Measuring the Impact: ROI of Combining Internal and External Training

In this article, we will explore the critical intersection of internal and external training within organizations. Before examining the specifics of return on investment (ROI), we will establish a foundational understanding of training effectiveness. Key aspects include knowledge and skills enhancement, performance metrics, employee satisfaction, and company ROI. We will then shift our focus to ROI, a fundamental metric used to evaluate investment efficiency. By comparing net profits (or losses) to initial costs, ROI answers the question: “How well has my investment performed relative to its cost?” We provide a straightforward formula for calculating ROI and emphasize its versatility in assessing various investment scenarios. The subsequent sections will explore techniques for measuring training effectiveness and explore the tools available for evaluating ROI in integrated training programs.

In 2023, U.S. corporate training spending surged by $200 million, reaching a staggering $101.8 billion. This strategic investment underscores the unwavering commitment of successful organizations to empower their workforce and maintain a competitive edge. However, the question remains: How effective are these training programs, especially when combining internal and external training? As organizations across the country strive to optimize their training strategies, recognizing the critical importance of integrated approaches has never been more important.

Understanding Training Effectiveness

Before we dive into the return on investment (ROI) of combining internal and external training, let’s establish a clear understanding of what we mean by training effectiveness. Training effectiveness encompasses the measurable impact of training on various critical aspects:

• Knowledge and Skills: Participants gain valuable knowledge and acquire essential skills through training. This empowerment enables them to perform their roles more proficiently, contributing to overall organizational success.
• Performance: Improved performance metrics serve as tangible evidence of successful training outcomes. Whether it’s increased productivity, higher sales numbers, or enhanced customer satisfaction, these positive changes directly correlate with effective training.
• Employee Satisfaction: Employee satisfaction is a measure of how well an employee’s expectations, aspirations, and needs align with their actual experiences at an organization. Engaged and satisfied employees are more likely to apply their learning effectively. When employees feel motivated and supported, they actively utilize their newly acquired knowledge and skills in their daily tasks.
• Company ROI: Return on investment directly compares net profits (or losses) to the initial cost of an investment. A positive ROI indicates a worthwhile investment, while negative ROIs signal net losses. Ultimately, training should contribute positively to the organization’s bottom line. A well-designed training program not only enhances employee capabilities but also generates a high return on investment for the company.

Measuring Training Effectiveness

Several compelling reasons drive organizations to consistently measure training effectiveness:

• Employee Benefits: Evaluating training ensures that it benefits employees by enhancing their skills and performance. It provides a clear picture of their achievements and guides their growth.
• Feedback and Encouragement: Employees thrive on feedback. Measuring effectiveness allows organizations to provide positive reinforcement for accomplishments and identify areas for improvement.
• Resource Optimization: By assessing training impact, companies can allocate resources wisely. If a program isn’t effective, adjustments can be made, or alternative approaches can be explored.

Measuring ROI: Techniques and Tools

Return on Investment (ROI) is a fundamental metric used to evaluate the efficiency and profitability of an investment. It provides insights into how well an investment has performed by comparing the net profit (or loss) generated from that investment to its initial cost or outlay. In simple terms, ROI answers the question: “How much profit or loss has my investment earned relative to its cost?” The training ROI formula is straightforward:

                           Training ROI % = Monetary Benefits – Training Costs

                                                                   Training Costs x 100

When the current value of investment refers to the proceeds obtained from selling the investment. ROI is expressed as a percentage, allowing easy comparison with returns from other investments. 

Why ROI Is a Useful Measurement

Its versatility and simplicity make it valuable for various scenarios. Whether assessing stock investments, factory expansions, or real estate transactions, ROI helps investors gauge profitability. A positive ROI suggests a worthwhile investment, while negative ROIs signal net losses. However, it’s essential to compare ROI relative to other available options. 

Combining Internal and External Training

The ROI of combining internal and external training can be quite significant for organizations. By integrating external training programs with their existing internal programs, companies can benefit from a diverse range of training resources, expertise, and perspectives. This combination of internal and external training can help organizations to provide a more comprehensive and well-rounded training experience for their employees, while also increasing the overall effectiveness of their training programs. 

