HRD Roi

Download as pdf or txt
Download as pdf or txt
You are on page 1of 19

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/280058880

A Study on Return on Investment of Training Programme in a Government


Enterprise in India

Article  in  Vikalpa · March 2012

CITATIONS READS

10 1,417

3 authors, including:

Priya Dhamija Gupta Vinita Sinha


Symbiosis Centre for Management and Human Resource Development Symbiosis Centre for Management and Human Resource Development
7 PUBLICATIONS   95 CITATIONS    13 PUBLICATIONS   61 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Strategic Management View project

Human Resource Management View project

All content following this page was uploaded by Priya Dhamija Gupta on 15 July 2015.

The user has requested enhancement of the downloaded file.


RESEARCH A Study on Return on Investment
includes research articles that
focus on the analysis and of Training Programme in a
Government Enterprise in India
resolution of managerial and
academic issues based on
analytical and empirical or
case research
K S Subramanian, Vinita Sinha and Priya D Gupta

Executive Return on investment (ROI) has become one of the most challenging and intriguing
issues facing the human resources development (HRD) and performance improve-
Summary ment fields. With ROI, decision makers evaluate investments by comparing the mag-
nitude and timing of expected gains to the magnitude and timing of investment costs.
A good ROI means that investment returns compare favourably to investment costs.

This study is aimed at testing the feasibility of a Return on Investment (ROI) model in
the context of a training programme in the Indian Oil Corporation (IOC), a govern-
ment organization, to see whether the success of a training programme can be meas-
ured more accurately in monetary terms. It is meant to enable the management to
understand the direct impact on the business bottom-line as a causal effect of the
training imparted and to decide whether to continue or discontinue the programmes.
IOC conducted in-house training programmes in 2004 which included a blend of be-
havioural and functional training. The programmes conducted at this organization
were evaluated using the most comprehensive evaluation models and discussed in
terms of return on investment. The two programmes chosen for the study were: The
Threshold Programme and the Excellence in Project Management, each having 30
participants.

The ROI analysis plan document captures information on several key issues neces-
sary to develop the actual ROI calculation:

• Significant data items


• The method for isolating the effects of the training and education programme
• The method for converting data into monetary values
• The cost categories, noting how certain costs should be prorated
• The anticipated intangible benefits
• The communication targets to receive the information
KEY WORDS • Other issues or events that might influence programme implementation.

ROI Evaluation With a proper planning around a proven framework, realistic evaluation targets, and
shared responsibilities for major steps, the ROI process can be implemented in a cost-
Training Programme effective, systemic manner and can assist the resource-constrained training function
Government Enterprise to reap financial benefits that leaders understand and have come to expect. It is now
strategically imperative that training be conducted with the clear understanding that
Indian Oil Corporation
if people are truly the organization’s greatest asset, then training is beyond doubt, the
India greatest investment and must hence be utilized wisely.

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 31


R
eturn on investment (ROI) has become one of lect number of programmes. It can determine if the ben-
the most challenging and intriguing issues efits of the programme, expressed in monetary terms,
facing the human resources development (HRD) have outweighed the costs and thus whether it has made
and performance improvement field. The interest in ROI a contribution and is actually a good investment or not.
during the 1990s was phenomenal, more so in the new
Sets Priorities – By calculating ROIs in different areas,
millennium. This topic appears on almost every HRD
one can determine which programmes contribute the
conference and convention agenda. Articles on ROI ap-
most to the organization, allowing priorities to be es-
pear regularly in HRD practitioner and research jour-
tablished for high-impact training.
nals. Several books have been developed on the topic
and consulting firms have sprung up almost overnight Focuses on Results – Measurement of ROI is a result-
to tackle this critical and important issue. based process which brings a focus on results with all
programmes. The process requires instructional design-
ROI is one of the several approaches to evaluating and
ers, facilitators, participants, and support groups to con-
comparing investments. With ROI, decision makers
centrate on measurable objectives – what the programme
evaluate investments by comparing the magnitude and
is attempting to accomplish. Thus, the process has the
timing of expected gains to the magnitude and timing
added benefit of improving the effectiveness of all the
of investment costs. A good ROI means that investment
training programmes.
returns compare favourably to investment costs. In the
last few decades, this approach has been applied to as- Alters Management Perceptions of Training – The ROI
set purchase decisions (computer systems, factory process, when applied consistently and comprehen-
machines, or service vehicles, for example), “go-no-go” sively, can convince the management group that train-
decisions for projects and programmes of all kinds (in- ing is an investment and not an expense. Managers will
cluding marketing, recruiting, and training pro- see training as making a viable contribution to their ob-
grammes), and to more traditional investment decisions jectives, thus increasing the respect for the function. This
(such as the management of stock portfolios or the use is an important step in building partnership with man-
of venture capital). agement.

WHY MEASURE ROI OF A BASIC ROI ISSUES AND TRENDS


TRAINING PROGRAMME?
Many professionals argue that most models of the ROI
Several issues are driving the increased interest in, and process ignore or provide very little insight into two key
application of, the ROI process, the most common being: elements essential to developing the ROI:
• the pressure from clients and senior managers which • Isolating the effects of training
show that the return on their training investment is • Converting data into monetary values
probably the most influential drive
• the competitive economic pressures that are causing While most executives can logically conclude that train-
intense scrutiny of all expenditures ing can pay off in important bottom-line measures such
• the general trend towards accountability with all staff as productivity improvements, quality enhancements,
support groups that is causing some HRD depart- cost reduction, and time savings, frustration comes from
ments to measure their contribution the lack of evidence to show that the process is really
• to justify the existence of the training department by working. Organizations have moved from training for
showing how it contributes to the organization’s ob- activity to training with a focus on bottom-line results
jectives and goals and this shift is evident from the beginning to the end of
• to decide whether to continue or discontinue the the process.
training programmes.
The ROI Analysis Plan
BENEFITS OF ROI The ROI analysis plan is a continuation of the data col-
Measures Contribution – ROI makes it possible for the lection plan. This plan document captures information
HRD staff to know the specific contribution from a se- on several key issues necessary to develop the actual

