How to measure the effectiveness of your training.

1. TRAINING NEED ANALYSIS

2. What is training?
• TRAINING IS TO IMPROVE WORK
PERFORMANCE
– ON THE JOB TRAINING OR
– OFF THE JOB TRAINING

3. RETURN ON TRAINING
IMPROVEMENT VALUE TRAINING INVESTMENT
REDUCE INVESTMENTS
CAPITAL
INCREASE OPPORTUNITY COSTS
REVENUE
REDUCE ACTUAL COSTS
COSTS

4. RETURN ON VALUE OF
IMPROVEMENT
TRAINING
THIS IS A RATIO JUSTIFYING
THE INVESTMENT ON TRAINING
TRAINING
INVESTMENT

5. Combined Evaluative Approach
Source: Jack J. Phillips.
What was the return Level 5 Return on Investment.
Houston: Gulf
on the investment? ROI Publishing Co., 1997.
Did it have an impact Level 4
Impact
on the business?
Did they apply it on Level 3
Application
the job?
Did they learn what Level 2
Learning
was required?
Level 1
Did they like it? Reaction
5

6. ROI Calculations
Source: ROI Institute.
Measuring the
ROI of Training and
Performance
Improvement Programs.
Program Benefits Arlington, VA: ASTD,
Benefit-Cost Ratio = 2004. Page 2.9.
Program Costs
Net Program Benefits*
ROI = X 100%
Program Costs
*Net Program Benefits = Program Benefits – Program Costs
6

7. Balanced Scorecard
Source:. Kaplan and
Norton. The Balanced
Scorecard. Boston:
HBS Press, 1996.
Financial
Perspective
VISION
Customer & Process
Perspective STRATEGY Perspective
Learning
&
Growth
Perspective
7

8. Balanced Scorecard
Source: David P. Norton
Balanced Scorecard
Balanced Scorecards tell you ….. Report. “Use Strategy
Maps to Communicate
the knowledge, skills and systems that Your Strategy.” Page 169
your employees will need (their learning
and growth) …. to innovate and build the
right strategic capabilities and efficiencies
(the internal processes) ……that deliver
specific value to the market (customers),
……which will eventually lead to higher
shareholder value (the financials).
Financial
Vision
&
Strategy
Process
Learning & Growth
Customer
8

9. McBassi Methodology
• Human Capital Capability Scorecard™— predicts an
organization’s ability to achieve future business results
by analyzing data on an array of human capital
indicators.
• Generates prioritized, fact-based recommendations for
improving business results through more effective
development and management of employees.
• Statistically analyzes the relationship between HCCS
scores (by P&L center, branch, etc.) to identify those
factors that are the most powerful predictors of an
organization’s performance
• Serves as a blueprint for creating employee investment
strategies, and a baseline to evaluate the effectiveness
of these strategies.
9

10. ABA CLO Summit Application
We modified the Human Capital Capability Scorecard™
and our data collection to those elements with both of the
following characteristics:
- Most relevant to employee development, and
- Could be provided by a single individual within
the organization
10

11. ABA CLO Summit Results
• The evidence clearly points to a positive
relationship between human capital (learning)
practices and investments, and financial returns.
• This relationship is most consistent for the
measure that captures training and development
expenditures per employee.
• The financial outcome most consistently
associated with an array of human capital
measures is net income per employee.
11

12. ABA CLO Summit Sample Results
Median Net Income Per FTE (10/02 to 9/03), by Top Half/Bottom Half on Human Capital Variables
$80,000
Median Net Income/FTE
$60,000
$40,000
$20,000
$0
Resources: T&D Resources: Employee Average Systems Average Workforce Average Learning
Expenditures Per FTE to Trainer Ratio Maturity Score Optimization Score Capacity Score
Human Capital Variable
Institutions in Top Half on HC Variable Institutions in Bottom Half on HC Variable
12

13. Conclusion
There is every reason to believe that
an institution’s increased focus
on, and commitment to, human capital
factors, especially learning and
development, should lead to improved
financial performance.
Which side of the fence are you on?
13

14. Conclusion
There is every reason to believe that
an institution’s increased focus
on, and commitment to, human capital
factors, especially learning and
development, should lead to improved
financial performance.
Which side of the fence are you on?
14

15. Step 1 – identifying critical
performance gaps
• Gaps is obtained through comparing actual
against industry standards
• Critical is how material is the impact on the
corporate objectives.
• Use ROE format as a coporate summary
• Critical is derived from pareto and sensitivity
analysis

16. P. 31
Define the Performance Gaps
Describe Discrepancy
DESIRED PERFORMANCE (Optimals)
- ACTUAL PERFORMANCE (Actuals)
= POSSIBLE TRAINING NEED

17. P. 34
Is it critical?
• Why is it important?
• What if you did nothing?
• How big is it? (Quantify if possible)
• Who cares?
• “Is the cost of the discrepancy high
enough that it seems worth pursuing
a solution?”

18. Step 2 - calculate the KPI of each
critical performance areas
• Calculate KPIs for actual, standards and
industry
• Compare KPIs to evaluate true performance.
• The KPI may be used in ROI calcualtion.

19. Step 3 - Analysing further the critical
performance gaps
• Is it true performance gaps?
• Is the gap caused by factors other than
competency.
• Benchmarkings to recognise best practices
• Use input output analysis
• Task and subtask analysis
• Interviews, observations, focus
groups, documentations

20. Determine Cause(s)
Is it a problem of skill
or
a problem of will?
I don’t wanna!
I don’t wanna!
I don’t know
how.

21. Yes, it is a skill deficiency
Arrange Formal
no Used to do
Training
it?
yes
Arrange Practice
no
Used often?
Arrange Feedback
yes

22. Other questions
Change the Job
Simpler
way?
Arrange on-the-job
training
Potential?
Transfer or terminate

23. If a skill deficiency..
• Provide training
• Provide practice
• Provide feedback
• Simplify the task
• Develop a job aid
• OJT
• Transfer
• Terminate

24. And one last question...
Remove
Obstacles?
Obstacles

25. P. 39
Step 4: To train or not to train?
Calculate cost
• First determine cause(s)
• Only then look at Select best
solution(s)
possible solutions
• Seek integrated Implement
solution systems that
get to the root of the
problem

26. P. 39
Cause Solution
• If skill or knowledge……….training
• If lack feedback……………..feedback, standards
• If not motivated…………….rewards, consequences
• If unclear expectations…..std, measure, discuss
• If job environment…………change environment
• If potential……………………change personnel

27. EVALUATE PERFORMANCE
C O M P E T E N C Y
LP HP
WP LP
MOTIVATION

28. Step 5 - calculate the ROI training
• The purpose of this step is to justify the
training BEFORE the training start.
• Calculate the benefits generated by the
training divided by the capital employed in the
training.
• We obtain our ROI figures through the input
output model.

29. ROI Calculations
Source: ROI Institute.
Measuring the
ROI of Training and
Performance
Improvement Programs.
Program Benefits Arlington, VA: ASTD,
Benefit-Cost Ratio = 2004. Page 2.9.
Program Costs
Net Program Benefits*
ROI = X 100%
Program Costs
*Net Program Benefits = Program Benefits – Program Costs
29

30. SUMMARY
1. Identify critical performance gaps using some
benchmarks.
2. Identify key job holders and conduct
competency profiling.
3. Identify best practices
4. Identify effective training alternatives
5. Use projected ROI to justify training