Measuring ROI on Soft Skills Training An Approach Document

See Change Consulting, India

Web: http://www.seechangeworld.in Email: info@seechangeworld.com

The biggest problem wit h t he ROI claim is t he let t er I , which st ands for
"I nvest ment ." Cont rary t o almost all t hinking in t his profession,
t raining is not an invest ment - it is simply an expense. While
"invest ment " sounds more import ant t han "expense," t raining is
nonet heless, an expense. "I nvest ment " is a business t erm t hat implies
t he adding of capit al t o an organizat ion. Unfort unat ely, "human
capit al" does not qualify. Unt il a t raining vendor will sell a course t o
you, and t hen buy it back for more t han you paid, you did not invest in
t raining, you spent money on t raining. Pet er Drucker was right when
he said, "Market ing and innovat ion make money. Everyt hing else is a
cost ."

Not yet convinced it s wort h t he money t o spend on an expensive
consult ant or t raining seminar? Read on.

True, it may t ake some t ime t o see ret urn on invest ment . However, in
almost all cases, soft skills t raining is well wort h t he t ime and money
in t he long run. As Nierenberg point s out , t he result s may not be
immediat e but impr oving int eract ion and people skills leads t o bet t er
assignment s down t he road. "Your most import ant element is your
human capit al," she says. "Unless you have t he soft skills, you cant
get t o t he hard skills."

Company management want s t o know t hat t he money t hey are
spending on t raining is well spent . They want t o know t hat t hey are
get t ing a sufficient ret urn on t heir t raining invest ment ( ROI ) .
I mprovement fact ors include increased product ivit y, r educt ion of
wast e, and improved employee ret ent ion.

Measurement of t raining ROI st art s wit h defining t he reasons and
goals for t he t raining, det ermining how much t he t raining will cost , and
verifying t he amount of ret urn.

Quest ions you may have t o include before you spend on
t raining:

What is t he reason for t he t raining?
What is t he invest ment in t raining?
How is t he ret urn measured?

St art wit h t raining goals

A company may provide t raining t o t heir workers, managers,
cust omers, and somet imes suppliers. The ult imat e reason for t raining
Measuring ROI on Soft Skills Training An Approach Document
See Change Consulting, India
Web: http://www.seechangeworld.in Email: info@seechangeworld.com

t hem should be t o improve t he profit s and repeat business of t he
company. I t is preferred t hat t his impr ovement is measur able, so t hat
an effect ive ROI can be det ermined. I f t here are no well defined
"measurable goals" t hen dont even st art t he t raining process.

Reasons t o t rain workers

The reason t o t rain workers and managers is so t hey will learn t o do
t heir j obs bet t er or perhaps learn new skills or t echnologies t hat can
be applied t o t he companys goals. Somet imes workers and managers
are t rained t o sat isfy government requirement s, t o ensure safet y, or t o
prevent lawsuit s or ot her forms of company loss. Managers are oft en
t rained in people- handling skills. Also, companies may allow workers
t o t ake t raining simply as a way t o keep t hem happy in t heir j obs.

I nvest ment in t raining

I n order t o t rain personnel a company must pay for t he development
of t raining mat erial and t he t ime spent by t he t rainers in t he
classroom. This is eit her absorbed t hrough an in- house t raining
depart ment , paid t o out side t raining companies, or a combinat ion of
t he t wo.

Cost s include paying for t ime off from work, paying t rainers, and t ravel
and lodging expenses.

Time spent by workers

Workers and managers must oft en t ake t ime off from work t o at t end
t raining classes. Not only is t he company paying wages for no work
done, but it may also lose opport unit ies for more sales or product ivit y
during t he absence of t he personnel. For off- sit e t raining, t he company
may also have t o pay for t ravel and lodging. The burdened hourly rat e,
est imat ed loss of product ivit y, and t raining expenses must be
calculat ed.

Keep t rack of cost s

Obviously, if a company want s t o det ermine t heir ROI for t raining,
t hey must account for all t he money spent , especially t he hidden
expenses.