32 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


ROI calculation. The key issues include: itself. IOC used training as a major tool to change the
attitude sets and skill levels of its employees. Conduct-
• Significant data items, usually Level 4 (Business Im-
ing programmes all over the country right through the
pact), but in some cases could include Level 3 (Ap-
year, it has succeeded in not only holding its own in
plication and Implementation) data. However Five
today’s dynamic business environment, but has also
levels of measurement are said to be currently in prac-
ventured into businesses outside the country success-
tice, (Phillips, 1997a) (Annexure 1)
fully.
• The method for isolating the effects of the training
and education programme Training Vision
• The method for converting data into monetary val-
ues • Be a learning organization, and inculcate skills and
• The cost categories, noting how certain costs should competencies required for becoming a transnational,
be prorated integrated energy company and for value creation
• The anticipated intangible benefits for the stakeholders.
• The communication targets to receive the informa-
Training Mission
tion
• Other issues or events that might influence pro- • Develop employees by enhancing their knowledge,
gramme implementation. skills, and competencies in functional areas – gen-
eral, strategic management, and advanced functional
These two planning documents are necessary to suc- management, in line with the business of the com-
cessfully implement and manage the ROI process. pany.
• Provide post-experience management education for
Criteria for an Effective ROI Process
renewal of executives to global standards.
The following criteria were developed for an effective • Achieve and sustain customer respect through world-
ROI process with inputs from hundreds of education class products and services.
and training managers and specialists (Phillips, 1997a). • Sustain learning environment through creativity,
competence, and recognition of contribution.
• It must be simple, void of any complex formula.
• It must be economical with the capability to become
SURVEY OF RELATED LITERATURE
a routine part of training and development without
requiring any additional resources. Many organizations around the globe are using cost-
• The assumptions, methodology, and techniques used saving approaches so that they can begin conducting
must be credible. ROI evaluation within their current budget while oth-
• Ideally, the process must strike a balance between ers are using such approaches in order to increase the
maintaining a practical and sensible approach and a number of ROI studies they conduct. General cost sav-
sound theoretical base for the process. ing approaching for measuring programmes at the ROI
• The ROI process must account for other factors that level introduced by Phillips (1997a) have been proven
influence the output variable. to significantly decrease resource requirements while
• The ROI process must be applicable to both hard and still providing sound, credible data. Despite these fac-
soft data. tors, establishing an evaluation culture is no easy task.
In many ways, implementing a system-wide ROI effort
Post-1990, when the economy was liberalized, the coun- is similar to implementing a large-scale change initia-
try was given firm indications that it would no longer tive.
be functioning in a closed, regulated, and secure envi-
ronment and that it would eventually have to face the The concept of ROI has been used for centuries. The 75th
open market forces. If a company had to survive in such anniversary issue of Harvard Business Review (HBR)
an environment, it would require a drastic change right traced the tools used to measure the results in organiza-
from the roots. A lax, laid-back organization would have tions. In the early issues of HBR, during the 1920s, ROI
to re-invent itself into a more competitive player in the was the emerging tool to place a value on the payoff of
industry and a force to reckon with in order to re-invent investments. In recent years, the application of the con-

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 33


cept has been expanded to all types of investments in- ess is as important for managing training programmes
cluding training and education, change initiatives, and and investment, as it is for any other project requiring
technology (Phillips, 2000a). With increased adoption significant financial investment by a business. Training
and use, it appears that ROI is here to stay. Today, hun- programmes consume resources (i.e., they take people’s
dreds of organizations, representing manufacturing, time and money), but they are also critical to maximiz-
service, non-profit, and government, are routinely us- ing the return on investment in other programmes or
ing ROI calculations for education and training pro- products (e.g., the effective introduction of software sys-
grammes. A professional society, The ROI Network™, tems requires users to be able to use the systems effec-
with over 500 members, allows practitioners an oppor- tively if the potential benefit of the software systems is
tunity to share information and tools around ROI. The to be realized in practice), as well as generally improv-
networks have been formed within the organizations to ing the productivity of the workforce. If ROI is to be
focus on the ROI and accountability issue. Almost 1,000 successfully managed and measured, it is important that
individuals have been certified to implement the proc- the process be included early in the planning cycle for
ess in their organizations. Three casebooks have been the training programmes. (Buckberry, 2004).
developed to show specific applications of ROI (Phillips, A study was conducted by Reed (1986) to determine the
1994; 1997; 2000c). A fourth casebook describes success- net impact of Job Training Partnership Act (JTPA) train-
ful implementation of the ROI process (Phillips, 1998). ing. (A measure of net impact expresses only those gains
This level of interest and activity is evidence that the due to training and not those due to other reasons.) Job
ROI process is here to stay. service applicants were chosen as a comparison group
There are good reasons why return on investment is so whose recent labour market experiences would parallel
significant. Although the viewpoints and explanations those of JTPA participants. All results were positive. For
may vary, some things are very clear. First, in most or- men who participated in JTPA in 1983-84, the estimated
ganizations, education and training budgets have con- effect of training was an additional $1,400 earned dur-
tinued to grow year after year. As expenditures grow, ing 1985. It appeared likely that the benefit persisted in
accountability becomes a more critical issue. A grow- 1986. For white women, the estimated effect of training
ing budget creates a larger target for internal critics, of- was an additional $1,000 earned in 1985. A separate es-
ten prompting the development of an ROI process. timate of the impact on earnings was made for recipi-
ents of Aid to Families with Dependent Children
Second, Total Quality Management and Continuous Pro- (AFDC). For them, the effect was an additional $1,200 in
cess Improvement have drawn increased attention to 1985 earnings. Because their initial earnings were so low,
measurement issues. Today, organizations measure pro- this amounted to approximately 100 per cent of the 1979
cesses and outputs that were not previously measured, income. The reduction in AFDC grant amounts attrib-
monitored, and reported. This measurement focus has utable to training was another measure of impact used.
placed increased pressure on the education and training Twelve months after enrollment, AFDC recipients who
function to develop measures of programme success. participated in training were 86 per cent more likely not
to be receiving assistance than were their counterparts
A paper (Buckberry, 2004) has been developed to pro-
who did not participate.
vide to members of Computer Education and Manage-
ment Association (CEdMA) some basic introductory Collins, Collins and Jensen (2009) concluded from their
information and ideas to assist in the preparation of their study that wisely allocating financial resources is essen-
own customized ROI processes. CEdMA’s clients are tial to the success of every health care organization.
typically purchasers of IT software and hardware, and Therefore, health care managers must be able to deter-
CEdMA members are responsible for the provision of mine if dedicating the necessary funds for employee
training to these clients. The question this paper ad- training results in an adequate return on investment.
dresses is, “How do we help customers understand and This case study examines how training programmes can
justify for themselves the need to invest properly and be evaluated in terms of business results and describes
comprehensively in training, and how do we present one method, simple regression analysis that health care
the comparative benefits of different approaches to train- managers may use, to help determine if the training was
ing?” Implementing some form of measurement proc- financially beneficial to the organization.

