Return On Investment (ROI) In Training Field: Definitions And Current Status

This assessment requires you to write a critical report or essay of a topic which is of interest to you and ideally of an area or issue that forms part of your later research papers.

Is to write a general essay about ROI (return on investment) in Training field. This short essay will be my introduction of the final Doctorate essay after a year, so its conclusion shall be open for more and deeper research.

it needs to include all the needed definitions, introductions and history about ROI in general, Training in general and the the use of the ROI in training. Plus any use of various kind of assessments to measure the value of training.

The Importance of Understanding ROI in Learning and Development

The enumeration of the return on investment (ROI) in particularly learning as well as development can be regarded as a critical issue in the field of human resource development. For over a decade now, the measurement of the ROI is taken into account in different agendas of conference and meetings. As such, enumeration of return on investment is categorized as flawed and at the same time inappropriate by many, whilst there are others who view it as the only solution to different accountability concerns. However, the truth perhaps lies somewhere between these two perceptions. Particularly, the comprehension of specific drivers of ROI methodology along with determination of strength as well as weaknesses of ROI can help in the process of assumption of a rational tactic to identified issue and execute an approximate mix of analytical strategies that comprises of return on investment.  

Return on Investment essentially refers to a mathematical formula that diverse financiers can use for analysis of investments and judge the way a specific investment has performed in comparison to others. However, the enumeration of ROI is sometimes along with other approaches to develop a business case for a particular proposal (Domkina 2015). The entire ROI for a specific business enterprise is sometimes utilized as a manner to grade the way a company can be handled. De Grip and Sauermann (2013) opines that return on investment refers to the power of earning of diverse assets enumerated as the ratio of the net income to the average employed capital in a company or else project. Customarily, this metric represented using percentage provides a dimension of profitability that refers to whether a business enterprise is utilizing the resources in an effective manner. For instance, in case if the long term return on specific investment of a corporation can be regarded to be lower than the cost of capital, then the business corporation can be considered to be better off by way of liquidating all the assets as well as depositing all the proceeds obtained in a particular bank. Again, if a business enterprise has immediate intentions of acquiring higher revenue share in the market, development of infrastructure, locating the firm appropriately for ensuring higher sale or else other objectives, a return on investment might be in terms of satisfying one or more of objectives rather than meeting the requirements of profit or else savings of cost (Cook and Triola 2014).

As correctly put forward by Martinez et al. (2013), different measures of ROI can be utilized for the purpose of analysis of different categories of investment. As such, business concerns can make use of enumerations of ROI at the time of evaluation of different potential investments or else the success of preceding investments. Particularly, individuals can enumerate ROI for assessment of personal investment and comparison of one investment against other investment portfolios. Nevertheless, calculations of figures for each portion of particular equation can be intricate for businesses that frequently need to determine different components of each portion of the equation (Ashar et al. 2013).

Definitions of Return on Investment (ROI)

Enumeration of return on investment essentially started in the manufacturing segment. It was basically an easy way to enumerate time needed to accomplish an action and the total number of widgets generated. Subsequently, the ROI evaluation transferred to the field of banking that can be utilized frequently (Jehanzeb and Bashir 2013). However, ROI evaluation can be considered as an integral section of different part of commerce. For instance, ROI evaluation can be utilized to appraise the overall cost along with benefits from buying novel computers for the purpose of outsourcing different procedures that are outside the purview of core business of corporation; for generation of advanced facilities, programs for health together with fitness of employees. In addition to this, individual also take into consideration different personal investments (Li et al. 2014).

Sageman (2014) opines that the establishment of human resource management can be considered to be separate function in different business corporations that confers a specific accountability to respond swiftly to the demand of stakeholders. This can help in the process of measurement of the overall worth in order to justify the entire existence. Diverse functional areas of human resource management, specifically training as well as development department is getting more attention of diverse stakeholders owing to huge deployment of resources towards the operation of the department. However, analysis of ROI has essentially become a critical issue encountered by the specific department of training as well as development. Grohmann and Kauffeld (2013) discovered that majority of the professionals in this particular field of human resource management express concern regarding showing a return on investment prepared by them for justifying the overall upward trend portrayed by specifically expenditures of training and development. Conventionally, the program on training and development helps in measurement of ROI of training and development using the formula:

Prior studies help in comprehending the fact that the measurement of ROI can be considered to be one of the most important ways that can help in the process of evaluation of the rate of effectiveness of the training and development program (Parsons 2014). Academic literature on analysis of diverse programs for training as well as development is primarily dominated by necessarily the “Kirkpatrick’s approach” (Mery et al. 2017). Nevertheless, this approach cannot appropriately address different questions orienting the effectiveness of programs along with the cost involved in the process of conduction of program on training as well as development. Elnaga and Imran (2013) added that the fifth level of the Kirkpatrick approach also known as the ROI, was essentially introduced initially for a particular business organization to utilize mathematical as well as statistical mechanisms in the process of determination of costs as well as benefits of intervention of human resource.

