I am often asked how an organisation can calculate the return on investment (ROI) it makes on Training and Development.
I use this formula based on one individual that can be extended based on numbers trained and salary variations.
IE% on CS – TC =ROI X EY’s
CS – Current Salary
IE% – Improvement Expected from Learning (average a 10% improvement)
TC – Training Cost (4% average of annual payroll)
ROI – multiplied by expected years of ongoing service (5 years average)
Using a Salary of €50,000 pa the formula is as follows-
€5,000(10%) – €2,000(4%) = €3,000 x 5 years = €15,000
What gets measured gets done – so it is vital to demand the expected improvement.
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