34 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


Philips and Philips (2009) describe the ROI methodo- Dependent Variable: Change in the attitude sets and skill
logy, a measurement process that was developed almost levels of the employees and direct impact on the busi-
30 years ago and refined over the years to the point that ness bottom-line have been considered as dependent
it is now becoming a staple for many HR functions. variable in the present study. It includes change in
During difficult times in the economy, nothing is more knowledge, skills, and competencies enhancement in
important to top executives than knowing the true value functional areas as well as change in attitude and the
of a particular project or programme. “Show me the behavioural aspects of the employees.
money” has become a battle cry for many executives
demanding that any new HR project or programme
Programmes/Sample
shows its value even before it is implemented and, cer- The two programmes chosen for the study were:
tainly, the impact and return on investment (ROI) after
1) Threshold Programme (30 Participants)
it has been implemented. Around the globe, HR execu-
2) Excellence in Project Management Programme (30
tives are taking a look at the ROI process as a way to
Participants)
show credible values, including financial ROI. This arti-
cle describes why and how ROI is used to show the con- Threshold Programme
tribution of HR programmes and improve them further
This particular programme was chosen for the purpose
so that they can add more value, build support for HR,
of ROI calculation since this is one of Indian Oil’s most
enhance commitments, and concretize important busi-
elite programmes. The programme has been designed
ness relationships. This method can be used to show the to enhance the general management skills of senior man-
value of major programmes and projects and establish agers of the company and to help them acquire a com-
HR as a business partner. With the ROI process, the HR prehensive strategic perspective so that they are
staff and the client would know the specific contribu- prepared to lead the organization with confidence to
tion of an HR programme. meet the emerging challenges. This is the programme
where the best of the best are trained to enable them to
METHODOLOGY cross over from middle management into the rungs of
top management.
Objectives
This study is aimed at testing the feasibility of a Return Excellence in Project Management Programme
on Investment (ROI) model within the organization so Due to the increased investment envisaged by the cor-
that the success of a training programme or a set of train- poration to meet the current challenges in technologi-
ing programmes can be measured more accurately in cal, environmental, and customer expectations in terms
monetary terms, thus enabling the management to un- of quality in delivery, the Excellence in Project Manage-
derstand the direct impact on the business bottom-line ment Programme becomes one of the most vital ingre-
as a causal effect of the training imparted. dients in the recipe for success.

Variables Collecting Post-Programme Data

Independent Variable: The effects of behavioural and The questionnaires for “Threshold Programme Evalua-
tion” and “Excellence in Project Management Pro-
functional training imparted to the employees have been
gramme” (Refer to Annexure 3) have been implemented
coined as independent variable. IOC used training as a
to ascertain the degree of success in meeting the objec-
major tool to change the attitude sets and skill levels of
tives of the training programme at IOC.
its employees. It conducted 2,434 in-house training pro-
grammes which included a blend of behavioural and
Converting Data into Monetary Benefits
functional training. The training was intended to develop
employees by enhancing their knowledge, skills, and Several methods such as calculating the cost of quality,
competencies in functional areas/general/strategic using historical costs, and internal and external experts’
management and advanced functional management, in inputs and converting employee time could have been
line with the business of the company. used but due to lack of time and data, the method chosen
for this study was to use the estimates from participants.

