CXO

How to evaluate the ROI on your company's IT training

Is that new IT training you're considering going to pay off? Here are some tips to help your company make a decision.

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Image: iStock/NicoElNino

According to a 2016 survey by Training magazine, enterprises with over 10,000 employees spend an average of $13 million annually on training, while businesses with under 1,000 employees average $290,000 in training spend. Of these training dollars, nearly one in every five is allocated and spent by end business units. One of the business units most likely to get a dedicated training budget is IT, because it is difficult for HR to determine the particular technical skills that training is needed for.

It is mid-level IT managers who identify the need for a training program in their organizations and develop a budget proposal for the CIO for review. But because training is a discretionary expense, it is most likely to get cut if IT is asked to reduce its budget.

This makes it imperative for IT to not only prioritize training needs, but to evaluate each training request for the potential return on investment (ROI) it is going to deliver to the company.

Measuring the effect of a training program

According to advice by consulting firm Business Training Experts, it's important for business leaders to ask two questions:

  1. How many dollars did I gain as a result of the training?
  2. For every dollar I invested, how many dollars did I get in return?

But while a cost-oriented approach can work for skills like sales and customer service, it is much more difficult to use the same approach with an information technology training program, where the payoff of investing in training for areas like infrastructure skills isn't necessarily quantifiable.

One approach to measuring training return on investment that worked well for me as a CIO began by asking this set of questions:

  1. Did the training solve specific issues that we couldn't solve before?
  2. Did it deliver hands-on skills that staff could put to use right away?
  3. Did training educate our organization on new technologies and solutions that could be beneficial to our company in the future?
  4. Did the training boost employee morale and sense of value?
  5. Did training present opportunities to network and collaborate with others?

SEE: On-the-job training: How to develop IT skills that translate into results (Tech Pro Research)

How to plan IT learning opportunities

The highest ROI scores usually went to training that directly addressed—and solved—complicated problems that we couldn't solve on our own. Most of these issues were technical, and the payoff was immediate because fixes to age-old problems almost always make IT run more efficiently and deliver faster times to market for the end business that could pass a cost-benefit analysis, such as operational savings or revenue enhancement.

The next-highest training ROI producer consisted of staff skill upgrades that could immediately be put to use in projects. In most cases, we were able to complete projects faster, and this also reduced the company's time to market for much-needed business applications that contributed to competitive advantage.

It was harder to measure ROI from futuristic seminars on new software and technologies that we felt we needed courses on so we could be prepared for IT that the company would need two to three years in the future. It was also harder to attach a definitive ROI to training that was value-added to the company but also important for boosting individual employees' sense of value and morale.

For the latter, we sometimes developed metrics around employee retention, but since there are other factors that also enter in, getting this training ROI formula to work was hard to do.

Finally, in good budget years, I looked at opportunities for our staff to meet IT professionals from other companies. This created networking and collaboration opportunities—and more than once, we learned about a successful workaround another company was using for a common software that we both used—or about recommendations on where to get the best equipment deals. Doing a cost-benefit analysis for this was difficult, but we found the networking valuable.

SEE: The truth about MooCs and bootcamps: Their biggest benefit isn't creating more coders

Keeping the cost of technology training manageable

Ultimately, here is how this type of training program factored back into the budget:

In a good revenue year for the company, we funded all of our training. But if in mid-year, company revenue growth wasn't as strong as initially projected and we had to cut back training, we revisited the budget and deferred training where we couldn't readily justify a clear or immediate return.

We also scheduled the courses where benefit wasn't as clear for the third and fourth quarters, so we could easily defer them if we needed to. Conversely, immediate ROI training was scheduled aggressively into first and second quarter.

The system worked reasonably well.

The system was also easier to explain to IT staff, who understood the importance of setting training priorities that addressed our most critical pain points as an organization.

The value of this last point cannot be overstated—because there will always be staff members who feel they are being left behind when others get training or certification, and they don't.

In these cases, management should always explain why certain types of courses and training are being prioritized—and work to develop alternate in-house means of learning opportunities for employees who don't get to attend seminars.

Also see:

About Mary Shacklett

Mary E. Shacklett is president of Transworld Data, a technology research and market development firm. Prior to founding the company, Mary was Senior Vice President of Marketing and Technology at TCCU, Inc., a financial services firm; Vice President o...

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