Chapter 2: Return on Investment of Training Program

Chapter 2: Return on Investment of Training Programmes

When you can measure what you are speaking about and express it in numbers, you know something about it; but when you cannot measure, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of science, whatever the matter may be.

—Lord Kelvin (1824–1907

Nowadays, a company’s human capital is accepted as one of their most valuable assets. In the ever increasing competitive and globalised business environment, a company’s people are ever increasing accepted as the foundation of their competitive advantage. A study by the American Society for Training and Development (ASTD) showed that through a study conducted between 1996 and 1998, on 575 US companies, that investment in training and education provided a direct link in increased profitability and share price performance. The study ranked companies by how much they spent on training per employee, it was found that the companies that spent the most on training per employee were the highest performing companies. Companies in the top 50 percent of training spend were found to have a 45 percent higher Total Shareholder Return (TSR) that the weighted average of the S&P 500, and 86 percent higher than the firms in the bottom half of the study (Bassie, McMurrer and Van Buren 2000).

In another ranking carried out by the US publication ‘Training Magazine’, which ranked the Top 100 best companies in terms of Human Capital, it was found that the most highly regarded US companies spent 4 percent of payroll on training which is twice the industry average. In addition, it was also discovered that the top...

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...of 1,000 or more, the training team often consists of a very small staff, these must then function as training coordinators and instructors as well as being the overall managers, this is the case in ChinaHR, where despite the organisation having over 2,500 staff, the training team is relatively small with 4 staff in Head Office and one trainer in each regional office.

In such situations, the training manager’s priority is towards the more actionable parts of the job, i.e. the visible, human relations, content creation, aspects of training. In small training departments, management gears more towards building up the visibility of the courses and programmes as opposed to record-keeping. Measuring accountability and return on investment, is viewed more as a back-office, number-crunching, time-consuming task that can be left until a slow time, which often never occurs.