Staff training and development are important in any SME, not only to ensure that employees can perform their roles properly and safely, but also for improving productivity and profitability.
Workplace training is often viewed as an expense in a business, but if handled well, it is actually more of an investment. And as for any investment, it can provide a significant and measurable return for a business.
What is involved?
Staff training involves more than sending employees off to do a course here and there, or running training sessions for the sake of it. Some of the aspects to consider include:
- Assessing business goals and the skills required to meet them, and identifying any gaps in that process. This is essential for training to be effective.
- Speaking to employees regarding any training they need or would like to undertake that is related to their job and / or career path.
- Considering training options – with examples including external courses, seminars, internal training sessions, on-the-job training, peer-to-peer training, online courses and webinars.
- Training topics – examples include:
- Customer service and sales.
- Technology – such as how to use customer relationship programs or databases, and cloud computing such as cloud accounting, virtual fax, and online file storage.
- Internal training on new products.
- Measuring the results by calculating the improvements to productivity and sales and comparing this against the cost of the training.
- Use training opportunities to foster a ‘learning culture’ in your business – one that is focused on continual improvement and growth.
Training and development has the capacity to not only improve workplace outcomes but also job satisfaction for employees. This can serve to reduce absenteeism and turnover – which in turn decreases costs to the business and improves its overall profitability.
Measuring Return on Investment (ROI)
To measure training returns, you will need to keep track of the costs (A) involved in the training and also calculate outcomes (B). These figures are then used to calculate the net benefit of training (C).
- A: Costs – these are likely to include training provider and course fees, materials, travel, accommodation and meals for employees if required, and also attendee wages and any extra resources required during the training period. The final cost is calculated by adding up all these costs X the number of attendees.
- B: Outcomes – these are measured by calculating changes in productivity, in the rate of staff turnover, in labour costs, and in sales.
- C: Net benefit – calculated by deducting A from B.
The ROI formula is C/A x 100. Example: If A (costs) is $5,000 and B (outcomes) is $7,500, then C (net benefit) is $2,500 – which is a 50% return on the initial investment of $5,000. Of course ROI will need to be calculated at a selected time period after the training, such as six or 12 months.
If investing in training and development does not produce any positive benefit then you need to assess the reason for this – which may include inappropriate training not related to the employee’s position, lack of implementation of the skills learned, or another reason. In any case, it’s important that staff training and development is undertaken with a clear focus, so that you can improve outcomes in your SME.
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