Organizational development and training are crucial in an ever-growing company, regardless of industry or corporate culture. It’s the bane of leadership roles around the world, for many reasons. Strategies for it are monsters to plan, and no one strategy can be an end all answer, but that’s a topic for another day. There are other issues at hand as well, and in business, the bottom line is money.
Measuring ROI in Organizational Development and Training
Measuring the ROI on organizational development and training is a rather mystifying thing for most people in the role of leadership, and we all know what it is like to explain expenditures to the accounting department. Not fun, to say the least. So, let’s take a look at some possible ways to measure ROI on organizational training, and see if we can’t demystify it a little bit.
Like planning strategies, there is no end all answer to this obstacle, it depends on many factors we can’t begin to totally account for here, so we must be somewhat general and vague. But, a trained leader will see how to apply these generalities to their situation without much confusion. Hopefully, this will help when judgment day comes (frequently) and the accountants come calling.
First and foremost, what changes are you implementing that require learning and training? In many cases, this is a software and technology issue, as new software, computers or upgrades of existing platforms are being adopted. This is common and frequent, more so as time goes by.
What benefits do these changes bring? Do they increase efficiency, reduce problems in existing systems, or something similar? If so, well, that’s magnificent, but how much expenditure in efficiency and technical issues is it resolving? Measure this first. Unitize every time work has been delayed or slowed due to difficulties with systems, or due to the procedures these systems enforce.
Measure it in a daily, weekly, monthly and yearly fiscal metric, and work out a total loss over your company’s normal fiscal periods. With this information, we can move on to the second step.
How much training is required to apply these changes, time-wise? If planning a strategy, you likely and wisely have taken metrics on how much learning must be done, how many hours of the day it will take, and for how long of a period. You can gain a second metric from this on how much it will cost in discreet units, to implement the training, without much convolution.
With these two metrics, you can then easily compare how much loss is being prevented by the training versus how much initial expense in hours and money is involved in the training itself. This differential will give you a loss to gain ratio. A positive ROI will be less expensive over the larger fiscal time unit for the training versus the time being lost to existing systems’ imperfections. But, this isn’t a truly refined ROI measurement just yet.
Whatever system you are implementing, be it new software, or something wholly different, look at other businesses that have already made these changes, if possible. Look at their annual reports within a time before and after the changes, and develop a forecast for possible gains alongside problem solving with the implemented changes.
Use a simple projection graph to combine your initial ROI measurement you just took, with this forecast, and you have a tentative refined ROI metric for this training which will be more than presentable to accounting or other departments which will ask for this data.
You’re probably surprised this was so simple, but this really is all there is to it. Of course, we had to be general about procedures to take because these different processes are technical and specific to a given company’s procedures and methodologies. But, this is generally the best way to take ROI measurements for organizational development and training, regardless.
More related information is available on employee development plan examples page, which will help you gaining better results.