Return on Investment (ROI)

[Pages:3]Return on Investment (ROI)

New England Supply Chain Conference & Exhibition Monday October 5, 2015 Marlborough, MA USA

You may use the NESCON 2015 Cost Worksheet and NESCON 2015 Benefits Worksheet to help you collect data for this calculation. Expressed as a ratios or percentages, ROI and Cost Benefit are calculated as follows:

% ROI = (Net Benefits / Costs) x 100 where Net Benefits = Total Benefits ? Program Costs

B/C Ratio = Program Benefits / Program Costs

Trying to set a monetary value on training is complex. Not all the benefits of training are quantifiable. Benefits such as and improvement in employee self-esteem and morale are intangible. Some argue that the traditional accounting methods are not sufficient. A formula for Return on Training Investment (ROTI) was also developedand can be researched on the web.

Multiple Methods of Calculating ROI

There are a number of models used to calculate return on investment (ROI) or return on training investment (ROTI). For information on the various theories and methods, consult the selection of references below:

Moy, Janelle & McDonald, R., "Showing That Enterprise. Training Pays Off," National Centre for Vocational Education Research (NCVER), Australian National Training Authority, 2000.

NESCON 2015 ROI

"Return on Investment for Customized Training," Howard Community College, 2012.

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Shepherd, Clive. "Assessing the ROI of Training," Fastrak Consulting, 1999.

"Why Train? Calculating the Return on Training Investment.," Open Learning Agency, 2002.

ROI Calculators

Training ROI Worksheet - An Excel worksheet non_frame/free_tools/roi/worksheet.htm

When Is Calculating ROI Just Too Much Work?

As mentioned previously, trying to set a monetary value on training is complex. Ami Dean is the founder and CEO of WithIn, Inc., in central Illinois provides some commonly recognized guidelines in Peroria , April 2010. Source:

Benchmarking

Benchmarking your company's training and training expenditures against industry averages may also assist you in making the case to leadership to invest in NESCON.

The American Society for Training and Development's (ASTD's) annual State of the Industry Report has been the definitive annual review of workplace learning and development investment against which organizations can benchmark their learning investments and practices.

According to the American Society for Training and Development, investment in employee training enhances a company's future financial performance. An increase of $680 in a company's training expenditures per employee generates, on average, a sixpercent improvement in total shareholder return. Based on the training investments of 575 companies over a three-year period, researchers found that firms investing the most in training and development (as measured by total investment per employee and percentage of total gross payroll) yielded a 36.9-percent total shareholder return as compared with the 25.5-percent weighted return for the S&P 500 index for the same

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NESCON 2015 ROI

period. That's a return 45 percent higher than the market average. These same firms also enjoyed higher profit margins, higher income per employee and higher price-tobook ratios. Source: For the past seven years their employees have averaged more than 40 hours of learning, and this year employees at BEST organizations used on average 49 hours of learning. Similar to past years, while the number of hours of learning an employee used remained stable, the cost per learning hour used has increased. The cost per hour of learning has increased by approximately $10 each year for the past four years. Source: The cost of education through NESCON has remained stable for seven years! Verify the $199 Early Bird rate for each year since 2008, here: The average cost per learning hour used in a small company with fewer than 500 employees is $126, compared with $82 for a midsize organization, and $51 for a large organization with more than 10,000 employees. Source: Firms that invest $1,500 per employee in training compared with those that spend $125 experience an average of 24 percent higher gross profit margins and 218 percent higher revenue per employee. Source: Laurie J. Bassi et al., "Profiting From Learning: Do Firms' Investments in Education and Training Pay Off?" American Society for Training and Development, 2000.

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