Return on Investment
When you are considering return on investment, you are simply trying to identify what the benefit of making the investment is. Most times as HR professionals, you are calculating the return on investment for training and development of employees. As we have or will discuss in Unit 1, your role as an advisor is to first gather information, identify problems or issues and prescribe a solution.
In gathering information, you want to identify who your stakeholders are. As an HR professional, the last thing you want to do is go out and recommend a solution without having data to backup your recommendation. This is why the first step of gathering information (also referred to sometimes as a needs analysis) is important.
Our stakeholders are anyone who pays for, participates in, benefits from, or has decision-making responsibility for training. Some of the information that they will want to know and you will collect during the gathering of information is what exactly is the need for training? What results or benefits can be expected from this training? And the biggest question of all, you guessed it, what it is the cost of this training.
You may have heard or will hear me say that the HR function is a non-revenue generating function. Because of this, it’s important to use the calculation of ROI or cost benefit to not only manage the training budget but also to quantify the effectiveness of the training recommended.
As we dive deeper into ROI, we should be able to clearly articulate the answers to these questions. What objective are we hoping to meet by the completion of this course and what effect will achieving those goals have on the organization? Simply put, what do we want people who take this training to learn and how will this add value to the organization?
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