Measuring t he ROI

Measuring ROI on Soft Skills Training An Approach Document
See Change Consulting, India
Web: http://www.seechangeworld.in Email: info@seechangeworld.com

The great est fact or in measuring t he ret urn- on- invest ment for t raining
is t he definit ion of what t he t raining is t o achieve. Measuring t he
amount of money generat ed by a group before and aft er t he t raining,
and t hen comparing t hat improvement wit h t he cost of t he t raining is
t he way t o measure t he ROI .

I f no measurable goals

Very oft en t here are no specific or measurable goals t o achieve for a
t raining session. This is especially t rue in many of t he "soft skills"
t aught t o managers. I t is very difficult t o measure t he result s of a
manager st yle t raining seminar. I n fact , t he goal for such t raining
might be somet hing like: "To be a bet t er manager," what ever t hat
means. I f t here is no way t o measure t he effect iveness of t he t raining,
t he company might be bet t er off simply giving t he people money t o go
on a vacat ion.

Having specific goals or Key Performance I ndicat ors ( KPI )

I f t he goal is t o improve t he product ivit y of a worker in a cert ain
process, a met ric must be det ermined t hat leads t o a company bot t om
line number. Before and aft er t raining measurement s must be made t o
det ermine t he effect iveness of t he t r aining sessions. Then t he cost s
involved in t raining t he personnel can be compared wit h t he real
improvement of profit s t o det ermine it s ROI .

For example, safet y t raining has a specific goal of reducing t he
accident rat e. St at ist ics can be made t hat will verify t he effect iveness
of such t raining.

The reason t o t rain should be t o impr ove t he companys bot t om line.
The invest ment in t raining consist s of t he cost of t he t raining and t he
t ime spent by t he personnel from t heir j obs. By measuring t he effect
on t he company profit s before and aft er t raining, and t hen comparing
wit h t he cost s of t he t raining, a company can det ermine t heir ret urn-
on- invest ment .

Key performance indicat ors

So t he best place t o st art is ident ifying key performance indicat ors
( KPI s) . But t hen what ?

"St art ing wit h t he KPI , ident ify t he key act ivit ies t hat have t o happen
for successful achievement of t he measure and for each act ivit y,
Measuring ROI on Soft Skills Training An Approach Document
See Change Consulting, India
Web: http://www.seechangeworld.in Email: info@seechangeworld.com

ident ify t he compet ency requirement s, especially t hose wit h most
leverage over t he out come," says Tony Dunk, principal of HR
consult ancy CDAs t raining and development business.

For example, t he KPI might be a cust omer ret ent ion measure, where
one cont ribut ing act ivit y is t o reduce cust omer losses by dealing wit h
complaint s effect ively, so a key soft skill is dealing wit h angry
cust omers. I n t his case, Dunk says t hat we can measure t he cust omer
losses bot h before and aft er t he dealing wit h angry cust omers
t raining, quant ify t he improvement , and set it against t he cost of t he
t raining.

"Where it is difficult is t o t ake a generic t raining Programme on
handling difficult cust omers, and answer t he quest ion what is t he ROI
for t he Programme when it isnt wit hin t he cont ext of a specific KPI ,"
says Dunk.

"This is why t raining depart ment s oft en find it difficult t o est ablish ROI
for t heir curricula, because t heir needs analysis oft en drives generic
development across t he organisat ion, wit hout a real underst anding of
t he financial need being addressed in specific areas of t he business.
That and t he fact t hat t hey only t end t o do it when t he budget comes
under scrut iny."

Hence one needs t o keep in mind t hat ROI on generic programs is not
really measurable.

Donald Taylor is st rat egic alliances dir ect or at management soft ware
company I nfoBasis and chairman of t he Learning Technologies
conference. He says t hat when calculat ing t he ROI on any t raining,
result s need t o focus on core areas such as product ivit y, morale and
st aff t urnover, which are in line wit h business needs and are of clear
value t o t he organisat ion.

"I t s crucial t hat alignment t o business needs is done up front wit h
t raining, so t hat when you are asked ret rospect ively whet her t here has
been value added, you have clear answers," he says.

Skills audit

According t o Taylor, t his means ensuring t hat t raining is aligned t o an
ongoing skills audit . "I f you are on t op of which skills each role
requires and because roles are defined by business needs, it can
illust rat e how t raining bridges t hat gap, " he says.
Measuring ROI on Soft Skills Training An Approach Document
See Change Consulting, India
Web: http://www.seechangeworld.in Email: info@seechangeworld.com


Declan Mulkeen, market ing direct or at communicat ion and cult ural
awareness t raining provider Communicaid, agrees t hat for soft skills
t raining it is vit al t o underst and t hat effect ive programmes will have an
impact on end behaviour.

