Explain the issues involved in establishing ROI for T&D initiatives. What role do HRIS T&D applications play in establishing ROI?

Question

What will be an ideal response?

Answer 1

Return on investment on training is a financial measure of the total benefits (anything that adds directly or indirectly to the bottom line of the organization as a result of training), compared with the total costs of training, including direct and indirect costs. Direct costs involve any costs directly related with training (e.g., trainer’s or instructor’s fees, equipment and facility rental, or production and purchase of training materials). Indirect costs are not directly associated with the delivery of training (e.g., administrative support or office supplies) (Noe, 2002).
ROI is generally expressed as a percentage of the total benefits less total costs over the total costs and is usually determined by the following formula:
(total benefit ? total costs)
——————————— = ______ × 100 = ROI
total costs
While it can be difficult to ascertain the costs involved in training, the task of establishing financial benefits can be even more onerous. Moreover, ROI analyses provide no insights into how to improve business results in the future (Conner, 2002). Russ-Eft and Preskill (2005) highlight three critical factors in human resource development evaluation, which complicate the assessment of training outcomes:
1. Evaluation occurs within a complex, dynamic, and variable environment.
2. Evaluation is essentially a political activity.
3. Evaluation ought to be purposeful, planned, and systematic.
The variety of possible outcomes from training, the variety of factors that affect these outcomes, and the variety of data to be collected to produce any meaningful results appear to make the evaluation process a rather tedious task that would be next to impossible to complete efficiently and effectively without the help of a computerized system. Most commercial HRIS can be customized to record, analyze, and report on the training metrics that have been identified by a firm. For instance, the system could be configured to collect information on the monetary benefits of T&D projects, such as increased production output or a reduced number of complaints, and compare this information with data collected on the costs of T&D projects. T&D data will usually be stored in the T&D module of the HRIS. In addition, a broad range of dedicated T&D systems is commercially available.