{"id":8978,"date":"2021-04-05T07:32:15","date_gmt":"2021-04-05T12:32:15","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=8978"},"modified":"2021-03-31T09:37:12","modified_gmt":"2021-03-31T14:37:12","slug":"roti-return-on-training-investment-calculations","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/roti-return-on-training-investment-calculations\/","title":{"rendered":"ROTI: Return on Training Investment Calculations"},"content":{"rendered":"<p><img decoding=\"async\" class=\"alignright size-medium wp-image-8982\" src=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Stock-image-1-ROTI-300x200.jpg\" alt=\"\" width=\"300\" height=\"200\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Stock-image-1-ROTI-300x200.jpg 300w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Stock-image-1-ROTI-768x513.jpg 768w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Stock-image-1-ROTI-1024x684.jpg 1024w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><a href=\"https:\/\/flevy.com\/business-toolkit\/return-on-investment\">The concept of Return on Investment (ROI)<\/a> was formed as part of the concept of <a href=\"https:\/\/flevy.com\/browse\/stream\/value-creation\">Value Creation<\/a>.\u00a0 The origins of ROI were in the Manufacturing sector, where it\u2019s simple to measure time and output. \u00a0Next, to adopt the concept was the Banking industry where intense competition necessitated <a href=\"https:\/\/flevy.com\/browse\/stream\/innovation\">Innovation Management<\/a> and with that the need to calculate ROI. \u00a0ROI calculation is now a common feature in every industry and business function.<\/p>\n<p><a href=\"https:\/\/flevy.com\/business-toolkit\/employee-training\">Employee Training<\/a> is part and parcel of workforce development.\u00a0 It necessitates spending a lot of effort and resources.\u00a0 Deliberating if the Training Program is going to be worth all the costs is a valid concern.<\/p>\n<p><a href=\"https:\/\/flevy.com\/browse\/flevypro\/return-on-training-investment-roti-5565\">Return on Training Investment (ROTI)<\/a> is the comparison between financial benefits obtained from a training program and the total cost of running that training program.\u00a0 The objective of ROTI analysis is to see whether the benefits outweigh the costs i.e., to establish if the investment was worthwhile.<\/p>\n<p>ROTI calculation and analysis is significant when:<\/p>\n<ul>\n<li>Investment in a training program is viewed as a substantial outlay.<\/li>\n<li>Attainment of explicit strategic or operational objectives is associated with the training program.<\/li>\n<li>Financial benefits and their amount from the training program is ambiguous.<\/li>\n<\/ul>\n<p>ROTI can be calculated dependably so long as:<\/p>\n<ul>\n<li>Measurement data on changes in business performance, pertinent to training, is reliable or can be rationally estimated by those who matter.<\/li>\n<li>Financial values can be assigned to the applicable performance measures.<\/li>\n<li>Cost related to developing, delivering, and handling the training program can be classified.<\/li>\n<\/ul>\n<p>ROTI calculation involves selecting performance measures, gathering data on those measures as well as data on costs\u2014both direct and indirect\u2014related to training, and lastly calculating the Return On Training Investments.<\/p>\n<p>Key steps in the ROTI calculation are:<\/p>\n<ol>\n<li>Choose the performance measures to use.<\/li>\n<li>Gather data on changes.<\/li>\n<li>Gather data on costs.<\/li>\n<li>Calculate ROTI.<\/li>\n<\/ol>\n<p>There are 3 types of calculations that are relevant in ROTI analysis.<\/p>\n<ol>\n<li><strong>ROTI as a percentage<\/strong><\/li>\n<li><strong>Benefit to Cost Ratio (BCR)<\/strong><\/li>\n<li><strong>Payback Period<\/strong><\/li>\n<\/ol>\n<p><a href=\"https:\/\/flevy.com\/browse\/flevypro\/return-on-training-investment-roti-5565\"><img decoding=\"async\" class=\"aligncenter size-full wp-image-8980\" src=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Slide-Deck-image-ROTI.png\" alt=\"\" width=\"1002\" height=\"752\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Slide-Deck-image-ROTI.png 1002w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Slide-Deck-image-ROTI-300x225.png 300w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2021\/03\/Slide-Deck-image-ROTI-768x576.png 768w\" sizes=\"(max-width: 1002px) 100vw, 1002px\" \/><\/a><\/p>\n<p>Let us delve a little deeper into the calculation methods.<\/p>\n<h2><strong>1. ROTI as a percentage<\/strong><\/h2>\n<p>This calculation shows Net Training Benefits as a percentage of Training Cost.\u00a0 An outcome of 100% or more denotes that the Program has a Net Benefit after accounting for all the costs connected with running the program.