Everything you need to know about training and development in human resource management.
Training is the process of increasing the knowledge and skills of an employee for doing a particular job. It involves the development of skills that are usually necessary to perform a specific job.
Its purpose is to bring about positive changes in – (i) knowledge, (ii) skills, and (iii) attitudes of the employees. Development is concerned with the growth of employees in all respects.
It is the process by which managers or executives acquire skills and competency in their present jobs and also capabilities for future tasks. The purpose of development is imparting advanced knowledge and competencies among the employees.
Although training helps employees do their current jobs, the benefits of training may extend throughout a person’s career and help develop that person for future responsibilities.
Development by contrast, helps the individual handle future responsibilities with little concern for current job duties.
1. Meaning and Definition of Training and Development 2. Concept of Training and Development 3. Factors Influencing 4. Identifying Needs
5. Need Assessment 6. Inputs 7. Techniques and Methods 8. Evaluation.
What is Training and Development in HRM? – Meaning, Factors and Techniques
- Meaning and Definition of Training and Development
- Concept of Training and Development
- Factors Influencing Training and Development
- Identifying Training and Development Needs
- Training and Development Need Assessment
- Inputs of Training and Development
- Techniques and Methods of Training and Development
- Evaluation of Training and Development
What is Training and Development in HRM – Meaning and Definition
Training is the process of increasing the knowledge and skills of an employee for doing a particular job. It involves the development of skills that are usually necessary to perform a specific job. Its purpose is to bring about positive changes in – (i) knowledge, (ii) skills, and (iii) attitudes of the employees.
‘Training’ denotes a systematic procedure for transferring technical know- how to the employees so as to increase their knowledge and skills for doing particular jobs. —Edwin B. Hippo
When employees join an organisation, they are required to be trained because there is a difference in the skills the employees possess and the skills a job requires. This difference is removed by education, training and development. Skills of employees are developed through training upon which the efficiency and effectiveness of an organisation depends.
In words of Edwin B. Flippo, “Training is an act of increasing the knowledge and skills of an employee for doing a particular job. The major outcome of training is learning; a trainee learns new habits, refined skills and useful knowledge during the training that helps him improve performance. Training enables an employee to do his present job more efficiently and prepare himself for a higher level job.”
According to Michael J. Jucious, “Training is any process by which the aptitude, skills and abilities of employees to perform specific jobs are increased.”
Thus, Training is a process by which skills of new or existing employees are improved so that he is better skilled to perform his current job and he becomes capable of performing higher level jobs with higher responsibilities.
Training improves knowledge, skills and attitude of employees. Training is related to some specific skills and operations.
Development is concerned with the growth of employees in all respects. It is the process by which managers or executives acquire skills and competency in their present jobs and also capabilities for future tasks. The purpose of development is imparting advanced knowledge and competencies among the employees.
Development is a continuous process of building competencies of employees and thus facilitating their overall development. The term is generally used in relation to managers or executives and is described as ‘management development’ or ‘executive development’.
Training is related to some specific skills and operations while development is concerned with overall improvement in employees and makes them capable of handling more responsibility. Development prepares employees for future. It is related to future growth.
Development involves technical skills as well as problem solving and decision making skills.
The term development is used for executives or managers.
What is Training and Development in HRM – Concept
The function of Human Resource Development (HRD) is primarily concerned with training and development. The activity is so important that sometimes the HRD is equated with it, though the starting point of HRD in an enterprise need not always be training and development.
The potentiality of people in a working organization is said to be unlimited. They are believed to be capable of much more than they are normally called upon to do and can learn much more than is formally thought possible.
The objective of any organization in relation to its markets, return on capital, productive capacity, and fluidity of capital (cash flow) etc., is achieved essentially with the help of employees. They possess an untapped intellectual reservoir that can serve as an organizational creativity pool and resources, if managed. Such a management calls for training and development of employees.
