I’ve got a simple, solid argument that training professional and managerial staff provides a good return on investment (RoI). Put more in and you get more out. That’s a controversial statement.
Even more controversial is my claim that you need only a 0.33% increase in productivity to justify buying some elearning courses.
There are hundreds of ways to try to calculate training RoI. Most are complex and require delving into survey results and the like. But not this one.
Look at what people cost first
I’ve turned the old RoI calculations for training on their head. In the past you had to know the productivity increases achieved by the training to prove that when you paid for training, in time and cash, you earned a profit.
Let’s start with what people are paid. The average annual salary for managers, professionals and senior officials in the UK is £45,220, according to the Office of National Statistics (ONS).
Make sure it is the total costs not just salaries
But that is not the full cost to the company of employing that person. A popular “cost of employment” calculator run by iCalculator says the real cost is £81,724 for that salary. Now we’ve got a stake in the ground.
The average working hours per week for these employees is 37.5 hours, says the ONS. That means the total employee cost is £41.90 per hour.
Only 6.5 hours increase a year to get a RoI on this course
Only a couple more steps to go and we’ll be there. Let’s now look at the other side: the cost of the course. We at ContentETC are selling elearning courses for just under £20 each. It can take six hours to complete. This means that this person needs to improve their productivity by only 6.5 hours in the whole year to provide a positive RoI.
I’ve turned the normal calculation on its head and calculated what time the person doing the course would need to save, to justify the training. If you can’t make a productivity gain of more than 6.5 hours over a whole year you must be very bad at learning.
That’s just a 0.33% increase in productivity to justify the investment.
So here’s the formula for you to use yourself:
Time saved in productivity by taking a course = time taken to do the course in hours, multiplied by the cost of employment per hour, plus the cost of the course; all divided by the total cost of employment per hour.
The higher the pay of the individual, the shorter the time for payback. The higher the cost of the elearning, the slower the payback. The longer the course takes, the longer it takes to get the payback.
Use this approach and become an RoI centre and not a cost centre
Overall you can see that these are stunning RoI figures.
Buyers of training should therefore use this approach to see if training does provide an RoI. They will find it does in many cases. So choosing an elearning training course is not a cost, but an investment which returns profit.
If you’re having problems with the calculations, contact me and we can go through it.