evaluation is best carried out, is presented and consists of collecting data, pre-and post-testing, multivariate analysis and calculating the ROI.

Fourth, a number of quantitative techniques are readily available (some of which are presented) for evaluating training programs. These techniques vary in complexity but are generally easily accessible through computer packages.

Fifth, the choice of technique depends on the quantity and quality of the data. This equally is applicable to both qualitative or quantitative analysis.

This study has shown that a well-designed and -delivered training program can be expected to generate significant financial returns that compare quite favourably with other forms of investment.