The cost of everything.....
Written byon 23 April 2014
While cost is not the sole measure of value, there is no doubt that placing a monetary valuation on the impact of training is the gold standard of evaluation. I have not tested this out but I reckon that 'return on investment' (ROI) is the topic most written about by TJ bloggers and understandably so.
Essentially ROI approaches seek to echo economic evaluation methods. Economists in fact have long been concerned with placing a monetary value on, well, pretty much every activity associated with human life from how we chose to allocate our leisure time, to whether we decide to park our car illegally or not to the effects of alcohol consumption.
The starting point for economic evaluations of workplace learning is 1927 when two economists - Paul Douglas and Colin Cobb developed a means of measuring organisational productivity (the thrillingly named Cobb Douglas production function which is still very much in use today). Economic evaluation has spiralled off into many different approaches since then: cost benefit analysis, cost effectiveness, cost analysis and cost utility analysis.
Few of these techniques though are directly used by training evaluators. In principle though economic evaluation isn't that difficult. Here's a three step guide to cost benefit analysis:
Step 1: decide what are the costs associated with introducing training are.
Step 2: identify what commensurate monetary values can be attributed to the benefit of training.
Step 3: decide what aspects of steps 1 and 2 are 'set up' costs? For example the cost of evaluating a training programme is a one off, (normally).
Step 4: strip out step 3 costs (these are called Input costs) and compare what's left (called Activity costs and benefits).
Of course, in practice things are inevitably a bit more complicated. Take costs. It's good to be reminded by economists that we need to consider costs when evaluating training, including the cost of evaluation itself but which costs should be attributed to a programme? If delivered by an in house team should a proportion of the firms fixed costs be included? While being trained workers aren't being productive - how should that be accounted for? Think about benefits. Economists do try to place a monetary value on things that you won't find in the shops but how do you value in cash terms the benefit of say diversity or leadership training? Not easy.
With evaluation there isn't a one size fits all. Actually why should there be? We don't take a homogenous approach to training methods. Rather we tailor our content and deliver to the subject and learners. It's worth, though, thinking about economic evaluation as part of the toolkit of approaches we can use to assess the difference training has made. Cost effectiveness analysis, for instance, compares the relative merits of two or more interventions. Now how often do we compare the effectiveness of different training programmes?
We shouldn't see the value of training just in terms of its net worth in monetary terms, but nor though should we ignore costs and benefits.