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Recommended Scope of Analysis
There are many methods available to
measure the overall effectiveness of training initiatives. The growing
interest in measuring an organization's Return On Investment (ROI) of
its training expenditures is fueled by the understandable need to
document measurable improvement in both individual and organizational
performance. It is also gaining momentum as a measurement tool,
because there is an increasing trend to hold staff functions
accountable for results they achieve.
We recognize that using ROI to analyze
the effectiveness of training programs is becoming both a political
and operational imperative in an age when staff budgets are
increasingly scrutinized and every line item has to be justified. We
believe that the real purpose of calculating a ROI on training
programs is to demonstrate that participants are able to effect
organizational performance as a result of what they learn in the
classroom. ROI should not, in our judgment, be used simply as way to
demonstrate that one training program is less expensive than another
and, therefore, worth its investment. Cost comparisons of training
programs and training technologies are vital parts of the buying
process that training departments should be expected to perform. These
types of cost analyses represent training's due diligence.
The following ROI template has been
designed to enable your training department to measure the extent to
which the organization's bottom-line has been improved as a result of
training. A central issue to be resolved before embarking on this
effort is to reach agreement on what costs should be recognized in
this process. While a case certainly can be made for costs to include
both "department overhead" and "general and
administrative" (G&A), we believe that the resulting effort
would be too time consuming and nearly impossible to address without
having to restructure how most training departments handle their
accounting function. We believe that it is far easier and fairer to
recognize the direct costs associated with any training program.
Given this recommendation to
recognize only direct costs when calculating ROI, it is rather
straightforward to identify and categorize these costs. The list of
Direct Costs presented on the next page represents our recommendation of the
important direct costs to track as you calculate your ROI.
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Recommended
Scope of
Analysis
Direct
Project
Costs
Revenue,
Cost
and
Performance
Off-Sets
System
Components
That Will
Generate
A Positive ROI
Summary
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