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The Myth of Training ROI
To calculate the appropriateness ratio, divide the training costs for training those people identified with specific business objectives by the total cost of all training.
In the applicability ratio example above, 24 of the 60 people enrolled in the course-specific classes are identified as being there for a specific business objective, so we divide the cost of training those 24 people by our total training costs. Thus the appropriateness ratio is (24 x $1,000)/(80 x $1,000) = 30 percent, which says that 30 percent of our training costs were spent training certain people for specific skills needed to meet our business objectives.
The appropriateness ratio promotes training for specific business objectives while it discourages superfluous training—imagine being able to give priority to students who need the training for specific business objectives.
If you were presenting an annual report of training, would you rather say that your training this year compared to the previous year was:
- 20 percent more effective.
- 12 percent more efficient.
- Provided 25 percent more skills valued by the organization.
- 30 percent tied to training specific people for specific projects.
Or would you rather say that your training ROI was negative 500 percent?
Would you rather be judged by your negative ROI? Or would you rather talk about the effectiveness, efficiency, applicability and appropriateness of your training? If you were fighting for valuable budget dollars, which metric would you use?
Bob Dust is the founder and general manager of Gyrus Systems, a company with 23 years of experience developing software products for the training industry. He can be reached at email@example.com. Visit Gyrus Systems’ Web site at www.gyrus.com. Bob is also an instructor in the School of Business at Reynolds Community College jsr.vccs.edu.
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