<\/p>\n<h2><strong>2. Benefit : Cost Ratio (BCR)<\/strong><\/h2>\n<p>This ratio divides Total Training Benefits by Total Training Costs.\u00a0 When BCR is greater than 1, the benefits exceed the costs and the program is judged a success.\u00a0 When BCR is less than 1, the costs surpass the benefits and signify that enhancements or alterations are needed to warrant the continuation of the program.<\/p>\n<h2><strong>3. Payback Period<\/strong><\/h2>\n<p>This calculation exhibits the time in which the Training Investment will be paid back i.e., when the costs equal the benefits.\u00a0 The calculation is usually done in terms of months.<\/p>\n<p>Monthly Training Benefits are calculated by dividing Total Training Benefits over 12 months.<\/p>\n<p>It is pertinent to note that although ROTI analysis is important in evaluating a training program, merely a ROTI calculation will not typically be adequate to make the business case for a Training Program or influence top management to act.\u00a0 Sometimes we have to consider non-monetary benefits of training, such as a change in attitude.\u00a0 When monetary and non-monetary benefits are combined, these supplement <a href=\"https:\/\/flevy.com\/browse\/stream\/performance-management\">Performance Management<\/a> resulting in benefits such as reduced absenteeism, lower turnover rates, and more promotions from within.<\/p>\n<p>Interested in learning more about <a href=\"https:\/\/flevy.com\/browse\/flevypro\/return-on-training-investment-roti-5565\">Return on Training Investment<\/a>?\u00a0 You\u00a0can download\u00a0<a href=\"https:\/\/flevy.com\/browse\/flevypro\/return-on-training-investment-roti-5565\">an editable PowerPoint on <strong>Return On Training Investment<\/strong>\u00a0<strong>(ROTI)<\/strong> here<\/a><u>\u00a0<\/u>on the\u00a0<a href=\"https:\/\/flevy.com\/browse\">Flevy documents marketplace<\/a>.<\/p>\n<h2>Do You Find Value in This Framework?<\/h2>\n<p>You can download in-depth presentations on this and hundreds of similar business frameworks from the\u00a0<a href=\"https:\/\/flevy.com\/pro\/library\">FlevyPro Library<\/a>.\u00a0\u00a0<a href=\"https:\/\/flevy.com\/pro\">FlevyPro<\/a>\u00a0is trusted and utilized by 1000s of management consultants and corporate executives. Here\u2019s what some have to say:<\/p>\n<blockquote><p>\u201cMy FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market.\u00a0 They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.\u00a0 I strongly recommend FlevyPro to any consultant serious about success.\u201d<\/p>\n<p>\u2013 Bill Branson, Founder at Strategic Business Architects<\/p><\/blockquote>\n<blockquote><p>\u201cAs a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.\u00a0 For us, it is an invaluable resource to increase our impact and value.\u201d<\/p>\n<p>\u2013 David Coloma, Consulting Area Manager at Cynertia Consulting<\/p><\/blockquote>\n<blockquote><p>\u201cFlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!\u00a0 The quality of the decks available allows me to punch way above my weight \u2013 it\u2019s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.\u201d<\/p>\n<p>\u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>The concept of Return on Investment (ROI) was formed as part of the concept of Value Creation.\u00a0 The origins of ROI were in the Manufacturing sector, where it\u2019s simple to measure time and output. \u00a0Next, to adopt the concept was the Banking industry where intense competition necessitated Innovation Management and with that the need to&hellip;&nbsp;<a href=\"https:\/\/flevy.com\/blog\/roti-return-on-training-investment-calculations\/\" rel=\"bookmark\"><span class=\"screen-reader-text\">ROTI: Return on Training Investment Calculations<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":8982,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[85],"tags":[2456,209,1459,2457,450,2455,2453,2451,2452,2454,1199],"class_list":["post-8978","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-organization","tag-bcr","tag-business-performance","tag-innovation-management","tag-payback-period","tag-performance-management","tag-performance-measures","tag-return-on-training-investment","tag-roi","tag-roti","tag-training-program","tag-value-creation"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/8978","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=8978"}],"version-history":[{"count":8,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/8978\/revisions"}],"predecessor-version":[{"id":8992,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/8978\/revisions\/8992"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/8982"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=8978"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=8978"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=8978"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}