Investing in Your People

What's the ROI on Training Management?

Whats the ROI of Training Management Solutions__Header

“What’s the bottom line?”

The answer to this question drives every one of our business decisions. So what is the bottom line when it comes to the ROI on a training management system? Will it be worth the significant financial investment and the time it takes to implement?

Understanding training and development ROI can be more complex than purchasing new equipment because the measure of value is more than fiscal—it has to do with the overall growth of your team. In this article, we’ll define ROI and provide you with five big things to consider when measuring the ROI of your training management program.

What is ROI?

ROI is a common profitability metric that depicts the performance of an investment. ROI stands for Return On Investment. It’s a way of measuring the value, efficiency, or profitability of something you’ve invested in. ROI is frequently used to compare investments to see which one performs better than the others.

Measuring return isn’t limited to financial investments. In addition to the ROI of accounting software and heavy equipment, you can evaluate and compare the ROI of investments in time, energy, and other kinds of capital. According to the Society for HR Management, the biggest metrics to look at when it comes to training management software ROI are the overall cost of the training system and how practical the training is.1

Five Considerations When Measuring Training ROI

Determining the ROI for training requires more than comparing columns of data. Your costs may be embedded in the broader context of employee development. Measuring a training and development system requires digging into where your money is currently going and whether those dollars used effectively.

1. What are you spending on training right now?

Have you evaluated the amount of money you currently spend on training employees? Suppose you don’t have a training management system. In that case, this cost is likely hiding within payroll since foremen, superintendents, EHS managers, and other senior employees are taking time out of their workday to train new employees. Remember, it's always worth the cost when you do what it takes to train your team well. You just need to know where those costs are coming from. 

2. How much does turnover cost you?

We all know the familiar gut punch of a new guy not showing up to do his job. These scenarios draw resources from areas of the project that were allocated to something else. On the conservative side, it can cost 1.5-2X a person’s salary to replace them.2

A good training solution will reduce turnover and increase employee retention. A whopping 94% of employees say they would stay longer at a company if that company invested in their careers.3

3. How much more business could you do?

Are there jobs you know you have the technology and equipment to perform, but you just don’t have the team to justify bidding the project? Would your number of contracts increase if you had a more reliable, skilled crew and a way to direct new people to any training systematically they may need?

4. How much are on-the-job mistakes costing you?

Mistakes are costly. Reportable safety incidents, however minor, lower your EMR.4 If your EMR drops, it could inhibit you from bidding jobs that require a specific safety metric. Even if you end up footing the bill for a “only” monetary mistake, like a missed grade or broken water line, these are costly lessons that gouge profits and skew performance results. What if you could avoid the cost of these errors by having a training management system in place?

5. How do you collect feedback on your training program?

How well were you able to answer questions one through four? Do you conduct surveys or collect assessments from leaders in each department to track every employee's performance? Without standard measures of performance and growth, it is impossible to measure the efficacy of your employee training accurately.

A Formula for Measuring Training Management ROI

In the Dirt World, an evaluation of training management ROI might look like this: you’re a 150-person company paying three employees to carry out the orientation and daily training process for every employee. You purchase a training management system for $24,000, enabling you to reduce your staff by one person. The reduction generates approximately $10,000 per month in reduced payroll.

ROI% = $ benefit of training - $ cost of training
$ cost of training

Plugging the numbers into the formula above gives you the following results: 

$10,000 in reduced payroll - $2,000 for software = $8000 savings. $8000 savings divided by $2000 cost of training equals $4000. In other words you’d be increasing ROI by +400%.

Summary

We’re all concerned with our bottom line. If we’re not making money, we can’t care for our employees. If we can’t take care of our employees, turnover increases, morale decreases, and it becomes more challenging to win jobs.

But investing in training management software doesn’t have to be a huge risk. By taking into account the five points we covered in this article, you can understand what you are already paying for training, turnover, and mistakes. Then you can see what your budget is for a course management system that can lift company culture, improve performance, and increase profit margins. Check out BuildWitt’s software, made just for the Dirt World, here.

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