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The Return on Training Investment
John Smithman,
founder of Champions in the Workplace™
If a prospect asks me how much we charge for training, I sometimes ask them to give me a dollar to keep; without expecting its return. If they give me the dollar, in spite of my stated condition —and most people do— I give them $5 in return. That is designed to show my commitment to their return on investing (ROI) in our training services; because it is my goal to surpass the 5-to-1 return ratio for our clients. Good training has that effect.
Recently, I attended a presentation where the vice president of a large company told us how they had hired a training company to train their managers. They proudly told us that they were following their CEO’s leadership and advice, after the CEO had said, “In these hard economic times, cut costs, but don’t cut training!” So, they hired a training company to develop a program for their managers.
At the end of the presentation, the presenter asked the audience if they had any questions. Several questions were asked about the training process: how was it done, how long did it take, who was involved, and so on. A question was burning in my head. So, when the presenter said. “Can we have one last question please,” I raised my hand and asked, “You said that this training was motivated by your CEO who had said, “In these tough economic times, I want you to cut costs, but not training? Is that correct?”
The presenter confirmed my recollection.
So, I continued, “What has been your return on investment for the $millions you spent on the training?”
He said, “We can’t measure that.”
I continued, “So, can you say how much money you saved on reduced costs as a result of the training?”
“No,” was his answer as he proceeded to end the presentation.
After the presentation, the training company’s representative came over to my table and supported his client’s statement that you can’t measure the ROI from training.
I couldn’t believe what I was hearing from supposedly professional executives. As the founder of a successful training & development company I have always held ROI as a very important measure of a training investment.
I believe that the CEO of this large company was trying to teach top level managers to focus on cutting costs and also, not to view training as a cost. The alternative to viewing training as a cost is to view it as an investment and, logically, to expect a return greater than the original investment.
More company leaders should support and reinforce this Chief Executive Officer's appreciation for training and development. It just makes sense.
Belief is a powerful precept. If you believe it, then it is so. If you believe your services are expensive, then they are. If you believe that you are charging too much, then you are. If you can’t assess the value of the impact that you’re making with your clients, then you are not making an impact. For the customer to be well served, the worth of your services must be greater than the cost of your services. Otherwise, it is an unnecessary expense.
One of our clients at Champions in the Workplace Training & Development, the financial vice president of a very large company, measured the results of training and showed me how our training had saved them over $4 million a year in costs with a positive impact of the quality and effectiveness of their work. They had spent $200,000 with us. That was a 20 to 1 return on their training investment within one year of completion.
Don’t tell me that training ROI can’t be measured!
Often a customer will say, “I believe in developing my people, but training costs money!”
But, what will it cost for them to stay where they are and not develop their employees? Yes, training costs money: one way or the other! Isn’t it better to be in control of training costs… proactively? Or should you wait until the cost of not training catches up with you?
It’s not the cost of training that’s important. It’s the value of development that must be measured. What will those enhancements save you in time and money? What will the changes generate in money saved or money earned and the resulting impact on your customer service? If you can’t identify those things, then you don’t deserve the training!
A training company who cannot estimate the dollar value of the training they offer shouldn’t be in the business.
A company that ignores the return on their training costs won’t be in business for long.
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