THE STATE OF ROI TRAINING MEASUREMENT IN SOUTH AFRICA:
GROWTH AT LEVELS 4 AND 5
 

Marius Meyer and Melanie Bushney
University of South Africa
 

South African companies are spending millions of rands on training their employees. The mere expenditure of vast amounts of money sounds great until you realise that most of these organizations don’t know how much value their training adds to the organisation. However, the critical question is whether training affects the bottom line.  This article attempts to provide an overview of the current state of ROI measurement practices in South Africa. 

Return on investment (ROI) is a measure of the financial benefits obtained over a specified period in return for a given investment – in this case, a training programme. To put it simply, it is the extent to which the benefits (outputs) of training exceed the costs (inputs). 

Since the Skills Development Act and Skills Development Levies Act require employers to invest in staff training, managers are increasingly demanding not only accountability for the time spent on legislative processes, but also greater articulation of how training interventions benefit their companies in terms of the bottom-line. The pressure to measure ROI is thus increasing. The critical question is:  

In America considerable emphasis is being placed on the evaluation and measurement of training. The American Society for Training and Development (ASTD) has been the international champion for ROI measurement.  The ASTD ROI Network has been very active to promote good measurement and evaluation practices. The four level evaluation framework developed by Donald Kirkpatrick has been used for decades as the ASTD benchmark for training evaluation, supplemented by the ROI process of Jack Phillips. ASTD Global Network South Africa recently conducted the third annual state of the South African industry training and HR study.  A total of 432 training and HR managers contributed to the study.  The South African results in comparison with the American study are as follows: 

TRAINING EVALUATION LEVELS
Source:  ASTD State of the South African HR and Training Industry Report (2005)

The above table indicates that the many South African organizations are applying the Kirkpatrick levels to some extent, while results evaluation and ROI measurement has increased significantly over the last year. 

REASONS FOR THE GROWTH IN ROI 

The question is: What is the reason for the good growth in ROI in South Africa. There are a few possible reasons:

  • The HR and HRD industry has matured over the last ten years. The industry is very well organided and open debate and networking is actively encouraged at a national and regional level. According to the Human Resource Council there are 130 000 HR practitioners in South Africa.
  • The Skills Development Act requires that companies spend 1% of payroll on training. There is a huge investment in training, but CEOs are asking for ROI.  In addition, training is championed by more than 20 Sector Education and Training Authorities in all the different industries.
  • Some conference companies like Knowledge Resources are organising regular seminars and conferences in ROI.
  • There is an increase in publications and literature on ROI in South Africa.
  • Many South African training managers visit the ASTD Conference in the USA where they have been exposed to several ROI presentations.
  • ASTD Global Network South Africa is the local champion for ASTD best practices such as ROI and is very active in their support for ROI measurement.
  • The annual South African ASTD State of the Training and HR Industry Report highlights ROI practices and many HR and training managers have been exposed to the results.
  • Certain industries for example banking openly encourage ROI measurement.
  • International ROI champions such as Jack Phillips (USA) and Diederick Stoel (The Netherlands) are regular visitors to South Africa and are continuing to inform the market of the application of ROI methodology
  • Several local HRD consultants have started to specialise in ROI measurement.
  • Many universities and other training providers have included ROI in their HRD and other training management programmes and there is also an increase in the number of master’s students doing research in this area.
  • There is a well established corporate governance framework in South Africa called the King II Report that provides clear guidelines on accountability, including the measurement of human capital development. Many companies report this data in their annual reports.

Despite the good growth in ROI, there is still a big need for capacity-building in ROI. The following table reflects the responses with respect to ROI practices in South African organizations. 

ROI MEASUREMENT PRACTICES IN SOUTH AFRICA

ROI COMPONENTS

2004
%

2005
%

We calculate the input costs of training programmes.

48

41

We do pre- and post assessments of training.

39

34

Our training reports to management indicate ROI figures.

32

26

We calculate the Rand value ROI of training programmes.

28

25

We ask training providers to supply us with ROI data.

30

30

We use specific software to assist in the ROI process.

13

12

We use ROI data when compiling training budgets.

28

22

Our training staff have formal training in ROI processes.

16

13

Source:  ASTD State of the South African HR and Training Industry Report (2005)

The above table contradicts the graph on the growth in ROI. Although ROI measurement has increased in South Africa, it appears as if more focussed work needs to be done to create fully integrated ROI evaluation in  organisations.  For instance, how do you implement ROI if only 13% of HRD staff members have been trained in the methodology?

GUIDELINES FOR IMPLEMENTATION

The challenge is to build sufficient awareness and capacity so that training managers can take ownership of ROI measurement and ensure that it is implemented in their organisations.  The following recommendations can be used as a guideline: 

  • Build a solid business case before training is implemented
  • Read ROI articles and books in order to learn more about the concept and its application (www.kr.co.za or www.exclusivebooks.com)
  • Create effective training transfer strategies to support the application of skills and the measurement of results.
  • Participate in ROI workshops to build your capacity to do ROI measurement (www.kr.co.za)
  • Attend the annual ASTD conference in the USA to learn from the ROI experts.
  • Search the internet to find more information about ROI, in particular the ASTD ROI Network (www.roi.astd.org) Join the network!
  • Obtain the services of a ROI consultant to kick start the ROI process in your organisation.
  • Develop a ROI implementation plan for your organisation.
  • Go and measure ROI and report the results to management.

A critical step is to calculate the costs of a training programme (eg. design, facilitation, catering etc).  The ROI formula is:  net programme benefits times 100 divided by programme costs, where the net benefits are the monetary value of the benefits minus the costs of the programme.  The benefits (eg. less rework, more sales, less accidents etc) must be quantified into monetary value in order to be included in the ROI calculation. The formula is: 

                                      ROI (%) = (benefits – costs) x 100                                                                        costs 

Implementing an ROI exercise usually requires a major paradigm shift on the part of training practitioners and managers.  The ability to measure ROI is an opportunity for training managers to show the value they add to their organizations based on a solid business case.  ROI may be a new concept in South Africa, but it is clearly growing in importance. 

Marius Meyer and Melanie Bushney lecture in human resource development at UNISA, the fourth largest university in the world.  Marius is a member of the ASTD ROI Committee (USA) and board member of the Donald Kirkpatrick Foundation.   More information about the 2005 ASTD State of the South African training industry report is available on www.astd.co.za They  can be contacted at mmeyer@unisa.ac.za and mbushney@unisa.ac.za