Sales Manager - Case analysis - Training ROI

How to calculate ROI training.
A sales manager underwent a training workshop and came back with the following monthly performance.
Sales before and after :   120,000 and 140,000
Profit before and after:  12,000 and 16,800
Use return on sales as the Key performance indicator.
a)  What is the total improvement?  b)  What is the improvement contributed by improved competency or due to efficiency?  c)  What is the improvement caused by the volume change?  d)  What is the ROI on training if the cost of training is 10,000?

Answers
a) 4,800 total improvement
b) 2,800 efficiency improvement
c) 2,000 volume improvement
d) 2800/10,000 = 28% say per month. or 336% per year.

Note:  Efficiency and volume improvement has been separated.
For ROI just take the efficiency improvement in the calculation.

Arriffin Mansor 012-2786282

What they quoted me in UK training journal

Problems in measuring training results

1. The net impact of training is difficult to recognize.  Since profits has always been the business objective the additional net gain as the result of training should be measured.
2. The influence of other factors need to be eliminated as it is not done in a tube.
3. The cost of training intervention should include opportunity costs too.  For example, the participant salaries or loss of earnings for the corporation due to their training activities. 
4. As in all measurement, training too requires realistic assumptions.
5. Use input output to measure results of training.
6. Measure expected change results minus before training performance.
7. The change in competency causes the KPI line to shift to the left indicating improvement in performance after training.
8. The solutions are suggested in my other posts.

Arriffin Mansor 012-2786282

Performance Objectives

Objectives could be defined at 4 levels valid probably for the next 6  or 12 months using accepted KPIs.

• Corporate objectives
• Departmental objectives
• Sectional objectives
• Individual objective

Next, a set of key result areas are identified for each objective or goal.

Generally, we use financial ratios for performance measurement.  They are creditable, consistent and objective for comparison purposes.

The best measure of efficiency is dividing output by input.

Return is a better measure of performance.i.e outcome divided by input.

Arriffin Mansor 012-2786282

Building performance Leadership

How to build an effective team leader.

1. Clear Goals setting and definition - quantitative metrics
2. Key result areas as discussed and identified
3. Team's KPI as discussed and chosen
4. Measuring and evaluating Team performance 
5. Team  problems and solutions discussed and adopted
6. Team Initiatives or programs discussed
7. Leadership development
8. Performance improvement
9. Strategic mapping
10. Performance analysis and evaluation.
11. Group dynamics and synergy
12. communication improvement among team members.
13. Problem solving and decision making

Arriffin Mansor 012-2786282

Training Need Analysis

It is unfortunate I could not upload a graphic presentation in this column.

1. Identifying past  Performance Gaps  - using financial statements
• Gaps    - Performance Gap Analysis -  Critical Performance Gaps - Persons/Groups ----CGA
• (Input Output Analysis)    (Use Du Pont ROE Chart)
2. Future Gaps - Global       Expected        LT competency reqmt.
• Industry        ROE growth   ST competency reqmt    
• Scenario
• (the above two steps identify sets of critical competency gaps for critical staff.) (key performance Areas)(within the organisation)
3. Competency gaps Analysis
• competency profile of key workers
4. Delivery Training Alternatives
• Costs
5. Justify Training  ---Expected Performance Improvement (before and after)  - Input output Analysis
• to be delivered----Exp Training Costs (Actual + Opportunity)   Expected ROI --Cash flows --Expected IRR/NPV
• Evaluate
• Training      ---(Same as above) (except that they are all actual figures) Actual Return on Investment etc
6. Annual Training and budgeting based on expected ROI and prioritisation. 

                            


Arriffin Mansor 012-2786282

After ROI it is IRR

If you can calculate the ROI of training, you might as well proceed to calculate the internal rate of return of the training project.
The additional steps are as follows
Use excel or lotus spreadsheet for the purpose of analysis
1.  Extend the training benefits to the economic life of the training.
2.  Project the cash inflows and outflows of the training.
3.  Calculate IRR/NPV

IRR and NPV has better meaning than ROI.  It takes into account time value of money.


Arriffin Mansor 012-2786282

Training Management: Development Training Need Analysis

Training Management: Development Training Need Analysis

Arriffin Mansor012-2786282

Development Training Need Analysis

Being futuristic, development training is more difficult to identify than the normal training.
The future may include industry and global trend.  In addition, the planner may have his own reasons to forecast growth in certain areas.

The steps to conduct development TNA are as follows:-

1. Project ROE/ROA of the company say in the next 5 years
• based on market analysis
• based on market positioning
• based on market size and growth rate
2. Design projected business model with profit plans
3. Cascade in accordance to Du Pont Chart based on improved strategies.
4. Critical Performance Gaps
5. Locate best practices through benchmarking
6. Chart the BSC perspectives at corporate level
7. Identify the Critical Success Factors of the company.
8. Use BSC perspectives to identify individual's training needs - competency gaps
9. Justify training through expected ROI.

Based on the above, a new set of competencies are recognized to bring the company to the next level.

Arriffin Mansor 012-2786282

Individual training needs - the micro unit

1. The workload of a worker is drawn from the workload of his boss.
2. Ascertain the performance gaps by contrasting with the industry standards
3. Use the BSC perspectives to get the competency needs of a worker.
4. Alternatively, use the competency profile of an equivalent standard worker tracked by benchmarking.
5. Best Practices become competency requirement.
6. Competency gaps are the training needs

Arriffin Mansor 012-2786282

Identifying Developmental Training Needs

Developmental needs refers to the future needs of an organisation as oppose to the normal training needs which attempt to solve the current performance gaps.

How to project the growth of an organisation?  The best indicator of performance growth is the return on equity and the return on assets.  For example if last year you achieve 15% ROE,  projected 20% ROE would probably mean a new set of strategies are required.

The concept of cause effect linking up of all the strategies with lines towards the ROE is called the strategic map.

What variables within the ROE format you need to improve to result in higher ROE?

The change must be in line with accepted or best practice strategy.

To identify the learning needs the BSC perspectives could be applied.

At the bottom of the strategic map is the HR inputs.

We work downward to get the training needs.


Arriffin Mansor 012-2786282

IMPROVEMENT AND DEVELOPMENT TRAINING - 8 KEY STEPS

4 plus 4 steps

PERFORMANCE PHASE
1.  Performance Gaps - (ROE format)
2.  Critical Gaps (pareto and sensitivity analysis)
3  Eliminate non-training variables - (input output analysis)
4.  Calculate actual KPI of identified persons - (financial ratios)

COMPETENCY PHASE
5.  Competency profile of the benchmarked competent worker - (best practices and a defined set of KSA)
6.  Competency Gaps identified by comparing standards with actuals. - (a set of net KSA)
7.  Categorise and combine the gap competencies (core, soft and hard)
8.  Adopt delivery strategies on best practice basis.

Apply these steps to get the micro and the macro needs

Arriffin Mansor 012-2786282
arriffin@gmail.com

Training Need Analysis - 5 key steps

1. Identify critical performance gaps of an organisation -  by ROE format.
• variance analysis between actual against standards
• use pareto principle to identify the most critical
2. Analyse and select performance gaps caused by lack of competency - use input output analysis
3. Bench mark to get the best practices and standard competency profile - use KPI
4. Compare competency of relevant job holders with that of standard - competency gaps
• competency and depth
• Eliminate factors other than competency
5. Category and cluster competencies for appropriate training strategy and delivery 

Arriffin Mansor 012-2786282

From Performance Gap to Needs Analysis - Video

Arriffin Mansor 012-2786282

Please read my comments below on the above talks.