A resource for safe and effective troubleshooting from the leaders in simulation training.
Welcome back, Troubleshooters! Today on Troubleshooting Thursdays we’re wrapping up our in-depth series on calculating your training Return on Investment. If you’re just joining us, you’ll want to check out the previous three posts in this series. In Part 1, we talked about why you need to know the Return on Investment you can expect from training, and we showed you how to calculate the first part of the formula, your Gain from Investment.
In Part 2, we showed you how to calculate the second part of the formula, your Cost of Investment. In Part 3, we put it all together so you could complete the calculation, and included a helpful training ROI calculator to assist you. Okay, now you have a number! But what does it actually mean? Today in Part 4 we want to help you interpret your Return on Investment score, and talk about what to do if it is negative.
What your Return on Investment means
Basically, in any Return on Investment calculation, a result of 100% means that your Return on Investment is exactly the same as the cost of your investment. A result greater than 100% means that your return on the investment will be greater than the cost of the investment (a net gain). Anything less than 100% means the investment is costing more than it is gaining for you (a net loss).
For example, a training Return on Investment of 150% means that for every dollar your company spends on training, it will save $1.50 in downtime. If you have estimated your gains and costs as accurately as possible and come up with a Return on Investment greater than 100%, training is likely a good investment for your company.
What if your score is less than 100%?
However, if you’ve gone through this exercise and found that your Return on Investment is less than 100%, you may need a contingency plan to reduce the cost of investment. Here are four tips for recovering from a negative training Return on Investment:
1. Examine various training formats.
Does your training program use costly physical simulators, or require one-on-one instruction? Computer-based simulation can provide a very realistic, hands-on learning environment without the huge cost of a physical simulator. It’s also easily scalable to handle large numbers of trainees simultaneously, which stretches the Admin buck further.
2. Consider alternate training locations.
If trainee travel and accommodation costs to a central training site are too high, consider sending the trainer to them. With a web-based training solution like Simutech Multimedia, for example, the Admin/Instructor can oversee trainees’ progress from anywhere, and classroom needs are minimal. eLearning is another possibility that can reduce travel costs and avoid the need to rent or reserve dedicated classroom space.
3. Look for programs that are already designed.
If your program design costs are too high, explore ready-made programs that teach the skills you need. It’s often far more cost effective for a business to use existing troubleshooting training software (if properly designed) than to attempt to create a custom program, which requires significant programming and technical resources.
4. Use a training program that offers administrative support.
If your administration costs are prohibitive, look for programs that offer administrative support. It may be more economical to outsource the program admin (with regular reports to in-house staff) than to pay for the Director of Technical Training to oversee it directly.
Don’t forget the intangibles!
Of course, it’s important to remember that the exercise that you’ve just gone through only measures the tangible, quantifiable aspects of downtime and training. You may remember from Part 1 that there are also intangible costs to downtime that can’t really be measured. So downtime is actually costing your company even more than what we’re considering in our calculation.
In the same way, there are also intangible benefits to training that can’t be measured, such as increased job satisfaction, a more engaged workforce, and lower staff churn in a time when skilled workers are getting harder to find. So your actual training ROI is likely even greater than your final number indicates.
Clear, measurable goals
Once you’ve decided that training is likely to produce a good return on your investment, remember to set up your program with clear, measurable goals (e.g., actual reduction in monthly downtime) that will show whether the program is working according to your expectations and estimates. Also, keep track of all of the costs.
That way, if you do a trial run, or if you are likely to be repeating training on a regular basis, you’ll have rock-solid post-training data to compare to your pre-training numbers when you do your ROI calculations.
Ultimately, the goal of every business expense is to increase revenue, and that includes money spent on training.
Kaminski, K., Lopes, T. Return on Investment: Training and Development.
Thompson, M. How to Calculate ROI for Training
Business Training Experts. How to Determine Training Return on Investment (ROI) in a Manufacturing Environment
Follow Troubleshooting Thursdays
Tune in to Troubleshooting Thursdays for reliable tips, general troubleshooting process, and industry insights. Stay up to date with Simutech Multimedia:
- LinkedIn: Simutech Multimedia Inc
- YouTube: Simutech Multimedia
- Instagram: @simutechmultimedia
- Twitter: @SimutechTrain
Have a subject you would like Troubleshooting Thursdays to cover? Send Simutech Multimedia an email at [email protected].
Looking to give simulation learning a try? Get started with our award-winning first solution here: Get Demo.