Is it Possible to Calculate Return on Investment for Training?
A post from our Training & Coaching blog
Written by John B
I get asked about returns on investment (ROI) for training all the time and if it is possible to work out. People want to know that what they are investing in really is going to see a return. The simple answer is that for some subjects, it is easier to work out than others.
Where it can be difficult to calculate when the biggest difference after training is in an area that almost cannot be measured is quality. Can you put a value on quality? Probably not. If the quality of your presentations to internal customers, such as other departments, improves dramatically but there is no sale attached to it, does that mean it had no return? Of course not. If those people might now be more motivated where they go out and sell more is where your company sees the return.
However, it can be measured in other situations. Let's look at the example of a sales person receiving sales training. Imagine that you have a salesperson bringing in an average of twenty deals a month. His average deal is £500 which means that he makes your organization £10000 per month. Comparing his figures to the other salespeople in your organization, you realise that although he closes just as many deals, his average is below his colleagues and that could be why he is perceived to be a weaker member of the team.
The company decides to send him on a sales course which includes content on upselling and cross-selling. Let's use an average price of £400 for this course. Those modules should assist him in increasing his average sale. In the worst case scenario, he still only keeps making twenty sales per month but his average sale goes up 10% to £550 per deal. Once you have taken into account the cost of the course, that means he will now be making the company an extra £600 in the first month and £1000 each month thereafter. That means for this worst case scenario, you would have achieved a 5400% Return on Investment over the next twelve months.
The reality though is that he will not just improve his average deal but he should be closing a higher number of deals too. If he increased his sales by one a month (which is around twenty one deals at the new rate per deal being closed) that works out at 7050% ROI over the next twelve months. (Don't trust my maths? Give me a call and I'll take you through this step by step.) Remember, this was a worst case scenario and the reality is that a sales person should improve by more than this if he implements properly what he learns during his sales training. You just do not get better investments than this.
I once went through this exercise with a Sales Director where I used figures that she gave me that were based on average deals per month. She was so shocked that instead of just booking the one person that she was looking at receiving the training, she actually booked her entire team.
Another course that is easy to track ROI for is Negotiation Skills which is anything where actual figures are at hand. But if you can give us enough overall information, we probably could work out figures for how much work an Excel macro could be worth to you. (I once worked out that a particular Excel macro saved me three hours each time it ran. Over a year, it saved me thirty six hours. What did I cost the company per day? Just multiply that by four and you could see what that macro saved the company.) Negotiation Skills is not only simple to calculate but the returns are easy to work out as well.
The one thing that I can say for certain though is that if it is implemented properly, training will have a better Return on Investment than anything else you or I are likely to ever invest in.
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