Again, in the absence of particularly a comprehensive approach for calculation of ROI in training and development actions, large instituted organizations find it difficult to make intricate decisions at the time of cutting down budget of training. However, this is fundamentally attributable to the inefficiency to find out diverse training as well as development programs that are working extremely well and are absolutely ineffective programs that have the need to be revamped. Process of enumerating ROI of training as well as development delivers an appropriate mechanism for accomplishment of objective (Dhar 2015). This can also help in validation of the appropriateness of decision of human resource department regarding institution of training and development programs. The process of validation of the decision of the department involves examination of the data for the purpose of establishment of value of a specific program that is anticipated deliver post expenditure. In a bid to attain the specific objectives, it is considerably significant to detect the resistant characteristics of human resource professionals as well as senior management to plan and at the same time execute analysis of ROI of training programme (Kleemann et al.  2014). This too helps in the procedure of identification of different underlying reasons behind the resistance, barriers in the system of implementation, challenges in the recent trends as well as development in the field of analysis of ROI as well as requisites of successful analysis of ROI for identification as well as augmentation of weaker sections.

History of ROI Evaluation

As rightly indicated by Griffin (2014), provided that there is a requirement for liability of bearing learning expenditures and the notion of investment payoff is preferred, ROI can be utilized to assess investments in the field of learning and development. The perception of return on investment has been utilized for centuries. However, there is need for maintaining accountability of different dimensions of expenditures as well as notions of diverse pay offs of investment, the principles of ROI can be implemented for analysis of major investments for augmentation of learning and development processes. As rightly indicated by Phillips and Phillips (2016), ROI has been refined over a 25 year period and the methodology has been adopted by over 2000 business organizations operating in service, non-profit, government as well as educational backgrounds. Particular applications of the ROI methodology started specifically in the manufacturing segment in which ROI could be easily improved. Thus, the ROI migrated to different service sectors that comprised of service sector, specific health care sector, and specific public sector in addition to the education sector (Stowe et al. 2014).

As per the reports published in the training magazine, the utilization of ROI in the process of training corporations still continues to grow and of the top 100 business corporations during the year 2004, around 75% are making use of the ROI methodology. Furthermore, an important study undertaken by the Corporate Executive Board reflected that ROI is essentially the fastest developing dimension in the process of learning as well as development (Phillips 2012). Again, it is also the dimension that contains the widest gap between the actual use as well as desired utilization that can underscore diverse misconceptions regarding ROI.

As rightly put forward by Elnaga and Imran (2013), there are valid reasons behind the utilization of return on investment, though there are diverse views as well as explanations that might differ from one another. However, the significant issues that can be associated to the utilization of ROI include the increased budget, ultimate level of analysis, familiarity of the term ROI, trend of accountability and requirement of the top executives. As such, it can be witnesses that most of the budgets for training as well as development have increased year after year. However, with increase in the overall expenditure, accountability of the process becomes a vital issue. In itself, an increasing budget generates a larger target for different internal critics that again prompts the overall augmentation of the return on investment methodology. In addition to this, the function, department or else procedure reflects that the highest value receives the largest increase in the budget (Griffin 2014).

The ROI methodology provides a definitive level of evaluation that adds additional level of evaluation to four different levels of analysis that were designed about 40 years ago. Level one refers to reaction and planned action and the contentment from different participants of the program is also measured. This helps in understanding the manner of application of what is learned. Level 2 refers to learning that enumerates and concentrates on what different members learned during the course of program utilizing tests, competence and skills practices, different role plays, simulations, evaluation of groups as well as other evaluation instruments (Parsons 2014). However, level 3 that refers to the Application and Implementation where there are variety of follow up mechanisms that can be utilized to regulate application of the learning of the participants that is the employees on the job. Again, at level 4 refers to Business Impact that indicates the process of enumeration that concentrates on the alterations in the impact dimensions that are associated to the training as well as development program. Lastly, level 5 refers to the Return on Investment that is considered as the ultimate or else definitive level of analysis. As such, this dimension compares different monetary advantages of the training and development program with the costs of implementation of diverse training programs. However, there are many who consider that the evaluation cycle is incomplete until conduction of level 5 of evaluation (Sageman 2014).