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 35


In some situations, programme participants are capable Notes on Cost Evaluation
of estimating the value of a soft data improvement. This 1) The cost of conducting needs assessment has been
method seems appropriate when participants are capa- excluded from the costs. This might include time of
ble of providing estimates of the cost (or value) of the staff members conducting the needs assessment, di-
unit of measure improved by applying the skills learned rect fees and expenses for external consultants who
in the programme. The advantage of this approach is conduct the needs assessment and internal services
that the individuals closest to the improvements are also and supplies used in the analysis.
often the ones most capable of providing the most reli- 2) A final charge is the cost of overhead, the additional
able estimates of its values. costs in the training function not directly related to
any particular programme. Typical items might in-
Estimating Programme Costs clude the cost of clerical support, the departmental
Most of the data relating to programme costs was avail-
Table 2: Costs Considered in the Excellence in Project
able from the Project Completion Reports of the pro- Management Programme at IOC
grammes. The only additional cost which has been
No. Cost Element Consolidated
included is the cost of participants’ time which had not
Amount
been previously taken into account. This element has (Rupee Value)
been considered while trying to estimate programme 1 Faculty honorarium 19,200
costs because this represents the time that the partici- 2 Stay @ Rs. 1,500 per day/participant 1,68,000
pants have spent attending the programme which they 3 Catering @ Rs. 125 per day/participant 14,875
would have otherwise spent at the workplace. The CTC 4 Photocopying, stationary and brochure 27,500
(cost to company) of the participants represent an ex- 5 Air and local travel 34,755
pense that should be included. For situations where the 6 Photography and books 3,850
7 Cost of participants’ time @ Rs. 8,000 2,40,000
programme has been conducted, these costs can be esti-
per participant (assumed average CTC)
mated using average or midpoint values for salaries in Total 5,08,180
typical job classifications (Tables 1 and 2).
Source: HR (Dept.), IOC.

Table 1: Costs Considered in the Threshold Programme at IOC


No. Cost Element Amount Consolidated Amount
(Rupee Value) (Rupee Value)
1 Faculty Honorarium:
Vedanta 7,500
Thomas Intl. 29,160
APTECH 12,900
Comp. Update 20,000
IIM-A 11,98,800 12,68,360
2 Stay @ Rs. 1,500/- per day/participant for 22 SMs/CMs and @ 8,01,600
Rs. 2,400/- for 8 DGMs for 28 days
3 Catering @ Rs. 125/- per day/participant for 30 persons for 28 days 1,05,000
4 Photocopying 43,000
5 Stationary incl. Ties and Bags 18,220
6 Air Travel and Local Travel (If borne by IIPM) 5,000
7 Others: (Foreign Module)
a. Air Fare @ Rs. 35,726 for 31 people 11,07,506
b. Visa + Ins. @ Rs. 2,700 for 31 people 8,37,000
c. Foreign Allowance (27 people + 1 coordinator) 24,14,250 43,58,756
8 Cost of participants’ time @ Rs. 90,000 per participant 27,00,000
(assumed average CTC)
Total 92,999,36
Source: HR (Dept.), IOC.

36 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


office expenses, salaries of training managers, and Benefits/Costs Ratio
other fixed costs. Organizations might obtain an es- One of the earliest methods for evaluating training in-
timate for allocation by dividing the total overhead vestments is the benefits/costs ratio (BCR). This method
by the number of programme participant days for compares the benefits of the programme to the costs in
the year. For the sake of simplicity, such allocation
a ratio.
of overheads has been excluded from programme
cost tabulation. Programme Benefits
BCR =
Programme Costs
Calculating the Return
In simple terms, BCR compares the annual economic
The return has been calculated in three different ways: benefits of the programme to the costs of the programme.

Calculation of Return*
The Threshold Programme Excellence in Project Management Programme
1) Benefits/Costs Ratio 1) Benefits/Costs Ratio
This is calculated as follows: This is calculated as follows:
Programme Benefits Programme Benefits
BCR = BCR =
Programme Costs Programme Costs
32,50,000 9,87,750
= =
15,49,989 1,86,333
= 2.097 = 5.3
2) ROI Formula 2) ROI Formula
This is calculated as follows: This is calculated as follows:
(Programme Benefits — (Programme Benefits —
Programme Costs) Programme Costs)
ROI(%) = x 100 ROI (%) = x 100
Programme Costs
Programme Costs
(32,50,000 – 15,49,989)
= x 100 (9,87,750 – 1,86,333)
15,49,989 = x 100
1,86,333
= 109.68%
= 430% (approx)
3) Payback Period
3) Payback Period
Total Investment
Payback Period = Total Investment
Annual Savings Payback Period =
Annual Savings
15,49,989
= 1,86,333
17,00,011
=
= 0.91 years or 8,01,417
11 months (approx) = 0.23 years or
3 months (approx)
Net Benefits - Costs Breakup
Net Benefits - Costs Breakup

Costs
Net Costs
Benefits

Net Benefits

* The costs of both programmes have been adjusted on the basis of usable responses received. For example, there were thirty participants in the
Threshold Programme but only five usable responses were received. Therefore, the cost taken into consideration for the programme was one-
sixth of the total cost incurred.