Generally speaking, the existing system of imparting education is not designed to teach specific job skills for different positions in a particular company or organization. Even those who have had technical or professional or formal training must receive some initial training in the form of orientation to policies, practices, and the specific ways of the employing organization.
Traditionally, training and development was not viewed as an activity that could create value and successfully deal with competitive advantage. Organizations used to employ specialists whose job was merely to instruct and teach people on how to work more efficiently on the job at minimum cost, training and development was not regarded as an important activity of the HRD function. It did not aim at imparting the requisite knowledge, developing necessary skills, and bringing about the desired attitudinal (behavioural) change among the employees with the specific purpose of ensuring functional effectiveness.
Organizational priorities have changed in the recent years as the focus has moved from piecemeal training activities to more systematic HRD approaches. Many businesses have reoriented themselves away from training individual employees towards becoming ‘learning organizations’ with the emphasis on continuous learning.
Thus, learning organizations are those where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where corrective aspiration is set free, and where people are continually learning to see the whole together. The focus has shifted from training and development to learning and development.
What is Training and Development in HRM – 6 Major Factors Influencing: Organizational Change, Top Management Support, Commitment from Managers and a Few Others
Many companies have substantial training budgets and a large number of training staffs who design, develop, and market different programmes. Yet, they do not get the results they seek.
In order to see the success of training and development programmes, the following factors must be seriously considered:
Factor # 1. Organizational Change:
This is one factor that impacts and is impacted by training and development. The basic propose of training and development is to anticipate change and to respond proactively to it. Change involves moving from one condition to another, and it affects individuals, groups, and the entire organization.
The most prominent organizational changes affecting training and development include:
(a) Changes in organizational structure caused by mergers, acquisitions, rapid growth, downsizing, outsourcing, etc.
(b) Changes in technology and the need for more highly skilled employees.
(c) Changes in the educational level of employees.
(d) Changes in human resources, creating a diverse workforce consisting of many groups.
(e) Competitive pressures necessitating flexible (just-in-time and just-what-is needed) training courses, and
(f) Increased emphasis on learning organizations.
Factor # 2. Top Management Support:
Top management support is perhaps the most basic training and development requirement. Even the most competently designed training programme may fall through if it is not actively supported by the top executives. The support of top management must go beyond a policy statement regarding training. It must include their active involvement and participation in development.
Factor # 3. Commitment from Managers at All Levels:
In addition to top management, all managers— whether they are specialists or generalists—should be committed to and involved in the training and development programmes. Senior executives should never think that the training programmes are meant for their immediate subordinate managers only. Rather, it should include everyone right from the top manager down to the first-line supervisor. And the top management, as a matter of fact, should be trained first to provide an example of their commitment to the continuing development of all people in the organization.
Factor # 4. Technological Advances:
Technology, perhaps, is one factor that has influenced training and development the most. Technology is revolutionizing the way training and development programmes can be delivered. Technological advances, especially the computer and the internet, are dramatically affecting the way the jobs are conducted by the employees.
Computer-based training takes advantage of the speed, memory, and data manipulation capabilities of the computer for greater flexibility of instruction. No training and development programme can be effective unless it considers the impact of technology, especially the way knowledge is being delivered to employees through computer-based interactive technologies such as multimedia and virtual reality.
Factor # 5. Organizational Complexity:
The degree of complexity has increased in modern organizations due to the weakening of the stability-oriented traditional chain of command and the rapid changes in technology, products, systems, and methods. This has impacted training and development programmes in organizations.
In modern organizations, the tasks of individuals and groups have enlarged and enriched, and employees are now performing more complex tasks than before. Therefore, employees face the need to constantly upgrade their skills and develop an attitude that permits them not only to adapt to change, but also to accept and even seek it. All these changes translate into a greater need for training and development.
Factor # 6. Learning Principles:
Learning occurs when employees demonstrate a difference in behaviour or ability to perform a task. Although much remains to be discovered about the learning process, a few principles may be kept in view while developing any training programme.
These include the following:
(a) Motivation to learn – Learners progress in an area of learning where they see that learning will help them in achieving their goals.