Current Status: Challenges in the Training and Development Industry

As rightly indicated by Li et al. (2014), ROI is regarded as a familiar term. Nowadays, business managers often adopts a professional business approach towards learning and development and ROI is considered as an important part of the policy. As such, ROI is considered to be a term and notion that is familiar to professionals, specifically those engaged in business administration or else having management degrees. The business professionals wither have learned ROI in their academic preparation where ROI is essentially utilized to analyse purchase of different equipment, developing a novel facility, or else purchasing a new corporation (Jehanzeb and Bashir 2013). Subsequently, the professionals comprehend and appreciate ROI. In addition to this, they are also keen to see the application of the ROI methodology for the purpose of analysis of learning programs and subsequent improvement in the performance of the employees (Thesij.com 2017).

Jehanzeb and Bashir (2013) opines that there is persistent trend of accountability in different business corporations operating across the world. However, the support function attempts to reflect the worth by capturing the entire value that is added to the functionalities of the business concern. Nonetheless, from the perspective of accountability, different learning as well as development functions needs to be different from all other functions and this needs to reflect the entire contribution of the business concern. Shrm.org (2017) suggests that ROI assumes an augmented interest in particularly the executive suite. As such, senior executives observes different training as well as development budget that continue to develop without the suitable accountability dimension can become frustrated in an attempt to respond to different state of affairs. Thus they have turned to dimensions such as return on investment. Thus, senior executives nowadays demand appropriate calculations on return on investment on different training department and training functions (Roiinstitute.net 2017). Training as well as development mangers are nowadays aware regarding the fact that the impact of different training and development programs can be enumerated in different business concerns.

Cook and Triola (2014) advocates that with the acceptance and adoption of ROI as a conventional  tool for measurement for particularly learning and development functions, the entire debate has transferred from whether the tool needs to be applied and the way it needs to be implemented on specifically a consistent as well as standardized manner. Hence, diverse best practices for the return on investment have been designed based on the data on hundreds of business concerns that utilize different processes of ROI.  Essentially, the best practices of business organizations replicate use of particular ROI Methodology and these practices replicates the comprehensive or else assimilated approach that is realistic, feasible along with achievable within the budget limitations (Caveolearning.com 2017).

As rightly indicated by Purce (2014), despite much advancement that has been made in the process of implementation of ROI, important barriers necessarily inhibit the process of implementation of the entire notion. However, some of the barriers are also realistic whilst others are essentially myths founded on false notions. Specifically, the ROI methodology adds supplementary costs as well as time to the process of    analysis of diverse programs, although the supplementary amount is not extreme. The ROI procedure can be properly applied for around 3% to 5% to the entire budget of training. The cost and time restraints often limit the process of implementation of ROI early in the procedure. The supplementary investment in the ROI can perhaps be offset by supplementary outcomes attained from different programs and the eradication of diverse unproductive or else unprofitable programs (Davies et al. 2016).

As rightly indicated by Binnie et al. (2013), the resistance on the part of the human resource professionals can be regarded as barrier in the procedure of implementation of ROI. The resistance of the human resource professionals can be described in terms of incapability of enumeration of return on investment (ROI). Particularly, the managers are not aware about the information that needs to be amassed and find it problematic to deal with a number of variables that affect the alteration. In addition to this, the absence or else unstructured training requirement evaluation makes it intricate for identification of different parameters that is relevant as a dimensions of ROI. In addition to this, unwillingness to enumerate ROI can also considered as a barrier towards evaluation of ROI as there is lack of support as well as motivation from particularly the top management. As such, the management of organization also tends to avert the process of introduction as well as management of diverse complications in the procedures of analysis. Besides, the unwillingness to enumerate ROI also comprises of attitudinal issues that is sufficient enough to restrict themselves to the second level or else the third level of analysis of the program if required by the management to analyse (Purce 2014). However, in association to evaluation, there exists no need to justify the entire actuality. There also exists resistance on the part of senior management that refers to different resource that restrains the process of evaluation actions. The procedure of ROI involves investment of high amount of expenditure for the process of implementation. Again, it can also be considered to be time consuming procedure that refers to an accurate as well as credible process of analysis till the level 5. This calls for the need for commitment of allocation of trained staff to operate in this direction (De Grip and Sauermann 2013).  

Analysis of benefits

As rightly indicated by Martinez et al. (2013) issues in the process of conduction of ROI analysis of training as well as development can be comprehended by assessment of benefits. The process of comparing different processes of determination of cost of conduction of training as well as development program can be regarded as a difficult procedure. This is mainly attributable to the difficulty engaged in the procedure of conversion of different outcomes to particular monetary terms. However, the process of transformation of results to different monetary outcomes calls for the need of detection of a particular unit of enumeration and its transformation to a monetary value. However, the program undertaken contributes indirectly towards development of the corporation, for example, supervisors are qualified to extract the best from the subordinates. The real influence of the application of knowledge through different training as well as development programs includes complicated measurements as this is indirect in nature. Jehanzeb and Bashir (2013) added that the advantages of the program essentially accrue overtime.