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 37


A BCR of one means that the benefits equal the costs. A 5) The values are adjusted for the amount of the im-
BCR of two, usually written as 2:1, indicates that for each provement related directly to the programme.
rupee spent on the programme, two rupees were re-
turned as benefits. These five adjustments create a very credible value that
is usually considered to be an understatement of the
ROI Formula benefits accrued due to the training imparted. Tables 3
and 4 give the estimates of training impact from partici-
Perhaps the most appropriate formula for evaluating
pants in the different programmes.
training investments is net programme benefits divided
by cost. The ratio is usually expressed as percentage LIMITATIONS OF THE STUDY
when the fractional values are multiplied by 100. ROI
can thus be expressed as: The method chosen to isolate the impact of training is
meant to obtain information directly from the pro-
Net Programme Benefits gramme participants. The effectiveness of this approach
ROI (%) = x 100
Programme Costs rests on the assumption that participants are capable of
determining or estimating how much of a performance
The ROI value is related to the BCR by a factor of one.
improvement is related to the training programme. This
This means, for example, that a BCR of 2.56 is the same
is one of the major methodological limitations of such
as an ROI value of 156 per cent. An ROI on a training
studies. Erroneous, incomplete, and extreme informa-
investment of 60 per cent means that an additional 60
tion could have distorted the analysis. While calculat-
per cent of the costs are reported as ‘earnings’. An ROI
ing ROI through this method, the participants should
on training investment of 150 per cent indicates that the
know how much of the change was caused by applying
costs have been recovered and an additional 1.5 multi-
their learning from the programme.
plied by the costs is captured as ‘earnings’.
Apart from this, the following limitations have been fig-
Payback Period
ured out in the present study:
The payback period is a common method for evaluat-
ing capital expenditures. With this approach, the annual 1) The exact figure for cost of participants’ time was not
cash proceeds (savings) produced by the investment are available. Hence there is a possibility that the esti-
equated to the original cash outlay required by the in- mations made are not accurate.
vestment to arrive at some multiple of cash proceeds 2) Suitable responses from all the participants were not
equal to the original investment. Measurement is usu- available. This means that the effectiveness of both
ally in term of years or months. training programmes taken into consideration has
been an extrapolation of the responses, which were
Total Investment
Payback Period = made available. The assumption here is that similar
Annual Savings benefits would have accrued from the participants
who did not make their response available.
DATA ANALYSIS AND RESULTS
3) There was no possibility of even experimenting with
The calculations are based on a series on impact ques- the control groups since the project commenced post-
tions. Five adjustments are made to ensure that the data training.
is credible and accurate:
4) The participants of both the programmes were posted
1) The participants who do not complete the question- all over the country, making distance a barrier for
naire or provide usable data on the impact questions conducting in-depth interviews.
are assumed to have made no improvement.
The presence of participants across the nation also made
2) Extreme and unrealistic data have been omitted.
it difficult to obtain post-training data from more than
3) Only annualized values are used as requested in the
one source, i.e., the participants themselves. This was a
responses.
unique problem that was uncovered particularly with
4) The values are adjusted to reflect the confidence level
the Threshold Programme participants. Since they pri-
of participants.
marily occupy high leadership positions, they do not

38 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


Table 3: Estimates of Training Impact from Participants in the Threshold Programme

Participant Improvement Basis Confidence Isolated Effect Conservative


(Rupee Value) Level(%) Percentage Integration
Estimate(%) (Rupee Value)
1 30,00,000 Better decision making 30 50 4,50,000
2 25,00,000 Efficient management 60 40 6,00,000
3 20,00,000 Quick and accurate decisions 40 80 6,40,000
4 40,00,000 Efficient handling of situations and 30 70 8,40,000
increased teamwork within department
5 30,00,000 Good decisions 60 40 7,20,000
Total Benefits 32,50,000

Table 4: Estimates of Training Impact from Participants in Excellence in Project Management Programme

Participant Improvement Basis Confidence Isolated Effect Conservative


(Rupee Value) Level (%) Percentage Integration
Estimate(%) (Rupee Value)
1 1,60,000 Additional Sales 90 50 72,000
2 3,00,000 Decreased time overruns 60 50 90,000
3 3,00,000 Reduced cost of rework 70 60 1,26,000
4 2,00,000 Minimizing startup hiccups 50 50 50,000
5 2,75,000 Reduced maintenance problems 60 40 66,000
6 3,00,000 Increased site effectiveness 70 50 1,05,000
7 4,00,000 Reduced maintenance problems 80 40 1,28,000
8 2,00,000 Reduced project time 70 50 70,000
9 3,50,000 Reduced on-site problems 85 50 1,48,750
10 1,40,000 Efficient time and labour management 50 60 42,000
11 1,50,000 Under budget 100 60 90,000
Total Improvement 9,87,750

have any activity within their purview which directly months after the programme.
impacts the bottom line of the organization. It is gener- • Management involvement at the local level might
ally their ability to handle the employees, who directly prove critical to the response rate success. Managers
boost the bottom line well, which is their real contribu- can distribute the questionnaires themselves, make
tion. This indirect effect makes quantifying the benefits reference to the questionnaire at staff meetings, fol-
derived due to training rather difficult. low up to see if the questionnaire has been completed
and generally show the support for completing the
RECOMMENDATIONS AND IMPLICATIONS questionnaire. This direct supervisor support might
FOR FUTURE RESEARCH cause some participants to respond with usable data.
• For organizations implementing the ROI concept for • Even if it is an abbreviated form, participants should
the first time, it is recommended that only one or two see the results of their study. More importantly, par-
courses be selected for an initial calculation, as a learn- ticipants must understand that they will receive a
ing process (Phillips, 1997). copy of the study when they are asked to provide
• If appropriate and feasible, participants should re- the data. This promise might increase the response
ceive prior communication about the requirement for rate, as some individuals want to see the results of
a follow-up questionnaire. This minimizes some of the entire group along with their particular input.
the resistance to the process, provides an opportu- • It is difficult to evaluate an entire HRD function such
nity to explain in some more detail the circumstances as management development, career development,
surrounding the evaluation, and positions the follow- executive education or technical training within the
up evaluation as an integral part of the programme – ROI umbrella. ROI is more effective when applied to
not as an add-on activity that someone initiated three one programme that can be linked to a direct payoff.

