A. D. Novak Co. Inc.

Measuring Return On Investment

Relevant Training

Instructional materials creation is a process. Regardless of the delivery system, the process remains the same: planning and assessment, design, and development. Properly used, it ensures that the training relates to a business need and that training is a solution, not a panacea.

When training is based upon business needs and actual job tasks, training is highly relevant. This relevance should translate into measurable operational improvement. In fact, training's impact on operations is the only meaningful measurement for the objective value of training. And, investment in human capital can be evaluated as any other capital investment can, with a concomitant return on that investment.

A. D. Novak Co. Inc. measures two dimensions of training programs: training efficiency and training effectiveness.

Training efficiency is an economic measure of the time it takes to bring a new or re-purposed employee up the learning curve
Training effectiveness is a measure of improved operations realized as a direct result of training

Moreover, the potential effectiveness of an intervention can be assessed prior to beginning a project by answering the question, "Is the value of the solution divided by the cost of the problem greater than one?" Any legitimate business training need should meet this simple test.

(These measures are from the works of Jerome J. Peloquin from The Performance Paradigm and the late Thomas F. Gilbert.)

Training Efficiency

Training efficiency is the measure of the time required to bring employees up the learning curve. Note the growth of productivity and the time necessary to reach average performance. Observe the large opportunity represented by non-productive training time. We measure the results of training's impact upon the time saved by training (efficiency) and the increased productivity (effectiveness) of the programs developed. Once the current cost is established, it is reasonable to measure the incremental improvement achieved by a new training effort.

Training Effectiveness

Effectiveness is a measure of improved operations realized as a direct result of training. This effect has two facets:

Improved productivity from hire or promotion to average performance
Improved productivity from average toward exemplary performance

By moving the performance of the average toward the level of the exemplar (excellent performers) The performance movement is accomplished through modeling of the best practices and (through effective training) transferring the skill and knowledge from the exemplar to the average, or new, worker.

The latter measurement is known as the PIP (Performance Improvement Potential) and is, in effect, the ratio of the typical performer to the exemplar. PIP = Y (typical) to X (exemplary) A small improvement in this ratio leverages significant improvement in performance and productivity.

Our experience and creativity enable solutions that are cost effective and deliver measurable results. Our efforts focus on solutions that meet the business need and facilitate "Teaching people how to do things they couldn't do before."