(b) Spacing out the learning sessions – Learning takes time. Depending on the type of training, a wise move may be to space out the learning sessions. Learning in segments, over a span of time, rather than all in one go, may be desirable and more rewarding.
(c) Reinforcing learning – It is natural to forget if what is learnt is not practiced repeatedly. Repeating the process, as many times as necessary until the new employee can do the task on his/her own, provides the opportunity to reinforce learnt knowledge and behaviour.
(d) Feedback on learning – It is natural for people to know how much they have learnt or how well they are doing. The sooner employees know the results of learning, the better it is. Suitable mechanisms can be used (such as self-graded tests or programmed learning kits) for this purpose.
What is Training and Development in HRM – Identifying Training and Development Needs (Steps)
Before designing a suitable training programme for enhancing the skills of the employees, it is necessary to identify their training and development needs. A performance appraisal should be conducted to analyze the current level of knowledge and skills of the employee and train them according to their requirements.
Steps in identifying training and developmental needs:
(i) Performance Appraisal:
The manager should review the performance of different employees in each field of work and identify those areas where the performance is not up to the mark. The difficulty level of each job and the skills required to perform that job should be analyzed to understand why the employees had been unsuccessful in performing it.
(ii) Identify and Discuss Weaknesses:
After the performance review, the manager should identify those areas where their performance has been poor. He should study the weaknesses of the employees and focus on how these could be overcome.
(iii) Determine Work Assignments:
The kinds of projects or assignments that could be used to strengthen the worker’s knowledge and skills should be determined. Some skills are developed gradually through work experience while some others can be developed through methods like job rotation, coaching, mentoring, etc.
(iv) Decision Regarding On the Job Training:
Many employees have lower productivity because they do not have proper knowledge about the work processes. In such cases, on- the-job training with an experienced co-worker can help the trainees to grasp important aspects of the job.
(v) Training Programmes:
The HR department should design relevant training programmes that would benefit the employees. The methods of training should be chosen carefully according to the strengths, weaknesses and requirements of the employees. Time and dates for such programmes should be informed to various departments so that interested employees can participate.
(vi) Create an Action Plan:
The duration of the training programmes should be specified. Standards should be set so that the actual outcomes can be compared with the desired ones after completion of the programme. The programmes should be followed up from time to time for updating knowledge of the workers.
What is Training and Development in HRM – Need Assessment: Steps and Models
In view of the substantial emphasis placed on training and development, it is quite natural to presume that companies must have developed extensive methods to identify training needs. The rational way of deciding what kind of training should be undertaken is to make an analysis of the entire organization, i.e., of the people, jobs, technologies, and so on, to identify needs and the positions where training and development is required. The first step is that of ‘Need Assessment and Analysis’.
Steps in Training Need Assessment:
The detailed steps involved in the assessment of training needs are as follows:
(i) In the first step, one has to identify the functional requirements of the department as a whole, along with the overall organization’s long-term vision, goals, and objectives. This would provide crucial inputs regarding the manner in which the role of a particular department or function is likely to evolve and develop in line with the future requirements of the organization. This process will help in identifying priority areas, which need strengthening.
(ii) In the next step, the functional requirements of various sub-functions within the department have to be worked out as per the priority areas.
(iii) In the third step, the job analysis is carried out to find out what concept, knowledge, and skill are most needed for a particular job position.
(iv) In the fourth step, HR analysis is carried out to work out the significant gaps in terms of knowledge, skills, experience, etc., with respect to desired level of performance of employees at different levels and functional areas. The identification of the gaps is both from a short-term as well as long-term proactive perspective for future requirements.
The data regarding training needs may be gathered from:
The Job Performance of Employees:
Systematic analysis of performance appraisal reports, group discussions, personal interviews with concerned departments, union officials, etc. Survey of training needs, attitude and moral survey, employee suggestions, analysis of reports relating to costs, turnover, grievances, etc., exit interviews, customer complaints, and assessment centre approach are all used for determining the competency level of executives.