In addition to this, different isolating effects of training along with development programs orients around examination of diverse conditions of the market, alterations in the system, incentives offered to different members of the staff. In addition to this, the isolating impacts of training and development programs includes examination of diverse environmental factors that include assessment of different market conditions, alterations in the system, specific incentives that might influence the overall post training performance (Sageman 2014). Essentially, the enumeration of ROI calls for the need of post training performance. In addition to this, the calculation of ROI also have the need to determine the mechanism for isolation of the overall impact of both training and development programs in order to make it certain that the figures on ROI reflects the advantages arising out of training and development programs

As per reports, it can be hereby ascertained that the definition of diverse categories of cost as well as determination of the manner in which the costs can be prorated are also challenging decisions that need to be undertaken at the time of enumerating ROI. Besides this, the training and development program cost need to be taken into consideration for analysis of ROI (Grohmann and Kauffeld 2013).

ROI value varies for managers operating at different levels as well as in different functional departments. However, it is not valued identically alike at different stages of the business concern (Parsons 2014). As a consequence, there is requirement to reach to different stakeholders whilst evaluating the outcomes.  

Intangible benefits

The anticipated intangible advantages are not captured in the ROI figure and can be regarded as a pure financial figure (Elnaga and Imran 2013).

There exists risk of liberal appraisal at the time when participants otherwise the supervisors are enquired regarding provision of estimation for reflection of the value of training as well as development program (Kleemann et al. 2014).

As rightly indicated by Griffin (2014), technological advancements has directed different business organizations to utilise e-learning mechanism to deliver training to different members of the staff from the viewpoint of acquirement of required outcomes, lower cost of training per employee in addition to different facets of just in time training. This directs towards utilization of traditional mechanisms of analysing training as well as training programs that can be adopted and reassessed from the viewpoint of applicability to typically the e- learning environment. Phillips (2012) added that the ideal way to analyse the nature of technology based technology would be to utilize a hybrid of the Kirkpatrick as well as ROI models.

As rightly indicated by Phillips and Phillips (2016) system of e-learning helps in equipping all the professionals with the potential to arrange and prepare a business case for the efforts as well as outcomes that often find it difficult to enumerate ROI of different training actions. Dhar (2015) discussed in a paper regarding the purpose of discussing the reason behind the evolution of the e-learning transformations for inclusion of the ROI enumeration. The author also indicates that high amount of expenditure for e-learning as well as the supplementary versatility of specifically learning management systems to capture specific data have both stimulated the overall interest of all the business leaders to conduct training for addressing the definite needs as well as dimensions of outcomes. Nevertheless, another factor that can be taken into consideration is the utilization of online training, the program that contributes towards acquirement of benefits from the program (Elnaga and Imran 2013).

As rightly indicated by Parsons (2014), process of calculating cost of specific training as well as development program includes measurement of  cost of deployment of specialized trainer, cost of different facilities, conveyance cost, respondent’s wages as well as salaries including the benefits of the employees, different administrative along with the overhead costs. The ROI measurement process also calls for the need of conversion of output to specific contribution, enumeration of rework cost, damage cost, cost of addressing grievances as well as legal cost, establishment of value of the time employed by employees, measurement of sales cycle time, time saved owing to training program and calculation of margin of profits (Li et al. 2014). Assessment of the prior literature can help in creation of awareness in a specific corporation regarding ROI (Mery et al. 2017). Thus, development of a culture of enumeration as well as classroom training program or else online training can help in meeting the challenges of novel trends as well as developments.

In conclusion, it can be said that ROI is a very popular dimension owing to the versatility as well as simplicity. It is founded on the particular approach that specifies the fact that investment with particularly positive ROI evaluation needs to be undertaken. However, the existence of alternative investment opportunity that has higher ROI can essentially serve as an indicator for a particular move obligatory for different investment prospects. Again, the emphasis of administration on ROI evaluation of training and development programs replicates the continuing stress on the improvement of professionalism of different trainers as well as drive for higher responsibility. Thus, the current segment intends to draw the attention of all the researchers towards provision of comprehensive approach for enumeration of ROI for specifically all training programs that comprises of training on sales, technical aspects, customer gratification, personality development, time management as well as management of alteration. Thus, ROI enumeration of specifically programmes on training and development can make mangers apprehend that the training task is delivering feasible contribution to diverse organizational objectives.

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