Measuring the ROI in life skills training:
A conflict management case study
For years people have attempted to measure the return on investment (ROI) in training, it has been quite easy to calculate ROI when hard measures such as sales and defects are available. However, on the softer side – measuring improvements based on soft skills like teamwork, conflict management, leadership have not been so easy. For instance, at an international level it has been determined that proper conflict management typically yields an ROI of more than 1000%. But how do you achieve such an incredible score? Is it really possible? This article provides you with some ideas on how ROI can be measured, even if less tangible measures are available. Moreover, a practical case study is presented of how ROI was measured on life skills training at a South African company.
Innovation Group (Pty) Ltd is a solution provider operating on the continuum between business process outsourcing and software outsourcing solutions. These solutions support financial services risk products offering inbound and outbound call centre facilities, tele-marketing, motor vehicle, motorcycle, leisure products and commercial vehicle warranty administration. Other focus areas are motor vehicle fleet management information, vehicle rental management information, emergency roadside and home assistance, administration of warranties for household electrical products and appliances, motor accident repair process management, damage assessment, claims handling as well as insurance software provision.
To execute all of the above functions, Innovation is a company that places a high premium on developing their staff. Measuring the return on investment in training is the clearest statement an organisation can make to measure the tangible benefits of the amount invested in training. Innovation and Connectivity, a training provider that specialises in delivering high quality training customised to the needs of their clients, facilitated various training programmes for Innovation.
Why measure the Return on investment?
Why do organisations have to measure the ROI in training? When measuring, it is possible to establish the business benefits of training. If there is a benefit greater than the cost or investment in training, then training is worthwhile. To draw this conclusion, the return on investment has to be measured. Many organisations do not measure the return on investment and therefore do not determine the direct relationship between training inputs and bottom line profit and outputs. This is partly due to some of the challenges in measuring the impact of life skills and the difficulty in isolating the effects of non-training issues, for example the influence of a peak business season on sales. The good news is that ROI can be determined through a scientific method. ROI is the measure of the monetary benefits obtained by an organisation over a specified period in return for a given investment in a learning programme. In other words, it is the extent to which the benefits (outputs) of training exceed the costs (inputs).
ROI is a key financial metric of the value of training investments and costs. It is a ratio of net benefits to costs, (investment in training) expressed as a percentage.
The formula can be expressed as:
[(monetary benefits – cost of the training) / cost of the training] x 100
ROI (%) = (benefits –
costs) x 100
ROI measurement entails the three ‘c’s of ROI; cost, change and calculate, i.e. determine the cost of learning, measure the change in behaviour or performance improvement as a result of learning, and calculate the benefits as a rand value.
What is Innovation’s business rationale for their investment in training?
Upgrade employee’s skills continuously
Improve individual performance to meet operational standardsRaise the organisational level of performance Enable individuals to adapt to strategy, market conditions and technology Ensure adherence to legislative compliance Enable best skills matches between the individual and the organisation Develop the potential for promotion Develop the organisations’ human capital Show how the performance of each individual affects business performance
Specific measures are used when measuring ROI to demonstrate the link between training and tangible measures in the form of increased output, fewer errors, better quality or higher level of customer satisfaction. Positive behaviour as a result of training could be reduced absenteeism or lower staff turnover, or increased sales due to higher motivation.
Some of the constraints to measure ROI are the difficulty to collect data and the lack of sufficient training records. A business approach to ROI highlights other issues such as the linking of training to the organisation’s strategic objectives. These objectives are indicated amongst others, on the Workplace Skills Plan. Individual performance and the relevant training needs required to achieve strategic objectives should be linked to the Performance Management system of the organisation. One integrated process is then applied to identify individual competencies needed to achieve organisational effectiveness and these competencies are recorded on the individual’s Personal Development Plan. This ensures that learning is integrated into the overall business strategy.
Innovation decided to measure the benefits of a life skills programme. It is not always clear what the benefits could be due to a course that is seen as focusing on intangible benefits. In other words, what would the benefits be for employees who are now familiar with conflict handling knowledge and skills? Would it be possible to assign a rand value to these benefits?
|One of Innovations’
Call Centres consists of 150 employees. Due to the high pressure
environment, the high levels of stress involved, and sales targets, this
group is subjected to regular instances of conflict. Innovation sourced
the services of Connectivity to deliver a course on Conflict handling
and resolution. This course was attended by a group of 12 employees
presented over one day.
Sub-contracting to ROIONLINE, a training measurement specialist company, the impact of training was measured and an ROI was calculated. The results were astounding! The measurement focused on the increased amount of sales due to less time spent on resolving conflict situations. During a conflict situation, two people are involved as well as a team leader. During this time, at least one hour, both employees lost two sales. The ROI calculation was done on the basis that not only the employees who attended training are involved in a conflict situation, but also the team leader and other employees that are part of this team and are affected by the conflict. The calculation was done on the basis of two incidents of conflict over a twelve month period.
However, costs should also be considered. The next step was thus to calculate the training costs. All the training costs for the 12 delegates who attended the training were factored in; these included facilitation fees, learning material, and meals. Salary costs for the time while attending training were also included. No fixed costs e.g. floor space was included as this forms part of the overall monthly overhead costs.
The effect of non-training variables that could have an influence on the measurement was factored in. This is based on the assumption that the increased number of sales per employee for the department is not only due to less conflict issues, but also as a result of high motivation due to commission paid. The ROI figure was adjusted to incorporate the possible influence of this non-training variable.
The true ROI was 288% as a result of the benefits of training!
From the above measurement it is evident that a clear benefit could be assigned to attending the course on conflict handling and resolution. If this is the result of what one company can achieve by reducing conflict, imagine how much money is wasted in companies that do not address conflict management in a proactive and professional way. In essence, it is possible to measure the impact of life skills by calculating the amount of money a company is losing due to conflict. Companies can therefore measure an improvement in performance as a result of greater outputs achieved.
Please visit our website at www.roionline.co.za to obtain more information on other ROI measurements. Go to www.connectivity.co.za to view the range of life skills programmes offered by Connectivity.