"Once it is clear what changes in behaviour you require and you have
det ermined t heir pot ent ial impact on business performance, it is
possible t o t ranslat e t hem int o t angible met rics, which can be
measured financially," he says.

Mulkeen cit es t he example of measuring t he ROI on cult ural awareness
t raining given t o employees before being sent on an int ernat ional
assignment . " Assignment s are very expensive for any organisat ion,
wit h cost s t ypically four t o five t imes t he annual salary of t he
employee. By providing pre- assignment t raining, you can reduce t he
failure rat e. As you underst and what you want t o measure and possess
a clear vision of t he out comes you require, it is t hen possible t o
est ablish ROI ," he says.

However, Mulkeen does have a word of warning: on it s own ROI
cannot det ermine whet her t raining has been t ruly successful. "Dont
forget delegat e feedback, line manager and t eam 360- degree reviews
as well as pre- and post - t raining assessment s and examinat ions. Ot her
measures of t raining should always be considered t o evaluat e whet her
it was a successful init iat ive," he adds.

Top t ips

1) Before measuring ROI , make sure t he t raining solut ion is aligned
wit h core business needs
2) Use an ongoing skills audit t o provide evidence of why t raining in
specific areas is needed
3) Be clear on obj ect ives and ident ify key performance indicat ors
( KPI s) t o measure t raining against
4) Est imat e out comes from t he st art do not st art t raining
Programme unless t he init ial expect at ion of benefit s impr ovement is
j ust ified by t he cost .

The benefit s t hat would be felt anyway whet her you do ROI
calculat ion or not :

Whilst qualit at ive result s are hard t o quant ify, we believe t here are
many t angible benefit s t o invest ing a lit t le more t ime t o ensure t hat
Measuring ROI on Soft Skills Training An Approach Document
See Change Consulting, India
Web: http://www.seechangeworld.in Email: info@seechangeworld.com

soft - skills t raining is as effect ive as it can be. These include
creat ing/ enabling:

a) Dynamic working cult ure Team members become bet t er
equipped t o problem solve posit ively and proact ively, and t hey have
t he det erminat ion t o st rive for excellence.
b) Successful implement at ion of change - Effect ive leadership,
individual mot ivat ion and improved communicat ion brings act ive
involvement , and commit ment t o planned changes.
c) I ncreased sat isfact ion I mproved communicat ion and an open,
dynamic working cult ure improves overall sat isfact ion and
commit ment .
d) Reduct ion in st aff t urnover - A more sat isfied and commit t ed,
less st ressed workforce is less likely t o move on. Salary and ot her
benefit s become less import ant when t eam members feel respect ed
appreciat ed and support ed.
e) More efficient meet ings - Open and honest communicat ion and
effect ive facilit at ion of meet ings saves t ime and improves collaborat ive
problem solving and decision- making.
f) Meet ing of deadlines More effect ive communicat ion and
negot iat ion bet ween depart ment s means t hat t arget s are more likely
t o be met because of increased t ransparency, t rust and rapport .
g) I ncreased product ivit y Through effect ive leadership, improved
mot ivat ion and communicat ion, individuals and t eams are bet t er
equipped t o achieve result s.
h) Saving of managerial t ime - I mproved t eam communicat ion and
collaborat ive problem solving result s in fewer conflict s and fewer
demands on management t ime.
i) Reduct ion in complaint s I mpr oved collaborat ion, negot iat ion
and resolut ion of problems result s in fewer grievances, and a reduct ion
in int ernal and ext ernal complaint s.

I n summary, ' Soft Skills' Training can and does offer ROI t hrough
sust ainable and valuable improvement s, part icular ly when:

1) I t is st rat egically linked t o individual, t eam and organisat ional needs
2) I t addresses individual, t eam and organisat ional at t it udes t o change
3) I t is support ed by on- going reinforcement s by managers and t eam
members
4) I t is followed by real opport unit ies t o pract ice how t o .