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Measuring the ROI of Training

By Ben Worthen

February 15, 2001 — CIO — Reader ROI
* Learn how an ROI study can help improve your IT training
* Understand the steps involved in an ROI study
* Find out why it is important to measure skills in your organization

NO ONE WOULD OPEN A NEW OFFICE, roll out a new application or even hire a new employee without knowing-not thinking, not guessing, not wishing and hoping, but knowing-they were getting something back. To do otherwise would be bad business. But in the area of IT training, it happens all the time.

The Information Technology Training Association estimates that there are 10 million IT workers in the United States who, according to Stamford, Conn.-based Gartner Group, each cost companies more than $2,000 a year on training. That’s more than a $20 billion dollar market. And in most cases, the justification for spending all that dough is nothing more than the offhand assertion that, yes, employees really like training.

While keeping employees happy in this tight labor market is justification enough for many things, the bigger problem remains: Companies need to be accountable for every dollar they spend. According to Brandon Hall, a Sunnyvale, Calif.-based learning consultant, there is no other workplace issue on which so much money is spent with as little accountability as training. So far, IT training has managed to fly under the radar, but increased shareholder scrutiny combined

Fiscal Responsibility

A 1998 survey by the American Society for Training and Development found that while the importance of IT training has increased in 90 percent of the companies surveyed, only 68 percent predicted their IT training budget would increase as well. Therefore, the only way to meet growing training demands without dramatically increasing your budget is through more effective training. And the most precise way to measure and improve the effectiveness is through a return on investment analysis of training programs.Because there isn’t much incentive to conduct an ROI study if a training program will be approved without one, it is up to the CIO to require employees to justify a training program before he dedicates a slice of the budget to it, Hall says. "If you have poor accountability in your organization, you are wasting money all over the place," he says. "But you can bring good business metrics to this area, and you can do good studies on the business case for training to make sure your company is getting good ROI on it."

The Importance of ROI

Allan Wood, CIO of Mellon Financial in Pittsburgh, has sampled this wisdom firsthand. Like at most companies, employee turnover was a large problem for his IT department. "We knew that there was a significant cost in technology staff turnover-both in quantifiable terms and in softer terms," he says. "It is the cost of recruiting, the cost of bringing the technologist on board, the loss of productivity during the learning stage, but also [costs in] some of the softer [areas] like morale and continuity issues." Mellon designed a training program aimed specifically at reducing the turnover and, through constant analysis and improvement, dropped its attrition rate from 20 percent in 1997 to 12 percent in 1999 and 10 percent in 2000.

 

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