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Calculating Training Evaluation.pdf

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   2 Introduction  With companies scrutinizing costs and tightening purse strings, how do they prove that training/education is worth the investment? A first rate evaluation study may be necessary to  justify the investment of time and capital in a training/education offering. The classic model to evaluate training/education offerings developed by Kirkpatrick (1998) looks at four levels of assessment: ã Student reaction, ã Learning, ã Behavior, and ã Business results. When looking at the business results of training, many critics say the Kirkpatrick model does not go far enough in analyzing the impact of training/education on a company’s bottom line. Training/education offerings should be evaluated at a fifth level--financial return. There are several methods for evaluating training/education offerings based on financial return and these methods include both quantitative and qualitative assessments. Quantitive Assessments for Deteriming Financial Return on Training/Education Experts in the field identify three methods for evaluating training/education offerings that  provide a measure of the value of the offering utilizing a cost/benefit approach: 1. Benefit-Cost Ratio, 2. Return on Investment, and 3. Forecasting. The information provided by using these models can be used to compare one offering to another  based on its contributions to overall return to the organization. The methodology for Benefit-Cost Ratio and Return on Investment is similar in that both require determination of costs and benefits and using that data to calculate the ratio or return. However, the results in the calculations are expressed differently and lend themselves to alternative presentations. For example, the results from Benefit-Cost Ratio analysis can be  presented in a ratio but also are easily communicated in narrative. The results from Return on Investment analysis are always presented in percentages.   3 Benefit-Cost Ratio Benefit-cost ratio (BCR) analysis allows decision makers to determine the financial return on a training/education program by comparing benefits and costs. BCR is calculated by taking the program benefits and dividing those benefits by the program cost (See Figure 1.). Figure 1: Benefit-Cost Ratio Formula Program Benefits   can be one or more of the following financial gains for training/education: ã Time savings, ã Increased productivity, ã Improved quality of output, and/or ã Enhanced personnel performance. Program Costs   can include the following expenses related to training/education offerings: ã Course development or purchase, ã Instructional materials, ã Equipment and/or facilities, ã Salaries of instructors and staff, and/or ã Lost productivity due to training attendance. The result of the calculation is expressed as a ratio. For example, if the BCR calculation yields a ratio such as 4.5:1, this means for every one dollar of cost invested in training, there will  be 4.5 dollars in benefits from the training program. For any BCR that is less than 1:1 such as 0.80:1, the total monetary benefits are less than the total monetary costs and would indicate a less desirable offering. For any BCR that is greater than 1:1, the monetary benefits will be greater than the costs indicating a more desirable training /education offering. The higher the BCR, the greater the return of benefits in relation to the costs. Benefit-Cost Ratio can be used to determine the financial return from a single training/education offering or from two or more offerings (See Figure 2.). Program Benefits Benefit-Cost Ratio = --------------------------- Program Costs   4 Figure 2: Benefit-Cost Ration Comparisons for Three Training/Education Offerings   Training/Education Offering Benefit-Cost Ratio Offering A 2:1 Offering B 3.5:1 Offering C 8.4:1 The most favorable choice based on benefit-cost ratio analysis would be Offering C which would  produce 8.4 dollars in benefits for each dollar of cost. Examples of Benefit-Cost Ratio 1. A financial services company purchased software that would aid their sales force in turning customer contacts into sales. The total cost for the purchase, installation, and training associated with the new software was $83,960. The value of the benefits from increased sales was calculated to be $1,114,940. Program Benefits $1,114,940 Program Costs $83,960 The benefit-cost ratio in this example is $1,114,940/$83,960 or 13.3:1. In this case, the software seems to be a good investment because each dollar spent in training would produce $13.30 in creased sales or financial benefits. 2. A technology storage company was planning to develop multimedia training to improve the  performance of their technicians. The total cost to develop, install, and train the technicians was $1,748,327. The value of the benefits from increased performance due to training was $1,622,321. Program Benefits $1,748,327 Program Costs $1,622,321 The BCR is $1,622,321/$1,748,327 or 0.93 to 1 which is not nearly as high at the BCR in the first example. The training returned only 93 cents in benefits for each $1 in costs; therefore, the company decided that training was not the best way to increase the performance of the technicians.   10 Return on Investment (ROI) Return on Investment (ROI) analysis allows decision makers to determine the financial return from training by comparing net program benefits--benefits minus costs--to costs. ROI is calculated by taking the net benefits of training, dividing by training/education costs, and then multiplying the product by 100. ROI is always expressed as a percentage (See Figure 4.). Figure 4: Return on Investment Formula Program Benefits   can be one or more of the following financial gains for training/education: ã Time savings, ã Increased productivity, ã Improved quality of output, and/or ã Enhanced personnel performance. Program Costs   can include the following expenses for training/education offerings: ã Course development or purchase, ã Instructional materials, ã Equipment and/or facilities, ã Salaries of instructors and staff, and/or ã Lost productivity due to training attendance. For example, a business used a training/education offering that resulted in $4,000 in  benefits and $1,000 in total costs. Total benefits minus total cost equals a net program benefit of $3,000. Net program benefits ($3,000) are divided by program costs ($1,000) then the product is multiplied by 100 to yield a return on investment of 300%  Net Program Benefits (Benefits minus Costs $4,000 - $1,000) $3,000 x 100 Program Costs $1,000 The Return on Investment calculation can be used when both program benefits and costs can be converted into monetary values. An example of a specific training benefit that can be monetized would be increased productivity. If a trainee can produce 10 additional units per hour    Net Program Benefits (Benefits - Costs) Return on Investment % = ------------------------------------------------- x 100 Program Costs

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Jul 23, 2017

CMG GEM

Jul 23, 2017
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