How to Calculate Return on Investment for Professional Development & Skill Training

Calculating the return on investment (ROI) for professional development and skill training can help companies determine the effectiveness and value of their training programs. Here are some steps companies can take to calculate the ROI for professional development and skill training:

  1. Determine the costs: Companies need to determine the total costs associated with the training program, including the cost of training materials, instructor fees, employee salaries during the training, and any travel expenses.
  2. Determine the benefits: Companies need to determine the benefits of the training program, such as increased productivity, reduced error rates, increased employee retention, and increased customer satisfaction. These benefits can be estimated by conducting surveys, tracking performance metrics, or analyzing customer feedback.  Attributing a specific dollar amount to the benefit is what makes the ROI so complex.
  3. Calculate the ROI: Once the costs and benefits have been determined, companies can calculate the ROI by dividing the benefits by the costs and multiplying the result by 100. This will give a percentage value that represents the ROI.

The standard formula for computing your ROI for training is

 ((Benefit of Training – Training Costs)/Training Costs) x 100 = ROI (percentage)

For example, if the total cost of a training program was $1,000 and the estimated benefits were $3,000, the ROI would be calculated as follows:

ROI = ($3,000-$1,000 / $1,000) x 100 = 200%

This means that for every dollar invested in the training program, the company received a return of $2.

ROI may also be measured in terms of decreased per-item product cost or time.  For example, after training, the production of widgets increases from 100 widgets per hour to 150 widgets per hour.  So the cost of producing each widget decreases and the time to produce each widget decreases.

In its simplest format, I like to think about the time savings of one person learning a new feature that saves X minutes per day.  For instance, a savings of 12 minutes a day is one hour gained per week.  Multiplied out over a year, that simple savings provide a return of $1,000 for a $20/per hour employee.

Learning a more efficient weekly reporting process in your Excel spreadsheet can easily return such savings.  If the cost of a Microsoft Excel course is $200, the ROI would look like this:

(($1,000-$200)/$200) x 100 = 400%

Calculating the ROI for professional development and skill training can help companies make informed decisions about their training programs and allocate resources more effectively. It’s important to note that calculating the ROI for training programs can be complex, and companies may need to work with a financial analyst or training consultant to ensure accurate calculations.

Looking for a training provider? Contact Dawn Monroe Training for more information.