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 39


For this reason, ROI evaluation must be a micro-level Training can no more be a mundane task which exists
activity that will usually focus on a single programme because it always has. It is now strategically imperative
or a few tightly integrated programmes. This deci- that training be conducted with the clear understand-
sion to evaluate several programmes or just one pro- ing that if people are truly the organization’s greatest
gramme should include consideration of the objecti- asset, then training is beyond doubt, the greatest invest-
ves and timing of the programme. Attempting to ment and must hence be utilized wisely.
evaluate a group of programmes conducted over a
long period becomes quite difficult. The cause and By evaluating training programmes with the ROI in
effect relationship becomes more confusing and com- mind, training functions can be perceived in a more cred-
plex. ible light. Programmes aligned with organization strat-
• Incentives might be used to obtain a greater response egy are offered, while others that add little value are
results from the participants. For example, one might redesigned and sometimes eliminated. With proper
pin a ten rupee note to the questionnaire and add a planning around a proven framework, realistic evalua-
tion targets, and shared responsibilities for major steps,
heading on the questionnaire which states “Please
the ROI process can be implemented in a cost-effective,
fill out this form over a cup of coffee”. Another in-
systemic manner and can assist the resource-constrained
centive might be to send a pen along with the ques-
tionnaire along with a note which states “Kindly use training function to present their work in terms of fi-
this pen to fill out the form”. These methods have nancial benefits that leaders understand and have come
been known to boost response rates. to expect. Specifically, part one of this ROI series em-
phasized the following cost-savings approaches:
CONCLUSION
1. Plan for evaluation early in the process
Any organization wanting to improve systems, proce- 2. Build evaluation into the training process
dures, or even attitudes must plan accordingly. This 3. Share the responsibilities for evaluation
planning must be integrated and aligned with the busi- 4. Require participants to conduct major steps
ness. The effort to use training as a tool to help balance 5. Use short-cut methods for major steps.
an organization in a dynamic environment must be con-
tinuous. Part two will continue to describe practical application
of five additional cost-saving approaches to ROI imple-
There must be constant matching of individual and or- mentation:
ganizational needs in a system which is biased towards
neither. Once this matching is completed and training 6. Use sampling to select the most appropriate pro-
programmes carried out, it is then not only important grammes for ROI analysis
to evaluate the training but to realize how much it has 7. Use estimates in the collection and analysis of data
boosted the bottom line. Here is where the ROI comes 8. Develop internal capability
to the fore possibly on helping management realize that 9. Streamline reporting
training is truly an investment and not an expense. 10. Utilize technology.

Annexure 1: Five Levels of ROI Evaluation

The evaluation levels categorize data, reporting a chain of impact as reaction leads to learning, to application, to
impact, and to return on investment.
ROI Evaluation Level Measurement Focus
1. Reaction & Planned Action Measures participant satisfaction with the programme and captures planned actions
2. Learning Measures changes in knowledge, skills, and attitudes
3. Application and Implementation Measures changes in on-the-job behaviour and progress with application
4. Business Impact Captures changes in business impact measures
5. Return on Investment Compares programme monetary benefits to the programme costs.
Source: Phillips, 1997.

40 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


Annexure 2: Training at IOC

IOC conducts on an average approximately 2,000 train- regular basis and Enterprise Resource Planning So-
ing programmes per year which are conducted in-house, lutions and related training.
leveraging expert faculty from renowned institutes/or- • Focus on quality, ISO Certification/accreditation,
ganizations and well-trained business leaders from adoption of Business Excellence Model by strategic
within the company. The training plan contains a vari- business units and benchmarking with national/in-
ety of programmes which meet intrinsic needs of differ- ternational training providers.
ent functions. Some of the programmes are made • Train critical position holders extensively in India and
mandatory at the corporate level such as ‘Vigilance abroad to handle business ambiguities and complexi-
Awareness Programme,’ ‘Communication & Presenta- ties and gear up for the new business outside India.
tion Skills,’ ‘Gender Sensitivity Programme,’ and ‘Secu- • Develop in-house Petroleum based international
rity Sensitization’. However, majority of the Divisions MBA programme with in-built foreign module to cre-
carry out additional programmes based on ‘Here and ate a global mindset and entrepreneurial qualities
Now Needs’ of the customer divisions such as ‘Safety among executives.
and Hazardous Operations,’ ‘Safety Integrated Learn- • Depute sizable number of executives for MBA cour-
ing’, ‘Hydrotreatment Processes for Middle Distillates,’ ses in other Institutes of India for creating a mix of
and ‘Treasury Management.’ executives with general MBA and petroleum-based
MBA.
Training Strategy • Conduct Management Development Training Pro-
grammes in niche business schools in India and
• Align and integrate learning with the company’s
abroad for understanding global business trends.
business.
• Make a paradigm shift from ‘Supply and Distribu-
• Identify skill and competency gaps at all levels and
tion’ to ‘Marketing Strategies and CRM’
create groups for delivering in-house trainings.
• Train Executives for business integration, diversifi-
• Identify courses outside IOC/India and depute key
cation, and entering into joint ventures and handling
employees handling new technology, practices or
newly acquired companies.
new business to attend these courses.
• Set up a world-class institute for creating critical mass
Focus Areas of Training
of highly trained middle and senior level executives
for occupying top level positions to the organization Corporate Focal Area
and the industry/nation.
• Set up a learning centre for training of marketing • Strategic and General Management
executives on customer-orientation, marketing of • Operations & Technology Management
products and other marketing specific programmes. • Finance Management
• Organize cutting-edge training on quality, cost, atti- • Human Resource Management & Organizational
tude, customer service and communication network. Behaviour related courses
• Conduct brain-storming sessions with the key execu- • Information Technology & Enterprise Resource Plan-
tives, senior and middle management groups, un- ning related trainings (SAP)
ions and working levels, for deciding strategies for • Marketing Management
the changed scenario and involvement of employees. • Internal Audit, Security and Vigilance
• Organize regular interaction with top management • Gender Sensitization
for deliberations on specific issues in an organized • Women Development
way.
Refineries Division
• Impart training to senior top managers in advance
technologies and latest managerial tools and tech- • Projects Management
niques for maintaining cutting edge of the organiza- • Operations Management
tion and developing leaders with all-round qualities. • Programmes on Quality Initiatives
• Have multi-pronged communication about the im- • Maintenance and Inspection
minent competition across the organization on a • Fire and Safety