Training needs can then be worked out by comparing the desired level of skills with the present level of skills of employees.
The concept of ‘Need’ typically refers to a discrepancy or gap between what an organization expects to happen and what actually occurs. The focus is on correcting substandard performance. The need assessment and analysis process identifies gaps between employees’ existing skills and skills required for effective performance of the current job, and discrepancy between current skills and the skills needed to perform the job successfully in the future.
It also identifies the conditions under which the HRD activity will occur. Thus, need assessment and analysis forms the foundation of any training programme. The main purpose of need assessment and analysis is to perform a systematic exploration of the way things are and the way they should be.
This difference is called the performance gap. A study conducted in 1999 on HRD Trends Worldwide identified 16 major trends in the area of training and development and stated that need assessment and analysis was receiving more emphasis. William McGhee and Paul W. Thayer have suggested a model for assessing training and development needs built on organization, task, and man analysis.
1. Organizational Analysis:
At the organizational level, the training need analysis is done keeping in view the organizational goals, vision and mission, strengths and weaknesses of the organization, and also the resources available. At this level, the need analysis answers the following key questions—which are the key target areas? What is the HRD climate in the organization? Is it conducive to the implementation of the training programme?
Does the organizational analysis take a top-down view of training needs? It involves a detailed analysis of the organizational structure, objectives, human resources, and future plans. An in-depth analysis of these factors identifies deficiencies which, in turn, help in formulating organizational strategies to rectify them.
Organizational strategy is translated into operational plans right up to each department and ultimately every employee. Based on this, training needs are anticipated. By estimating future demand and supply in the context of an organization’s objectives, managers can determine who needs what training and when they will require it.
The analysis of the organizational needs should focus on the number of employees with various combinations of skills needed at each level and in every part of the organization for specified periods. For example, the existence of an aging workforce alerts organizations to the fact that successors may be needed in the near future. With this knowledge, the management may begin training eventual replacements.
2. Task Analysis:
The focus here is on the job. Every job consists of several different tasks. Task analysis is undertaken to determine the knowledge, skills, and abilities necessary to complete the various tasks involved in a total job. Analysis of the job and its various conditions will indicate the skills and training required to perform the job according to the standards. Questionnaires, personnel records, interviews, observation, and other methods can be used to collect job-related information from time to time. After collecting the information, an appropriate training programme may be designed.
3. Man Analysis:
The focus here is on the individual employee. The individual level analysis data is collected in order to find out the training requirements of individual employees. What are the various skills required by the individual employees to perform better? The immediate supervisor and the employee best did this jointly.
The immediate supervisor not only observes the performance of an individual employee and interacts with him/her, but he/she is also responsible for the same. The HR Focus Special Report on training and development in 1999 stated that need analysis should include answers to the following key questions—Why do you need training? Who shall you be training? What would the people be trained on? What resources does your organization currently have for training and development?
This reflects the top management’s philosophy of systematically identifying training and development needs of employees and integrating individual needs with organizational needs in order to enhance the relevance and acceptance of the training and development programmes.
Man analysis reviews the knowledge, skills, and abilities of the employees. Along with examining the employee’s skills and abilities, managers also need to consider whether the work environment motivates or discourages good performance. This helps in identifying the strengths and weaknesses specific to individual employees.
This assessment is then used to determine whether the individual employee requires training and, if so, of what kind. This process is facilitated by the use of employee performance reviews and other techniques for gathering information. Based on the information gathered, training can be tailored to overcome the shortcomings of individual employees.
What is Training and Development in HRM – Inputs
A training and development program must contain inputs that enable the participants to gain skills, learn theoretical concepts and help acquire vision to look into the distant future. Additionally, there is a need to impart ethical orientation, emphasize on attitudinal changes and stress upon decision-making and problem-solving abilities.
