TRAINING HR BUDGETS HR METRICS
Singapore - On average, HR professionals waste around half of their training budgets because they fail to understand and measure the effectiveness of the training and talent development programmes.
Kent Barnett, chairman and CEO for Knowledge Advisors, says a company spends on average about 2% of its revenue on training and development yet half of the training expenditure usually goes to waste. Reasons include employees attend training they don't need, won't apply at work, poorly designed courses or ineffective trainers. "There have been a lot of inefficiency and built up waste because there aren't measurement solutions out there."
He adds research has shown companies which invest heavily in developing their talent and in measuring the programmes' outcomes generally outperform their market's competitors by 15%. While asking a series of right questions can give HR the right indicators of future productivity, gathering feedback after a training session however requires at least 100 participants.
"The law of large numbers says if you ask enough people a question, when done right, they are going to be within 5% [of accuracy], give or take," says Barnett. "Then you adjust it for bias. It becomes a highly reliable predictor."
But for a company with less than 100 staff, Barnett says it's "not a real reliable measure". It would only be a reliable and cost effective practice for large organisations that have a few thousand people or more.
Nevertheless, HR managers working in small companies should still understand key productivity measures such as the profit contribution per employee. The formula for calculating that is (Revenue minus Labour costs) = Profit contribution of employees. Divide it by total revenue and that's the profit margin. If the HR manager of the small company is doing a good job, says Barnett, the profit margin should improve over time.
"If it's not improving over time, you need to ask yourself ‘Why?'" Barnett says. "Is it because you are in a bad industry or is it because you're not hiring the right people, not developing them, not managing them the way they should?"
Example questions for a learning and development metric:
1) Do you expect to apply this training?
2) Which business result will this training significantly impact?
3) How much more productive do you think you will be?
