What is Training ROI?
Also called: Return on investment of training · Phillips ROI · Learning ROIDefinition
Training ROI (return on investment) is a measure of the financial return from a training programme, calculated as net programme benefits divided by programme costs, multiplied by 100. Net benefits are the monetary value of the improvements attributed to training minus the total cost. In Jack Phillips’ ROI Methodology it is Level 5, added above Kirkpatrick’s four levels, and requires isolating the effect of training from other factors and converting outcomes such as time saved, errors avoided or sales gained into money.
The formula is ROI (%) = (programme benefits − programme costs) ÷ programme costs × 100. A related measure is the benefit-cost ratio (BCR) = programme benefits ÷ programme costs. Costs should be fully loaded: design or purchase, delivery, platform, participants’ time away from work, travel and evaluation. Benefits come from Level 4 data, converted to money using standard values, and are usually counted for the first year only.
The hard step is isolation: showing how much of the improvement came from training rather than a new product, a market change or a new manager. Methods include comparison groups who did not attend, trend-line analysis, and estimates from participants and managers adjusted for their confidence. Phillips recommends using conservative assumptions throughout. Bodhih’s competency-movement report gives the measured skill change that ROI calculations can build on, and the AI ROI for leaders toolkit teaches the calculation to managers.
Common mistakes: counting only delivery costs; claiming all business improvement as training benefit; projecting benefits over several years; and calculating ROI for every programme, when it is worth the effort mainly for large, costly or strategic ones.
Key points
- ROI (%) = (benefits − costs) ÷ costs × 100.
- Benefit-cost ratio = benefits ÷ costs.
- Phillips ROI Methodology: Level 5 above Kirkpatrick’s four levels.
- Isolate the training effect and convert outcomes to money.
- Use fully loaded costs and conservative, usually first-year, benefits.
An example at work
A Pune manufacturer spends ₹6,00,000 (fully loaded) training 30 supervisors in problem-solving. Over the next year, scrap falls by an amount worth ₹15,00,000; comparing with a plant that did not train, managers attribute 60% of the fall to training, giving ₹9,00,000 of benefit. ROI = (9,00,000 − 6,00,000) ÷ 6,00,000 × 100 = 50%.
Where this is used at Bodhih
Related terms
Kirkpatrick model
The Kirkpatrick model is a four-level framework for evaluating training: reaction, learning, behaviour and results.
Pre and post assessment
Pre and post assessment is measuring the same skills before and after training, using equivalent instruments, to show how much learners changed.
Training needs analysis
Training needs analysis (TNA) is the process of identifying the gap between the skills people have and the skills they need, and whether training can close it.
Competency assessment
Competency assessment is the process of measuring a person’s proficiency against defined competencies, using evidence from tests, tasks, observation or work samples.
More about Training ROI
How do you calculate the ROI of training?
Total all programme costs, including participants’ time. Measure the business improvement, isolate the share caused by training, and convert it to money. Then ROI (%) = (monetary benefits − costs) ÷ costs × 100. An ROI of 50% means every rupee spent returned the rupee plus 50 paise.
What is a good ROI for training?
There is no universal benchmark; it depends on the programme and how conservatively benefits were estimated. Any positive ROI means benefits exceeded costs. Many organisations set a target before the programme, based on what they would expect from other investments, and judge against that.
What is the difference between ROI and ROE in training?
ROI (return on investment) is a financial ratio of monetary benefits to costs. ROE (return on expectations), associated with the Kirkpatrick approach, asks whether the programme delivered the outcomes stakeholders agreed in advance, which may not all be converted into money.