Training imparts skills to employees that they need to operate machines, and use other equipment with least damage and wastage (basic skills). Without basic skills the operator will not be able to function. Then the worker also needs motor skills. Motor skills refer to performance of specific physical activities and involve learning to move various parts of one’s body in response to certain external and internal stimuli.
In addition to basic and motor skills, employees at supervisory and executive level need interpersonal skills to understand themselves and other better, and act accordingly. Listening, persuading and showing an understanding of others’ feelings are examples of interpersonal skills.
The aim of education is to impart theoretical concepts and develop a sense of reasoning and judgment. HR managers well understand that any training and development program must contain an element of education.
Development is less skill-oriented but emphasizes on knowledge. Knowledge about business environment, management principles and techniques, human relations, specific industry analysis are useful for better management of a company.
A training and development must also contain an element of ethical orientation. There is no debate about the fact that ethics are largely ignored in businesses. Unethical practices are prevalent in marketing, finance and production function in any organization.
5. Attitudinal Changes:
Attitudes are feelings and beliefs of individuals towards others. Attitudes affect motivation, satisfaction and job commitment. Negative attitudes should be changed into positive attitudes. Changing negative attitudes is difficult because employees refuse to change and they have prior commitments and information needed to change attitudes may not be sufficient. Nevertheless, attitudes must be changed to enhance the commitment of employees to the organization and motivate them for better performance.
6. Decision Making and Problem Solving Skills:
Decision making and problem solving skills emphasize on methods and techniques for making organizational decisions and solving work-related problems. These skills seeks to improve employees’ abilities to define and structure problems, collect and analyse information, generate alternative solutions and make an optimal decision among several alternatives.
What is Training and Development in HRM – Techniques and Methods
A wide range of training and development methods and techniques are noted to have been developed by various organizations and training experts for different categories of personnel in the organization namely managerial, non-managerial, administrative, skilled, unskilled, senior, and junior, etc.
The techniques may include:
(ii) Conferences, projects, panels, and ‘buzz sessions’,
(iii) Case studies and incident methods, and
(iv) Role playing, demonstration, and skills.
Each organization has to choose those methods of training and development which are relevant for its training and development. Simulation methods, role playing, case studies, management games, and in-basket exercises may also be used. Programmed learning and computer-based training are few other techniques currently in use.
The Special Report on Training, 2007, stated that 94.9 per cent of organizations offer in-house training staffed by in-house resources. Mid-sized and large organizations offer 100 per cent in-house training. Sending employees to outside training was implemented by 89.8 per cent of employers. The least popular approach was noted to bring in outside trainers for in-house training.
Methods of Training and Development:
Although training helps employees do their current jobs, the benefits of training may extend throughout a person’s career and help develop that person for future responsibilities. Development by contrast, helps the individual handle future responsibilities with little concern for current job duties. The term ‘development’ can be defined as the nature and direction of change taking place among personnel through educational and training processes.
Training, on the other hand, provides knowledge and skills required to perform the job. It can be viewed as job orientation leading to an observable change in the behaviour of the trainee in the form of increased ability to perform the job. On the other hand, although development is still job related, it is much broader in scope. It enhances general knowledge related to a job, as well as the ability to adapt to change.
Development programmes were started for middle managers, as well as the top management. Thus, training appeared to be an improper destination for learning a variety of complex, difficult and intangible functions of management personnel. Development of an individual is due to his day-to-day experience on the job.
Therefore, one must emphasise that development is highly individualistic and is self-development too. It must be generated within the man himself. No amount of coercion can produce development in a hostile and apathetic manager.
The processes of training and development are often confused. Training means learning the basic skills necessary for a particular job. Development, on the other hand, means growth of the individuals in all respects.
The most popular training methods used by organisations can be classified as – on-the-job and off-the-job. The most widely used training methods take place on the job. These methods are popular due to their simplicity and the impression that they are less costly to use.
On-the-job training places the employees in actual work situation and makes them appear to be immediately productive. It is learning by doing and for jobs that are either difficult to simulate or can be learned quickly by watching and doing, on-the-job training makes sense.
One of the drawbacks of on-the-job training will be low productivity until the employees develop their skills and knowledge. Off-the-job training covers a number of techniques like classroom lectures, films, demonstration and programmed instructions. The facilities needed for each training programme varies from the small classroom to an elaborate development centre with large lecture halls supplemented by small conference rooms.
As there are continuous advancements in technology, we can expect programmed instructions to become more dominant. Two noticeable versions, Interactive Video Disks (IVDs) and Virtual Reality are gaining momentum in the corporate training. IVDs allow users to interact with a personal computer while simultaneously being exposed to multimedia elements. This motion picture enables the trainees to experience the effect of his or her decision in real time mode.
A variety of training methods for human resources find mention in literature and are in use in various organisations. The complex nature of job of today’s personnel makes it difficult to pinpoint one or few appropriate training methods. Carrol, Paine and Ivancevich had conducted a useful study to rate the relative effectiveness of various training methods in relation to different types of training objectives.
According to Nishit Kumar, the designing of an effective programme, as well as selection of an appropriate method can be facilitated by considering some fundamental questions such as –
1. Who must be trained?
2. When is training beneficial?
3. In what areas is training required?
4. What are the competency levels of staff, both today and tomorrow, vis-a-vis the organisation’s growth and corporate plans?
5. Has the organisation conducted a skill inventory of its people, both in technology and attitude contents?
There are numerous training methods. According to Mirza S. Saiyadain, the choice of a method or a combination of methods depends on various considerations.
These are as follows:
1. The purpose of training is an important consideration in the choice of methodology. Knowledge can be provided by traditional methods of training like lectures and discussions whereas skills and attitudes can be developed by experimental methods of training.
2. The nature of the contents for the training programme often determines the nature of methodology. A concept can be clarified through a lecture while the operation of machine may best be done through demonstration method.
3. The level of trainees in the hierarchy of the organization also determines the nature of methodology.
4. Finally, all organisations have to consider the cost factors. Cost considerations have to be taken into account while deciding the methods of training. However, cost consideration should not override the quality consideration for the training programme.
Mirza S. Saiyadain further adds that all methods of training should satisfy the following criteria otherwise their effectiveness can be questioned:
1. Training and development programme should involve the active participation of the participants. Lack of participation by trainees will limit the learning to only listening to the trainer and will not provide the benefit of sharing experiences.
2. The training and development method should also provide participants with a constant feedback on their performance. The realisation that employees are learning constantly or they are not been able to improve upon the previous performance will be a useful motivation to put in the necessary efforts.
3. The training and development method should be able to facilitate applicability of training contents to the real life situations. The methodology should provide the participants the linkage between what is done in classroom and what is relevant to the actual job. This is an important consideration without which learning would remain only theoretical.
The following types of training and development methods are generally used:
1. On-the-job training
2. Vestibule training
3. Apprenticeship training
4. Job rotation
5. Internship training
6. Other methods.
What is Training and Development in HRM – How to Evaluate Training and Development Programmes
1. Cost and Ratios:
Establishing the cost of training is difficult but certainly not impossible. From an accounting point of view, once training and development has been accepted as a function of the company, the cost can be allocated to that function and figures with respect to training and development cost can be developed. The HR manager can certainly help in suggesting the lines on which the data can be generated.
The important components of training and development costs are participants’ cost, trainer’s cost, cost of various training facilities, administrative cost, instructional and course material development cost, and the research cost, i.e., the cost of survey and studies. The summation of the mentioned items gives the training and development cost.
Each of these components, when calculated and totalled for each course or training programme, will result in a reasonable estimate of cost. This will help the organization to determine not only the total cost but also a share of each component in the total and that shall be useful in analysing the training and development activity. Once the training cost is determined, probably the best ratio to monitor the performance of the training department would be the –
This will yield the training cost per employee. The enterprise efforts will be to reduce the cost over a period of time. Similarly, the training cost for certain specific categories of employees can also be found out. For supervisory and managerial cadre of personnel, for whom training expenditures are stated to be high, such a calculation will be useful.
Training cost (TC) = TC1 x TC2 x TC3.
The calculation of training ratios will help the top management in monitoring the training and development activity in the following ways:
i. Curtailing the cost of training per trainee day (TC1), either by suitable action on the cost side or by increasing the number of employees trained for the same cost, thus, increasing the cost effectiveness.
ii. Reducing the number of days needed to train participants in the programme—i.e., shortening the duration of it by improved training methods (TC2). It would also mean training effectiveness.
iii. Keeping the number of trainees at a reasonable level in the organization in relation to total number of employees (TC3). Too few trainees are stated to imply stagnation; too many, either poor selection of trainees or too high a turnover of employees (or of course, both). A central question in measuring training effectiveness is whether participants remain with the enterprise that provides the training.
If such calculations can be made for a period of, say, 5 or 10 years, and presented in a comprehensible form, it would probably be of immense use to training professionals either in justifying the cost of the programme or in seeking additional allocation for the training activity and getting support from the top management.
2. Return on Investment:
Another parameter for evaluating the effectiveness of the training programme is to compare the financial benefits of the HRD programme with the cost of programme. This comparison is called ‘Returns on HRD’. Training and development is one such function which is responding to increased demand of accountability through ‘Return on Investment’ (ROI) evaluation.
The term ROI seems to be an improper terminology for the HRD field because the expression originates from the field of accounting and finance. Nevertheless, this expression has recently become fairly common, and professionals suggest an appropriate name-‘returns on training’. Although ROI can be expressed in several ways, it is usually presented as a percentage or cost-benefit ratio.
In order to make a systematic approach to the ROI calculations, certain steps should be followed. Evaluation purposes should be considered before the development of the evaluation plan because these purposes often determine the scope of evaluation, the type of instruments used, and the type of data collected.
A variety of instruments can be used to collect data, and the appropriate instruments should be considered in the early stages of developing the ROI. Questionnaires, on-line services, interviews, and focus groups are commonly used to collect data in an evaluation.
The next step is to isolate the effect of the programme. In this step, specific strategies are explored that determine the amount of output performance that is directly related to the programme, i.e., the amount of improvement directly related to the programme.
There are different strategies utilized by organizations to tackle this issue—control group arrangements, establishing the mathematical relationship between input and output variables known as forecasting models, and estimation by participants, supervisors of the participants, senior managers, or experts. The third step is to convert the data collected into monetary values to compare with programme costs by selecting an appropriate strategy depending upon the type of data and the situation like –
(i) Measuring output increases and assigning monetary value on the basis of unit contribution to profit or unit cost reduction,
(ii) Calculating cost of quality and measuring quality improvements in terms of cost savings,
(iii) Ascertaining the value of time saved to complete projects, process, or activities in terms of participants’ wages and benefits, and
(iv) Supervisors of participants/senior management providing estimates on the value of an improvement.
The other part of the ROI is to tabulate the cost of the programme. Among the cost components, the following costs are included, namely, cost to design and develop the programme, cost of the programme equipment, software, and hardware, cost of the instruction including preparation time as well as the delivery time, cost of facilities of the programme, travel, lodging, and meals, cost for the participants, salaries plus employee benefits of the participants for the time involved in the programme, and administration and overhead cost of the training and development function. The ROI is calculated by using programme benefit and cost. The cost-benefit ratio is the net programme benefits divided by costs.
In addition to tangible monetary benefits, training programmes have intangible non-monetary benefits such as increased job satisfaction, increased organizational commitment, improved teamwork, improved customer service, reduced complaints, and reduced conflicts. During data analysis, an attempt is made to convert all data to monetary values. All hard data such as output, quality, and time are converted to monetary values.
The conversion of soft data is attempted for each data item. Thus, the ROI shows the value-added contribution of training to top management. But the ROI process must be approached with careful planning, methodical, logical, and practical analyses. The steps, techniques, assumptions, and issues must follow a conservative approach to build the credibility needed for acceptance of the process.
