Staff Training and Return on Investment

There is little doubt that contemporary organizations, particularly those that define themselves as learning organizations intent upon enhancing workersÆ knowledge and skills, emphasize training as part of the staff development and empowerment process. However, as Ivancevich (1998) has pointed out, training programs must be frequently evaluated in order to determine whether or not they are truly effective in meeting their goals and objectives.

A major reason for evaluating staff training is related to the accounting concept of return on investment (ROI) which focuses not only on issues related to cost effectiveness, but issues related to productivity as well. This report will provide an overview of current thinking with regard to ROI and staff training.

Ivancevich (1998) stated that ROI or cost-benefit analysis is generally more feasible for training and development than for many other human resource management (HRM) functions. Costs are relatively easy to prepare. They equal direct costs of training (trainer, materials, and lost productivity if training is done on company time) plus indirect costs such as a fair share of the administrative overhead of the HRM department.

The standard ROI measurement, used by many training professionals, is a formula that divides net program benefits (total benefits less cost) by program costs multiplied by 100:

[Net program benefits/capital program costs] x 100 = ROI

. . .
ing dollars scarce. Knowing upfront with some reliability what the probable outcome of a program is going to be and then comparing forecasts with actual outcomes is a valuable business tool (Wachovia uses ROIà, 2003). The process steps for ROI forecasting used at Wachovia Corporation follows these steps: Figure 1: Process Steps for ROI Forecasting: * Develop evaluation strategy and data collection plan. * Obtain buy-in/partner with client re: strategy and communication plan. * Develop forecasting tool and any other relevant information for participants. * Incorporate forecasting tool into design of program. * Develop tracking and reporting process. * Gather historical data. * Implement program and collect forecast data. * Compile data. * Communicate forecast results. * Track performance. * Report performance results as agreed to in communication plan. * Conduct follow-up evaluation (if planned for) and compare forecast results to actual performance improvement (Wachovia uses ROI, 2003, p. 1). Additionally, Wachovia training evaluators computes and forecasts ROI as follows: The cost to design and deliver this training becomes the numerator of the ROI analysis formula and also reflects the overall investment i
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Approximate Word count = 2138
Approximate Pages = 9 (250 words per page)

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