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 41


• Product Customization Pipelines
• Petrochemicals • Transportation Management
• Materials Management • Operations of Pipelines
• Human Resource Management • Fire and Safety Management
• Finance and Accounting Management • Materials Management
• Tendering Procedure and Contracts Management • Maintenance and Upkeep of Pipelines/Pumps
• Information Systems Management • Finance Management
• Corporate Communications and Media Management • Human Resource Management
• General Management courses such as: Executive • Contracting and Tendering
Stress Management, YOGA for Good Health and Re- • Total Quality Management
juvenation
R&D
Marketing
• R&D Management
• Engineering Services • Purchase and Work Procedures
• Customer Orientation • Best Practices and Benchmarking
• Brand Management and CRM • Creativity and Innovation
• Productivity Courses • Product Knowledge
• Marketing Strategy and Market Research: Tools and • Analytical Techniques in Petroleum Analysis
Techniques • Basics of Tribology
• Quality Programmes • Oily Sludge Management
• Human Resource Management • New Environmental Regulations
• Finance Management • Fundamentals of Lubrications
• Supply and Distribution courses • Petroleum Refining Technology
• Simulation Games • Hydroprocessing Workshop
• Fire and Safety Management
• Information Systems Management

Annexure 3: Questionnaires for Programme Evaluation

‘Threshold’ Programme Evaluation


1) Listed below are the objectives of the ‘Threshold’ programme. After reflecting on the programme, please indi-
cate the degree of success in meeting the objectives:
Failed Limited Generally Completely
Success Successful Successful
As a result of this programme, participants will be able to:
a. Develop a general management orientation through
highlighting the inter-linkages across decisions in
functional area
b. Strengthen the understanding of key issues and
challenges in strategy formulation and implementation
c. Enhance the awareness about the threats, constraints
and opportunities that have arisen from operating
in increasingly deregulated product, services and
resource markets
d. Sensitize the participants to the need to create value
through appropriate corporate actions for long-term
survival and growth of the organization

42 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


2) Please rate on a scale of 1-5, the relevance of each of the programme elements to your job by indicating (1) not
relevant and (5) very relevant

1 2 3 4 5
Interactive Activities

Group Discussions

Networking Opportunities

Reading Materials / Video

Programme Content

3) Please indicate the degree to which your use of the following actions was enhanced as a result of your participa-
tion in the training programme:
No Little Some Significant Momentous No
Change Change Change Change Change Opportunity
to Use Skill
Taking decisions with a sound analysis
of the same
Making the unit/department more
market-oriented
Focusing on customer analysis and
customer value
Effectively using the information
technology within the organization
Understanding and managing co-workers
and superiors
Effectively measuring and managing risk
Engaging in vertical integration, diversifi-
cation and/or mergers and acquisitions
Ability to envision for your organization
Enhancing your leadership traits
Better handling the competition faced by
your company

4) Please identify any specific accomplishments that you can link to this training programme (on time schedules,
project completion, response times, etc)

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 43


5) What specific value in Indian Rupees can be attributed to the above accomplishments/ improvements (use first
year values only)? While this is a difficult question, try to think of specific ways in which the above improve-
ments can be converted into monetary units. Please indicate the basis for your calculation.

INR

Basis:

6) What level of confidence do you place on the above estimations? %


(0% = No Confidence, 100% = Certainty)

7) Other factors generally tend to affect performance as well. Please indicate the %
per cent of the above improvements that is related directly to this programme.

8) Indicate the extent to which you think this programme has influenced each of these measures in your work unit,
department or business unit:
No Some Moderate Significant Momentous
Influence Influence Influence Influence Influence
Productivity
Customer Response time
Cost Control
Employee Satisfaction
Customer Satisfaction
Quality
Other

9) What barriers, if any, have you encountered that have prevented you from using skills or knowledge gained in
this programme?

10) What specific suggestions do you have for improving the programme?

44 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


‘Excellence in Project Management’ Programme Evaluation

1) Listed below are the objectives of the ‘Excellence in Project Management’ programme. After reflecting on the
programme, please indicate the degree of success in meeting the objectives:

Failed Limited Generally Completely


Success Successful Successful
As a result of this programme, participants will be able to:
Grasp the concepts of Project Management in the
current scenario
Grasp the latest trends in Project Management for
optimum utilization of resources available for the projects
Reduce the execution time by using modern construction
equipment
Identify key factors for improvement in time, cost and
quality of projects

2) Please rate on a scale of 1-5, the relevance of each of the programme elements to your job by indicating (1) not
relevant and (5) very relevant

1 2 3 4 5
Interactive Activities

Group Discussions

Networking Opportunities

Reading Materials / Video

Program Content

3) Please indicate the degree to which your use of the following actions was enhanced as a result of your partici-
pation in the training programme:
No Little Some Significant Momentous No
Change Change Change Change Change Opportunity
to Use Skill
Minimizing the non-contributing actions
per project
Arranging the site for maximum
effectiveness
Assigning appropriate work for involved
employees
Dealing with problems on site
Keeping the project members focused
Accomplishing project objectives
Evaluating the project
Implementing action plans
Planning a follow-up activity

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 45


No Little Some Significant Momentous No
Change Change Change Change Change Opportunity
to Use Skill
Organizing projects efficiently
Understanding of the project life cycle
Linking realistic objectives to stakeholder
needs
Establishing dependable monitoring
techniques
Estimating project costs
Preparing realistic time schedules
Using modern construction equipment
efficiently in mega projects
Controlling costs efficiently
Increasing the level of safety at construction
sites
Monitoring of the project
Minimizing start-up hiccups post-project
completion
Envisaging maintenance problems at project
completion stage and minimizing the same

4) Please identify any specific accomplishments that you can link to this training programme (on-time schedules,
project completion, response times, etc.)