The HR Focus in its Special Report on Training, 2007, emphasized that the ROI for training is the most important ‘hard’ data to many top executives, but many of them are still struggling with ways to measure and demonstrate the achievements of training.
3. Profit Centre:
Another approach to measure the returns on training and development is to convert the HR department to a profit centre. This concept is in the embryonic stage and very few organizations have started planning for the conversion. The concept involves the conversion of the HRD department from a budget-based centre to one that either breaks even or generates profit.
The revenue comes from the sale of products, programmes, or services delivered to the user department. The HRD departments are considered as staff overhead. The HRD staff is referred to as excess, overhead, burden, or an administrative expense. One way to move from that posture to one of self-sufficient nature is to convert the HRD department to a profit centre. Another reason for conversion is that the concept lessens the need to calculate the ROI for individual programmes.
The profit generated from revenues is used to calculate an overall return for the department. Unprofitable programmes will disappear or be subsidized by profitable ones. Thus, each user department pays for the service that it avails from the training centre.
The training and development department of the organization by the virtue of its profit centre concept also leases its services to other organizations. This helps to improve cash flow and the training and development department is able to earn some revenue for the organization.
This is quite revolutionary, since for years the training and development department is considered as a spender only, i.e., they are cost centres where expenditure is measurable but benefits are non-tangible. This concept is a valuable way to get the top management support, increased funding, and concern about results.
Top Management’s Perspective of Training and Development:
The HRD function is primarily concerned with training and development and, initially, was used as a synonym of the training and development activity only. While the initial emphasis in HR was on training and development, gradually, other aspects of HRD such as performance appraisal, human resource information system, and others were also adopted depending upon the need of the organization and the managements’ perspective.
Currently, training and development is viewed as an activity to help companies create value and successfully deal with competitive advantage. At the same time, the employees’ personal and career goals are furthered, generally enhancing their abilities and value to the employer.
Adoption by the management of a comprehensive and systematic approach towards training and development through need assessment analysis, setting up of training and development objectives, designing, delivery, and evaluation of the training programmes reflect the managements’ commitment to the activity.
The growing number of organizations formulating training and development policy in writing in the form of rules and procedures that govern or influence the standard and scope of training in an organization, initially starting with career planning, and later on encompassing succession planning for managerial cadre, reflect the positive side of the top managements’ perspective of HR.
A discerning change in the managements’ perspective is noted to have taken place with the development of a wide range of training and development methods and techniques, such as on-the-job and off-the-job training, by various organizations and training experts for the different categories of personnel in the organization.
The changing philosophy of the management is to make training and development an effective instrument so that organizations are transformed into learning organizations. And with that end in view, the training and development programmes are now designed in such a way that the process of continuous learning is in-built in the programme structures, and learners continue to learn even after the programme is over.
With the changing perspective of the top managements, the training budgets of organizations have increased consistently and these expenses are no longer treated as overhead expenditure but as a long-term investment. Even though the potential of training and development is being felt as providing solutions to even the most difficult problems faced by organizations, the necessary increase in the budgetary allocation is yet to come.
Although top managements have been noted to have given enough attention in identifying and analysing training needs, and adopting different approaches and programmes to employee training and development, very little attention is devoted to evaluate the effectiveness of the training and development programmes. Since training and development activity involves significant expenditure and energy, its evaluation has become necessary to justify such expenditure.
However, the top managements have not paid much attention towards the evaluation of training and development programmes as very little use is made of various performance evaluation tools such as cost-benefit ratios, ROI, and the converting of the training and development department into a profit centre to assess the extent to which training and development programmes improve learning, affect behaviour on the job, and impact the bottom line performance of an organization.
The changing view of the top management is important for it determines as to what extent the HR people evaluate their efforts. This new significant trend in measurement of training and development programmes seems to be the requirement of chief executives, and the HR people are expected to show evidence of their impact.