ReTurn On Investment (roi) for Corporate Training and Learning: How It Directly Impacts the Bottom Line

 “Return on investment (ROI) for corporate training and learning:  how it directly impacts the bottom line” is the chosen topic for this final research paper.  Return on investment is important to adult/organizational learning because human resource professionals are under pressure to prove their training programs produce “bottom-line” results which verifies effectiveness of the training.  Training effectiveness is defined as the benefits the organization and trainees receive from training.  Measuring training effectiveness is a gap area for many organizations today.  Although huge investments are made in learning and development, the benefits of these need to initiatives are not always realized.  Moreover, in today’s dynamic and competitive businesses there is a constant need to revise training programs so that they will be relevant for the ever-changing future.  The benefit an employee would acquire from learning could be an enhancement of current competencies or development of new skill sets.  Some benefits that a company could acquire are an increase in sales or profits, improved productivity or quality, innovation, customer satisfaction, improvement in employee morale and teamwork, etc. (Ganapathy, 2012)  It is a challenge to show how our efforts in training impact or contribute to the bottom line.  Measuring the return on investment is a powerful way to show top management the value of training investments in financial terms.

Return on investment (ROI) refers to the benefits that are derived from training relative to the costs it incurs.  (Snell, Bohlander, 2012) Return on investment is a comparison of the actual cost of a project to its monetary benefits.  It is the ultimate measure of accountability that answers the question:  Is there a financial return for investing in a program, process, initiative, or performance improvement solution?  (Phillips, P. & J., 2005) Return on investment is not something new as many think; it actually began in the 1970s.  ROI’s use in learning and human resources began when Jack Phillips conducted the first ROI study on a cooperative education program.  It has been used in the areas of quality and productivity training for many years.  ROI is an invaluable resource for training professionals who need to show how their training programs contribute to the bottom line.  More recently, it is being used as a standard metric for leadership development and coaching programs.  There is still a lot of confusion around ROI and how or when to use it plus how it should be reported to stakeholders and executives so that they see the value in the program.  (Phillips, P., 2014)

According to the USA Today, about $5.6 billion to $16.8 billion is wasted annually on ineffective training programs.  American companies spend approximately $100 billion dollars a year on training with only 8 percent of those companies measuring the ROI on these programs.  (Tampone, 2007)  According to surveys conducted by the American Society for Training and Development (ASTD) at their recent conferences, the following excuses were provided by training managers as to why they are not calculating ROI: