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PCCA Journal|2

nd

Quarter 2010

32

years’ productivity increases.

Add 5 and 6 to total estimated profit increase from

7.

training.

Calculate total training benefits after training cost

8.

by subtracting 7 from 3.

Calculate training ROI. This method rolls all return

9.

into the first-year calculation (which is the period in

which the training cost is expensed), so an annual-

ization of return is not needed.

Individual Commitments Approach

This approach focuses on changes accomplished and

overall business results instead of mathematical projec-

tions. The idea is to identify two or three core behav-

iors that if employed by a specific business unit within

the organization, would dramatically improve business

results. The next step is to provide the training and

focus on ensuring that participants who complete the

program are truly capable of performing the specified

behaviors.

The participants then receive three to six months of

reinforcement and support related to the target per-

formance and their subsequent progress. The specific

financial impact related to that business unit is com-

pared each month (or week) after the training experi-

ence. The impact of implementing the target competen-

cies is determined and evaluated in terms of strategic

benefit.

The ROI process involves the participants and their

managers and extends well beyond the learning event.

Once the detailed commitments are established, em-

ployees submit progress reports. Implementing the new

skills is linked directly to the business activity that is

the beneficiary of the changed behaviors.

Root Cause Analysis

Identify the root cause of organizational “pain”

1.

(e.g., closeout, change orders, or customer service).

Determine how much the pain costs. Using closeout

2.

as an example, determine the total cost of delay in

closing out, number of days of accounts receivable,

cost of general conditions for extra days, cost of

each “additional” punch list item, overtime, and call

backs.

Design a training program around focused training

3.

that would reduce the closeout cycle by a targeted

number of days, identify who and how many

people would be involved, and determine the costs

associated with it.

Develop a cost/benefit ratio. How much is earned

4.

by implementing training to closeout sooner versus

the current closeout cycle?

These are just a few examples of how you might try

to determine ROI. Return on investment in the area of

training is a somewhat subjective exercise. Collecting

enough evidence to point to training as the main rea-

son for success will undoubtedly require a great deal

of time, calculations, and expertise. It may take some

time for that investment to return to you through the

changes exhibited in your people. However, remember

that any training is an investment in your greatest as-

set, your employees. Training and development shows

them how valuable you think they are and increases

their value to you.

One-time training is useful but ongoing develop-

ment demonstrates to your people that you continually

invest in their value. A common concern from many

companies in this economy is they just do not believe

they have the money for training. Former Harvard

University President Derek Bok said, “If you think

that education is expensive, try ignorance.” With that

in mind, consider an analogy in our industry to help

frame this discussion. During this slowdown, a number

of companies have used the time to do maintenance on

their “fixed assets” (equipment). The “yellow iron” is

the cleanest and most maintained it has been in years.

The strategy is sound: you have to do the maintenance

on it anyway and it is money well spent in the end. It

is a good time to get everything in good working order

so that it is ready to go when you need it (or want to

sell it.) An added bonus is that you can keep some

good workers busy for a while. You spent some money,

but you know it will pay back when the work picks up

again. After all, as long as the equipment was sitting

An Upside to the Downturn

Continued from page 31

Cost of Training

Consider a two-day training program for 16 em-

ployees.

If you pay each employee $200 per day, multiply

that by two days. You would pay $400 times 16

employees for a total of $6,400 in trainee wages.

Estimated costs for training facilitator, materials,

room, a/v equipment, and travel equals $16,500.

If the company makes 20 percent profit on each

employee hour worked, the loss in employee

productivity while in training would be $1,280

($200 per day X 20 percent X 16 people X 2 days)

= the total training costs are $24,180, in this

example.

Assume that each of the 16 employees improved

productivity, which resulted in an additional 10

percent of profit per employee. The added profit af-

ter the training would equal $79,360 ($200 per day

X 10 percent X 16 people X 248 days) in the first

year, which, in this example, is a return of three

times the cost of the training.