Legacy ROI and benefit to cost ratio calculations
Which survey questions are used to calculate a financial ROI Percentage and Benefit to Cost Ratio?
Learner and/or Manager feedback on the three percentage-based questions below are factored in with estimated or true average cost of training and average salary to calculate a financial ROI Percentage and Benefit to Cost Ratio. Reports that provide these calculations in Metrics that Matter are the Human Capital Scorecard, End of Program Summary and Follow Up Customer Summary.
The ROI calculation in MTM is based upon the following questions:
A = Percent of work time requiring knowledge/skills
- Question Category: Job Impact
- Question Text: “What percent of your total work time requires the knowledge and skills presented in this training?”
B = Total percent improvement in performance, including training
- Question Category: Business Results
- Question Text: “Given all factors, including this training, estimate how much your job performance related to the subject matter will improve.”
C = Training's contribution to improved performance
- Question Category: Business Results
- Question Text: “Based upon your response to the prior question, estimate how much of the improvement will be a direct result of this training.”
The product of these three percentages (A*B*C) provides the Percent improvement due to training, which is then adjusted for confidence by 65% (standard; based on KnowledgeAdvisors research) to obtain the Adjusted percent improvement due to training or (A*B*C*0.65).
When entering the Average Cost per Person (X), be sure to include the financial cost of training itself and the lost revenue and or wage expenses as well. When entering the Average Salary per Person (Y), be sure to use the fully-loaded salary, including benefits.
The Monetary Benefit per Person (Z) is calculated as the product of the Average Salary per Person multiplied by the Adjusted percent improvement due to training, or Z = (A*B*C*0.65)*(Y).
The** Benefit to Cost Ratio** is calculated by dividing the Monetary Benefit per Person by the Average Cost per Person, or Z / X.
The ROI Percentage is calculated by subtracting the Average Cost per Person from the Monetary Benefit per Person, then dividing the result by the Average Cost per Person, or (Z - X) / X.