Back in 2013, we wrote a post on the four training evaluation levels you need to know about, based on the late Donald Kirkpatrick's highly influential 'four level' model for training course evaluation.
Vital in understanding whether your training has been delivered effectively, the four levels of evaluation (Reaction, Learning, Behaviour and Results) are invaluable in finding opportunities to improve throughout the training delivery process.
As Kirkpatrick said himself, in a 2009 interview with 'Chief Learning Officer',
"We call it the chain of evidence. You get evidence on Level 1 that they liked the program - they thought it was practical; Level 2 that they learned the knowledge, skills and attitudes; Level 3 that they changed their behaviour; and Level 4 that you're going to get the results from it"
Chances are that if you’re reading this post, you’re a passionate deliverer of learning. You get a kick out of reading evaluation reports and knowing that your training has had impact on your students. Making a difference to others lives is a worthy and rewarding career and who doesn't like that feeling of self-worth knowing that you've affected positive change?
However, like all businesses, training companies must turn a profit in order to be sustainable. Beyond focusing on the effectiveness of training and learning development, we must also evaluate monetary benefit. When the Finance Director knocks on your office door, it's unlikely that he's going to ask how effective your training was last month!
Therefore, it's essential for training companies to show the return on any training or marketing related costs.
The 5th Level
ROI (Return On Investment) as a 5th level of evaluation isn't a new concept, in fact Jack J. Philips suggested the addition as somewhat of a precursor to his now widely adopted ROI Methodology.
Now you might argue, as Roger Kaufman has previously, that the 4th evaluation level, results, should encompass the evaluation of monetary performance, and that any 5th level should really be reserved for evaluating the wider societal impact of the training provided, something akin to the 'Kirkpatrick Plus' model proposed by Kaufman.
However, the results level tends to cover the revenue generated by training, rather than a comparison of revenue generated vs. cost of acquiring the business. Of course, this is a vital metric as if costs outweigh revenues generated, then your training company has a bleak future.
How can you measure ROI?
It's a relatively straightforward calculation to understand how many £/$ you returned for every £/$ you spent.
ROI = (Revenue - Total Costs) / Total Costs
For example, if your total benefit/sales were £1,000 and your costs were £200 then your ROI would be (£1,000 - £200) / £200, therefore a ROI of 4 to 1.
Or, if you want to display ROI as a percentage.
ROI % = (Revenue - Total Costs) / Total Costs * 100
Revenue could well be a total sales/revenue metric evaluated from Level 4, results.
Total Costs are, of course, the costs associated with delivering the training. Philips suggests that these should be all-encompassing, including:
- Assessment costs (prorated)
- Development costs (prorated)
- Program material costs,
- Instructor/facilitator costs
- Facilities/Venue costs
- Travel, lodging and catering costs
- Participant salaries and benefits
- Administrative and overhead costs (prorated)
- The cost of evaluation itself
Administrate User? Good News!
If you're already an Administrate user, then calculating the profitability and ROI of your courses is a breeze within our Events and Reporting Systems.
Step 1 - Revenue and Costs
Revenue will be calculated for you, based on the prices set for each student. This includes both invoiced and forecast revenue for convenience.
Costs can be entered with just a few clicks, be they fixed (e.g. a venue cost), per student (in which case every time you add a new student, we'll automatically add that cost - e.g. lunch!), costs associated with personnel or costs associated with everyone. Costs will be totalled for you, both invoiced and forecasted, so you have full transparency over both the revenue generated and costs associated with your event.
Step 2 - Set Up ROI Reporting
Next, simply create a new report using the criteria below for Output Columns and you'll be presented with ROI figures for each of your Events.
The end result:
Not Using Administrate Yet? We've Got You Covered...
While we wax lyrical about how spreadsheets aren't a good way to manage your training operation, they have their uses in evaluating your training performance - especially if you don't yet have an all-encompassing Training Management System!
Download our free Training Company ROI calculator by entering your details below. Once downloaded, simply enter the total number of events and students, your revenues and total costs and it'll calculate your training ROI right there and then.
Don't forget, the ROI score you end up with only gives you a picture of the profitability of the courses you run, not the information required to improve your training course delivery - the first four levels remain invaluable for this.