5) What specific value in Indian Rupee can be attributed to the above accomplishments/improvements (use first
year values only)? While this is a difficult question, try to think of specific ways in which the above improve-
ments can be converted into monetary units. Please indicate the basis for your calculation.

INR

Basis:

6) What level of confidence do you place on the above estimations? %


(0% = No Confidence, 100% = Certainty)

46 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA


7) Other factors generally tend to affect performance as well. Please indicate the %
per cent of the above improvements that is related directly to this programme.

8) Indicate the extent to which you think this programme has influenced each of these measures in your work
unit, department or business unit:
No Some Moderate Significant Momentous
Influence Influence Influence Influence Influence
Productivity
Customer Response time
Cost Control
Employee Satisfaction
Customer Satisfaction
Quality
Other

9) What barriers, if any, have you encountered that have prevented you from using skills or knowledge gained in
this programme?

10) What specific suggestions do you have for improving the programme?

REFERENCES
Buck Berry, Norman (2004). “Summary Process for Measuring and Development.
ROI of Training,” Version Draft 5, May 2, Prepared for Phillips, J J (1996). “How Much is the Training Worth?” Train-
CEdMA Europe. ing and Development, 50(4), pp. 20-24.
Collins, Sandra K; Collins, Kevin S and Jensen, Steven C (2009). Phillips J J (1996). Accountability in Human Resource Manage-
“Determining Return on Investment for Training Using ment, Gulf Publishing Co.
Simple Regression: A Hypothetical Case Study for the
Health Care Industry,” The Health Care Manager, 28(1), Phillips, J J (1997). Handbook of Training Evaluation and Mea-
30-37. surement Methods, 3rd Edition, Houston, TX: Gulf Publish-
ing.
Hasset, J (1992). “Simplifying ROI,” Training, September, 54.
Phillips, J J (1997). Return on Investment in Training and Perfor-
Kirkpatrick, D L (1975). Techniques for Evaluating Training Pro- mance Improvement Programs, Butterworth Heineman.
grams,” Evaluating Training Programs, Alexandria, VA:
American Society for Training and Development. Phillips, J J (1997a). Return On Investment in Training and Per-
formance Improvement Programs. Houston, TX: Gulf Pub-
Phillips, J J (1994). In Action: Measuring Return On Investment, lishing.
Vol. 1. Alexandria, VA: American Society for Training

VIKALPA • VOLUME 37 • NO 1 • JANUARY - MARCH 2012 47


Phillips, J J (1998). Implementing Evaluation Systems and Pro- Pine, J and Tingly, JC (1993). “ROI of Soft Skills Training,”
cesses, Alexandria, VA: American Society for Training and Training, February, 55-66.
Development. Reed, David (1986). “The Return on Investment from Indiana’s
Phillips, J J (2000a). The Consultant’s Scorecard, NY: McGraw- Training Programs Funded through the Job Training Part-
Hill. nership Act,” Report, Indiana State Office of Occupational
Phillips, Jack and Phillips, Patti (2009). “Measuring Return on Development, Indianapolis, October.
Investment in HR,” Strategic HR Review, 8(6), 12-19.

Acknowledgement. We acknowledge the contribution of B ful to IOC for granting us permission to publish the results of
Vasanth Gopalan, an ex-student of SCMHRD, who collected our analysis.
the data from IOC and conducted the study. We are also thank-

K S Subramanian is the Director of Symbiosis Centre of Man- and national journals and has authored two books entitled,
agement & Human Resource Development, Pune. A Post- Implications of Hardiness and Social Support: Psychological Well-
graduate in Commerce from Wadia College, he had won a being-A Recent Perspective and The Burnout Process with Lam-
Gold medal in his Masters with Marketing and Human re- bert Academic Publications, Germany.
sources from the Symbiosis Institute of Business Management.
He served as a commissioned officer in the Indian Army in e-mail: [email protected]
Infantry, Anand Business Group, Aditya Birla Group, Grasim
and Indo Gulf Division, as Vice President of the Site for Dabhol Priya D Gupta is an Associate Professor in the Symbiosis Cen-
Power plant, and BPL technology group for their cellular ven- tre for Management and Human Resource Development
ture in Maharashtra and Goa. (SCMHRD), Pune. She is pursuing her doctoral degree in the
area of Training and Development from the Tata Institute of
e-mail: [email protected] Social Sciences, Mumbai. She has done her Masters in Human
Resource Management and also holds a Diploma in Training
Vinita Sinha is a faculty (OB&HR) at the Symbiosis Centre of and Development from the Indian Society of Training and
Management & Human Resource Development, Pune. She has Development, New Delhi. She has about 12 years of experi-
completed her doctorate in Psychology, has a Masters in Psy- ence in the area of Human Resource Management, her core
chology with specialization in OB, and a Post Graduate Di- areas of expertise being Training and Development, Perfor-
ploma in Human Resource Management from IMT Ghaziabad, mance Management, and Employee Relations. She has con-
Post Graduate Diploma in Health Psychology and Behaviour ducted workshops in the areas of self-development,
Modification from Amity University. She was the 1st rank motivation, leadership, communication; team building, human
holder in the college in both the years of her Masters. Her past resource management, etc., for different organizations. She was
work experience lies with the Great Lakes Institute of Man- the editor of SCMRD’s first peer reviewed Journal, OPUS
agement, Chennai; BIMTECH, Greater Noida and EMPI Busi- (Organization People and Us), for three years.
ness School, New Delhi. She has published numerous research
papers, articles, and book reviews in the refereed international e-mail: [email protected]

48 A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA

View publication stats

You might also like