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ROI - Perspective of Training Manager

Return on Investment (ROI) is a buzzword in the corporate houses today. It is very interesting to see that small organizations tend to get more obsessed with ROI as compared to bigger business houses. This is equally applicable for training function. There are instances when the CEO asks curt and crisp question to the Training Manager “Your training plan is fine but what will be my Return on Investment”. They want to see the dollars coming in out of dollars invested in the training function. It is also a widely seen situation that, whenever an organization embarks upon austerity measures, training budget is the first casualty. This is primarily due to the ignorance of the CEO regarding the value of the training function.

For a Training Manager, the goal is to bridge the skills gaps among the employees, which can be assessed through individual and team performance, before and after the training. However, the goal of the CEO is to gain competitive advantage and/or transform the organization to ultimately increase the shareholders value.

There have been instances where the organizations allocate 20% of their revenue expenditure on the training function year after year. At the same time, there are examples where the corporates spend as low as 2-3% on the training function. The budget allocation itself is an indicator of how the management thinks about Training.

The question now arises as to how to measure the ROI.

There could be lot many mathematical formulae to calculate ROI. Fact, however, remains that return on training is intangible, to begin with.

Being the training functionary myself, I can say with confidence that the ratio R/I can be more than 1 also, depending on the efficiency of training function. Following indicators can be used to appreciate the effectiveness of training:

1. Inspired performance by the employees
2. Availability of leaders at all levels in the hierarchy of an organization.
3. Lesser conflicts between the management and employees.
4. Lesser conflicts within the employees group and management group.
5. High incidence of useful suggestion coming from employees towards organizations improvement/ development.
6. Smooth career plan and succession plan
7. Healthy counseling and feedback system.

It is now left for the organizations as to how they measure these parameters and calculate ROI.

To summarise, I find it adequate to say that higher productivity is the best indicator of training function. Let training give us the ROI rather than our getting fixed with ROI and working overboard to clip the training function.

Drawing inspiration from a famous quote of Shakespeare, let me say ---

For measuring ROI , let the economists contest !! Whatever is administered best , is the best !!

Author - Lucy D 

Comments Listing
Posted: 22/02/2012 06:59:52

Very nice article, it actually highlights the top management requirments from Training. Lucy can we get article/s on how can a Training Manager effectively highlight his/her achievements to the management ???

Posted: 21/03/2011 05:05:45

How can we get soft copy of articles


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