• Baseline Metrics: Before implementing any training program, it’s essential to establish baseline metrics. These metrics serve as a reference point for evaluating the impact of training. Examples of baseline metrics include engagement, productivity, performance, absence rate, and other relevant KPIs. Post-training, measure these same metrics again to assess improvement. The difference between pre-training and post-training values provides insights into the effectiveness of the program.
• Kirkpatrick Evaluation Model: This model is a widely used framework for assessing training effectiveness. It assesses training effectiveness across four levels:
  • Level 1: Reaction (participant satisfaction) Gather feedback from participants regarding their satisfaction with the training experience. This level focuses on their immediate reactions.
  • Level 2: Learning (knowledge and skill acquisition) Evaluate how well participants have acquired new knowledge and skills during the training.
  • Level 3: Behavior (application of learning on the job) Assess whether participants are applying what they’ve learned in their actual work tasks.
  • Level 4: Results (impact on business goals) Measure the overall impact of training on organizational goals, such as increased revenue, reduced costs, or improved customer satisfaction.
• Participant Feedback: Collecting data directly from participants, trainers, and supervisors is crucial. Therefore, Adobe eLearning emphasizes the use of data tools, such as LMS, LCMS, and data analytics, for objective training evaluation. Learner interviews, training feedback forms, anonymous polls, and surveys are additional tools that provide valuable insights into program effectiveness. Feedback from participants can pinpoint strengths and areas needing improvement while input from trainers and supervisors aids in continuously refining and enhancing the program. 
• Monetary Conversion: To showcase the ultimate impact of training, convert program benefits into monetary values. First, calculate the monetary gains resulting from improved performance (e.g., increased sales, reduced errors, time saved). Then, compare these gains to the investments made in the training program (cost of trainers, materials, technology, etc.).

Remember, effective measurement ensures that training investments yield tangible results for both employees and the organization.

The Benefits of Combining Internal and External Training

When organizations strategically blend internal and external training, they unlock several advantages that contribute to overall success. Benefits include the following: 

• Enhanced Skillsets and Versatility: According to Forbes, older staffing models promoted specialization in singular areas, limiting employees to specific roles. However, the redesigned staffing model now emphasizes cross-skilling to nurture talents and enable individuals to embrace new responsibilities. Through a combination of internal and external training, employees acquire a more comprehensive skill set. Access to various training outlets prepares them to tackle a broader spectrum of tasks and duties. This versatility not only boosts their adaptability but also sharpens their problem-solving skills.
• Increased Productivity and Efficiency: Well-rounded training enables employees to perform their roles more effectively. A combination of internal expertise and external perspectives ensures comprehensive learning. As employees become proficient in various areas, productivity levels rise, benefiting the entire organization. 
• Improved Employee Retention: There is a critical link between effective training and employee retention. External training frequently introduces novel perspectives and innovative methods. Employees who undergo external training typically feel appreciated and committed to their career advancement. This sense of commitment cultivates loyalty, resulting in extended durations of employment with the company. Consequently, HR Daily Advisor recommends that organizations adopt a variety of training options, integrating both internal and external resources, to promote employee development, improve retention rates, and achieve sustained success.
• Competitive Edge and Innovation: Engaging an external partner can expedite the acquisition and enhancement of capabilities, which is crucial for fostering innovation. However, leveraging insights about your customers, processes, and culture holds even greater significance, and internal innovators are well-positioned to provide that knowledge. By integrating internal understanding with external perspectives, companies can cultivate creativity, adaptability, and enduring prosperity.
• Cost-Effective Solutions: Internal training is typically more cost-effective, as it leverages existing resources, but participants may encounter insularity, resource constraints, and limited expertise. External training, while valuable, may involve additional expenses (e.g., course fees, travel). Balancing both approaches optimizes cost while maximizing learning outcomes.

Overall, the ROI derived from integrating both internal and external training initiatives can result in significant advantages for organizations. Such an approach not only fosters a more engaged and proficient workforce but also contributes to heightened productivity levels and diminished turnover rates. Through the strategic allocation of resources towards both internal development programs and external training opportunities, companies empower their employees to cultivate the essential skills and knowledge necessary for success in their respective roles. This comprehensive approach not only enriches individual competencies but also enhances the overall organizational performance, ultimately leading to improved financial outcomes and sustained prosperity in the long run. Thus, by prioritizing investments in both internal and external training, companies can effectively align their workforce development efforts with their overarching business objectives, positioning themselves for enduring success amidst evolving market dynamics.

Maximize your organization’s potential by prioritizing investments in both internal and external training. Empower your workforce to excel in their roles, drive productivity, and reduce turnover rates. Explore JHMA’s extensive course catalog or contact us today to embark on a journey towards sustained prosperity and enduring success.