How do you calculate training ROI?
By Bodhih Training Solutions, Bengaluru · UpdatedThe short answer
Training ROI uses the Phillips formula: ROI (%) = (monetary benefits − total training costs) ÷ total training costs × 100. Count all costs, including fees, learners’ time, facilitation and administration. Value only benefits you can measure and attribute to the training, such as time saved or errors avoided, using a pre-training baseline and a re-measure after about 90 days. Convert benefits to money conservatively and state your assumptions.
What is the training ROI formula?
Jack Phillips added a fifth level, ROI, to the four Kirkpatrick levels. Two figures are commonly reported.
| Measure | Formula | Reads as |
|---|---|---|
| ROI (%) | (Benefits − Costs) ÷ Costs × 100 | Net return per rupee spent, as a percentage |
| Benefit-cost ratio | Benefits ÷ Costs | Rupees of benefit per rupee spent |
Which costs should you include?
Undercounting costs is the most common way ROI figures are inflated.
- Course fees or seat prices, plus GST if it is not recovered
- Learners’ time away from work, at a loaded hourly cost
- Facilitator or trainer time, internal or external
- Design, content and platform costs
- Travel and venue for in-person training
- Administration and the cost of measuring
How do you value the benefits?
Start from a business measure the training should move, such as hours spent on a task, error rate, cycle time or sales activity. Measure it before training and again later for the same group. Convert the difference to money using an agreed rate, for example hours saved multiplied by loaded hourly cost.
Then isolate the training’s share. Other things change at the same time. Use a comparison group if you can; if not, ask managers and learners to estimate the share due to training and how confident they are, and apply that discount.
Can you show a worked example?
The numbers below are purely illustrative, to show the arithmetic.
| Line | Illustrative value |
|---|---|
| Total costs (fees, time, admin) | ₹4,00,000 |
| Measured benefit over 12 months, before isolation | ₹10,00,000 |
| Share attributed to training after isolation | 50%, so ₹5,00,000 |
| ROI | (₹5,00,000 − ₹4,00,000) ÷ ₹4,00,000 × 100 = 25% |
| Benefit-cost ratio | ₹5,00,000 ÷ ₹4,00,000 = 1.25 |
What makes an ROI figure credible?
Show the baseline, the re-measure and every assumption. Use conservative values. Report skill movement honestly, for example by treating movement under 8 points on a 0–100 scale as “held steady”, as Bodhih does. A modest, well-evidenced ROI persuades a finance team more than a large unsupported one.
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Questions people ask next
What is the Phillips ROI model?
The Phillips ROI model extends the four Kirkpatrick levels with a fifth: return on investment. It converts training results to money, isolates the training’s effect from other causes and compares net benefits with fully loaded costs using (benefits − costs) ÷ costs × 100.
What is the difference between ROI and benefit-cost ratio?
ROI subtracts costs from benefits before dividing, so it shows net return as a percentage. The benefit-cost ratio divides benefits by costs without subtracting, so it shows rupees returned per rupee spent. A ratio of 1.25 equals an ROI of 25%.
Should learners’ time be included as a cost?
Yes. Time away from work is a real cost and is often larger than the fee. Use a loaded hourly cost multiplied by learning hours. Leaving it out makes training look cheaper than it is.
How do you isolate the effect of training?
The strongest method is a comparison group that did not receive the training. Where that is not possible, use trend analysis or ask learners and managers to estimate the training’s share and their confidence, and discount accordingly.
Is ROI worth calculating for every programme?
No. Full ROI analysis takes effort. Reserve it for large, expensive or strategic programmes. For the rest, solid Kirkpatrick Level 2 and 3 evidence, meaning measured skill movement and behaviour at 90 days, is usually enough.
When should benefits be measured?
Measure a baseline before training, then again after people have had time to apply the skill. Around 90 days is a practical point for skill; business benefits are often annualised from the change observed. State the period clearly in any ROI report.
How do you calculate the ROI of AI training?
Pick tasks the training targets, such as drafting or analysis time, measure them before training and again later, convert the change to money and apply the Phillips formula. Include licence and tool costs if they are part of the programme.