ROI (Return on Investments) becomes more intense with the current business climate than it has been over the years, it becomes inevitable for small and medium enterprises (SMEs) to invest in the training of employees to scale up and be strategically positioned. Who, in their right sense, will want to incur a cost with no visible benefit? Certainly no one even with barebones budgets. .
Benefits derived from training programs are very important in deciding whether such training investments are worthwhile. This is the situation – the issue of how training programs in SMEs can be evaluated and the rationality of the investment in future training interventions assessed.
1. Establish Training Goals that are Specific and Linked to the Corporate Objectives
When it comes to training, it is important to know beforehand what the end results of the training are intended to be. It helps to begin with the training objectives and achieve them through the business goals. For example, in the case of an SME which seeks to increase customer satisfaction levels, training may be directed towards better resolution of conflicts and enhancing interaction skills.
For each goal, develop target outcomes that are clear and quantifiable. For instance: The sales will rise after completing sales training. The customer ratings will rise after undergoing customer service training. Check out the training programs offered by WipData Academy here.
Operational efficiency will increase after new process or technology training has been conducted. All these points assist in establishing measurable achievements to gauge the results, and more importantly, assists in finding out if the training in question has tangible benefits to the organization or its business.
2. Evaluation of Employee Performance Before Training Program and After Training Program
Any training evaluation without the collection of benchmark data would be significantly undermined. Before the start of the training activities, the skillfulness of the trainees being trained on the particular skills will be measured against some relevant performance criteria. For instance, if employees are being trained on certain digital tools, how long it takes to perform relevant tasks should be measured. After the training, assess how these metrics have changed.
Key performance indicators (KPIs) that can highlight training impact include:
- Sales figures or conversion rates in sales roles.
- Time spent on specific tasks in operational roles.
- Performance Assessment Metrics or Net Promoter Scores (NPS) in relation to customer-facing responsibilities.
In the end, a comparative analysis of the index scores and work outputs before and after the training helps SMEs assess the positive impact of a training program on the performance of employees.
3. Use of Employee Feedback and Self-Evaluation Techniques
The input obtained from the employees indicates how the training conducted was able to meet the objectives set. Conduct research by means of surveys, questionnaires or self-evaluation forms to assess the employees’ opinion on:
- The appropriateness of the training materials assessed in terms of relevance and impact.
- Their self-efficacy about the learned content and skill application.
- Anything else that they feel is lacking or requires further training.
Feedback identifies the content or delivery method of the training that needs attention. Also, it can measure the motivational level/engagement of employees before and after training. Read up more on types of feedback here.
4. Calculate the ROI Using the Kirkpatrick Model
The Kirkpatrick Model is a widely used framework for evaluating training effectiveness. It assesses training across four levels:
- Level 1: Reaction – Measure participants’ satisfaction through post-training surveys.
- Level 2: Learning – Assess knowledge gained through quizzes or skill tests before and after training.
- Level 3: Behavior – Observe whether employees are applying new skills in their roles.
- Level 4: Results – Quantify the business outcomes, such as increased productivity or higher sales, attributable to training.
Using these four levels can help you track the impact of training on both an individual and organizational level, giving a comprehensive view of its effectiveness.
5. Assess Financial Impact with a Simple ROI Formula
To calculate the financial ROI of training, use this formula:
The Benefits of Training refer to any quantifiable improvements post-training, like revenue growth, cost savings, or productivity gains. For example, if training helps reduce customer complaints, the financial benefit could be calculated by estimating the cost saved in customer service hours or retaining valuable customers.
Let’s say an SME invests RM10,000 in a customer service training program. After training, customer complaints decrease, resulting in an estimated RM15,000 in annual cost savings. The ROI calculation would be:
This result suggests a 50% return on the initial training investment, indicating the program was financially worthwhile.
6. Follow-Up Assessment of Benefits Realization and Assessment of Improvement
The Training ROI is not restricted to the first analysis. The primary necessity is to follow up on the results achieved after a considerable period of time in order to see whether the effect of training is still felt. You may want to consider organizing additional reviews every three, six, or twelve months in order to assess the ongoing advantages and to resolve any issues that may arise.
In the event that the training outcomes are disappointing, consider possible solutions. Improvement may not be the only solution and you may conclude that the training method does not work or even that more additional sessions are required. Regular assessment and enhancement make sure that teaching is dynamic and efficient and helps in achieving optimal returns on investment in both the near future and the distant one.
Final Thoughts
For Malaysian SMEs, training is an investment in growth and competitiveness. By measuring training ROI through clear goals, performance tracking, and financial analysis, businesses can make informed decisions about where and how to allocate their training budgets.
Effective training not only benefits individual employees but also drives company-wide improvements that position SMEs for success in a competitive market. By implementing these strategies, SMEs can ensure their training programs yield meaningful returns and foster a culture of continuous learning and development.