Did you know that organizations in the U.S. allocated $83 billion to training expenditures in 2019? With a cost this high, organizations must prove that their investment in training is worth it.
Measuring employee training return on investment (ROI) through performance metrics can do just that. ROI helps evaluate the profitability of training programs and allows organizations to assess learner performance.
There is no single metric that can measure ROI. There are multiple, including:
- Employee Retention Rate
- Training Cost Per Employee
- Training Experience Satisfaction Rate
- Workers’ Compensation Incident Rate
The theory is that if you invest in your employees, it will boost their performance and elevate your business. By using metrics to quantify the ROI of your employee training, you can prove that your training program is successful and increasing your bottom line.
This article will define employee training ROI, explore 4 critical metrics that help measure ROI, and discuss how ongoing development can push your ROI even further.
What Is Employee Training ROI?
Employee training ROI measures the benefits a training program brings to an organization and justifies financial investments. ROI helps prove that your organization’s training is paying off. Training is an investment in your workforce, and ROI can help justify your decisions and prove your training goals are met.
Employee training can utilize various modalities, including virtual reality (VR), augmented reality (AR), eLearning, and virtual instructor-led training (VILT). Some modalities come with a high cost and can be intimidating for organizations looking to invest in these technologies.
High upfront costs may be daunting, but they have the potential to pay off and exceed initial expenses in the long run. Instead of viewing training as a cost, it should be considered an investment in the organization and workforce’s success. Strong ROI is proof that your training program is worth it, while weak ROI alerts training managers that training needs improvement.
Employee training ROI is significant because it accomplishes the following:
- Measures the value of your training program
- Ensures learners are completing the program and passing assessments
- Verifies that learners are satisfied with the program
- Helps grow your organization through pinpointing weaknesses in training and developing strategies to improve them
How To Calculate Program Success With Training ROI Metrics
Measuring employee training ROI is no easy task. Results can be subtle and hard to measure. When creating a training program, you should have metrics in mind. Metrics should be collected through multiple sources, like confidence levels, satisfaction rates, and training cost per employee. The critical element to remember is that no single measurement can gauge a training program’s success.
By asking yourself the following questions, you can make sure that your training program stays on track for success.
- What are our training program goals?
- Where are we now, and where do we want to be after the training program is complete?
- What metrics measure individual employee performance and the success of training?
The 3 Steps To Measuring Training Program Effectiveness
The first step in measuring a training program’s effectiveness is to set reasonable training outcomes. Outcomes could be anything from improving employee’s confidence levels operating different equipment to lessening the rate of workers’ compensation claims. With targeted SMART goals, you can ensure that your training goals support the overall company strategy.
The next step is to assess how your organization and employees operate before the training is implemented, then gauge where you want to be post-training. This process identifies shortcomings that you’re looking to improve while still aligning with organizational goals.
The final step to calculating employee training ROI is determining what metrics can measure the training’s success. Metrics can include customer satisfaction rates, assessment pass rates, training experience satisfaction, and more. For example, a reasonable metric to measure a warehouse safety training program’s effectiveness is the rate at which workers’ compensation claims are filed.
Critical Metrics For Employee Training ROI
There are countless metrics to quantify employee training ROI. Below are examples of 4 critical metrics that can justify your training program’s effectiveness and identify training areas that need improvement.
Employee Retention Rate
The formula is simple: Number of Employees at the Beginning of a Period / The Total # of Employees at the End of a Period x 100
Employee retention rate is an indicator of the percentage of employees still with your company after a specific time. Ninety days is the typical benchmark used to evaluate how many employees are still around. Proper onboarding and training can have a considerable effect on your employee retention rate.
Training Cost Per Employee
The formula for training cost per employee is calculated by: Total Training Expenses / Total # of Hires in a Given Period
In 2019, the average U.S. employer spent about $4,000 to hire a new worker. Training costs include external recruiting expenses, such as job sourcing and background checks, and internal costs, such as the program’s modalities.
Depending on the training modality, whether it be VR or AR, total training expenses can be pricey. High costs can be overwhelming for an organization, but a successful training program can outweigh these costs and yield long-term benefits.
Read More: How To Use VR Training Metrics To Measure Success
Training Experience Satisfaction Rate
Training experience satisfaction rates are calculated through the following formula: Sum of all the Ratings / # of Answers
Satisfaction rates are critical indicators of understanding how your employees felt about the training experience, whether it’s the facilitator, modality, tools, or content. Information can be collected through surveys or discussion boards where employees must rate the training experience from 1 (Strongly Disapprove) to 5 (Strongly Approve).
With this feedback, content within training programs can be revised, leading to improved programs better suited to learners’ needs.
Workers’ Compensation Incident Rate
The Occupational Safety and Health Administration (OSHA) suggests using the following formula to calculate workers’ compensation incident rates: (Number of Injuries and Illnesses x 200,000) / # of Employee Hours Worked
An on-the-job training metric, like workers’ compensation incident rates, helps track the effectiveness of a safety training program. Incidence rates show the relative level of injuries and illnesses at your organization during a specific period. These rates help determine problem areas and progress in preventing work-related injuries and illnesses.
Go Beyond ROI With Ongoing Learning
Training is not a one-time event, but rather a continuous process where employees learn and master their skills. ROI in training and development is critical for measuring an organization’s training program effectiveness, but it shouldn’t be the sole focus. In addition to ROI, organizations should focus on sustained change in employee performance and business results.
Examples of ongoing development include:
- Career Mapping
- Individual Development Plans
- Personal and Professional Goal Setting
When learners are provided a continuous learning environment, they can continue to improve their skills and evolve in their roles. Continued learning benefits not only the individual, but the entire organization. Ongoing learning programs, reinforcement of prior materials, and two-way feedback between employees and organizational leaders will yield a critical ROI: engaged and retained employees.
Do You Measure Up With Strong ROI?
This article has covered the definition, significance, and metrics used to calculate employee training ROI. We hope you better understand the significant role of ROI in training.
Are you ready to measure metrics throughout your extended reality (XR) journey? Get started here, or check out our Training Goals and Metrics Calculator.