Is Your Organization a Candidate for Training ROI?
By Patricia Pulliam Phillips and Jack J. Phillips

Rarely does a topic stir up emotions to the degree that training return on investment (ROI) does. Some individuals characterize ROI as inappropriate for training and performance improvement. Others passionately characterize ROI as the answer to their accountability concerns.

It is our contention that ROI can serve as an opportunity, a challenge, and a tool to improve training and performance improvement programs and solutions. However, ROI is not for everyone and every organization. Some organizations lack the trust and supportive climate that ROI requires. The successful champion of ROI must be willing to learn, change, and try new things; without this attitude and approach, it may be best not to try.

There are a number of revealing symptoms that will indicate if your organization is ready to implement ROI for training and performance improvement programs.

1. Pressure from senior management to measure results. This pressure can be a direct requirement to measure program effectiveness or a subtle expression of concern about the accountability of training and performance improvement programs.
   
   
2. Extremely low current investments in measurement and evaluation. Most organizations spend about 1 percent of their direct training and performance improvement budget on measurement and evaluation processes. Investments significantly lower than this amount may indicate there is little, if any, measurement and evaluation taking place, thereby signaling the need for greater accountability. Expenditures in the 4 to 5 percent range indicate that training and performance improvement are already undergoing serious evaluation.
   
   
3. Recent disasters with training and performance improvement programs. Every organization has had one or more situations where a major program was implemented with no success. When there are multiple program failures, the training and performance improvement function often bears direct responsibility - or at least blame. These failures may prompt the implementation of measurement and evaluation processes to determine the impact of training and performance improvement programs, or more appropriately, to forecast ROI prior to implementation.
   
   
4. A new director or leader in the training and performance improvement function. A new leader often serves as a catalyst to change and may initiate a review process of the success rates of previous programs. These individuals do not have the stigma of ownership or attachment to old programs and are willing to take an objective view. However, the desire to gain an immediate gauge of program effectiveness may lead to impatience if an evaluation process is not already in place.
   
   
5. Managers' desire to build cutting-edge training and performance improvement functions. Some managers strive to build cutting-edge training and performance improvement functions. In doing so, they may automatically build comprehensive measurement and evaluation processes into the overall strategy. These managers often set the pace for measurement and evaluation by highlighting the fact that they are serious about bringing accountability to their function. These functions have formal guidelines around their measurement process and build evaluation into the program development. They often begin with a thorough needs assessment to determine the best solution, then monitor the progress of the program and determine the business impact.
   
   
6. Lack of management support for the training and performance improvement effort. In some cases, the image of the training and performance improvement function suffers to the point that management no longer supports its efforts. While the unsatisfactory image may be caused by a number of factors, increased accountability often focuses on improving systems and processes, thereby shoring up the department's image.

The Typical Organization
While training ROI is suitable for any organization, the organizations currently implementing ROI as part of their training and performance improvement evaluation process share some similar characteristics. These include:

• Size of the organization: Typical organizations currently implementing ROI are large. Yet small organizations, which have an even greater reason to conserve resources and ensure they're getting the most out of their dollar, can implement ROI with credible results.
  
  
• Size and visibility of the training and performance improvement budget: The budget is usually large and has the attention of the senior management team. Regardless of how it is measured - whether as total budget, expenditure per employee, percentage of payroll, or percentage of revenue - a large budget demands appropriate measurement and evaluation.
  
  
• Focus on measurement: Typically, organizations implementing ROI are focused on establishing a variety of measures throughout the organization. Organizations already using well-known processes such as the Balanced Scorecard, Economic Value Added (EVA), Six Sigma, and others are ideal candidates for ROI because they already have a measurement-focused environment.
  
  
• Level of change taking place: Organizations using ROI are usually undergoing significant change, which in turn often increases interest in bottomline issues, thereby resulting in a need for greater accountability.

To see if your organization is a candidate for training ROI, take the following quiz.

IS YOUR ORGANIZATION A CANDIDATE FOR ROI IMPLEMENTATION?
Read each question and check off the most appropriate level of agreement on a scale of 1 to 5
(1 = Total Disagreement; 5 = Total Agreement).

SCORING
If you scored:
15-30 You are not yet a candidate for ROI.
31-45 You are not a strong candidate for ROI. However, it is time to start pursuing some type of measurement process.
46-60 You are a candidate for building skills to implement the ROI methodology. At this point there is no real pressure to show the ROI, which is the best time to perfect the process within the organization.
61-75 You should already be implementing a comprehensive measurement and evaluation process including ROI.

Excerpted from The Bottomline on ROI: Basics, Benefits, & Barriers to Measuring Training & Performance Improvement (CEP Press & ISPI, 2002), by Patricia Pulliam Phillips. The Bottomline on ROI is the first in a new Measurement in Action Series by series editor and ROI guru Jack J. Phillips.

$16.95 U.S. 120 pages ISBN 1-879618-25-7