Synapsys Blog - Return on Investment (ROI) models

Return on Investment (ROI) models

The starting point for most ROI models is the formula TB-TC/TC x 100. To work out your ROI, take the total benefit, deduct the total cost, and express the difference as a percentage of the total cost. Straightforward as far as it goes, but it doesn’t give you any clues on how to measure the costs and benefits…

There are a wide range of models that at least give pointers on how to approach the issue. Kirkpatrick’s four levels of assessing training is probably the most cited model. It suggests evaluation is conducted against four levels.
1. The learner’s reactions
2. What they have learned
3. How much that learning has been transferred into the work environment
4. What impact the transfer has had on the bottom line

You may be forgiven for thinking that the only measure that matters is level four. While it’s the ultimate measure of return on investment, evaluation at levels One to Three is critical if you aspire to continue and improve the intervention into the future.

Again, good as far as it goes, but how might you go about the measurement process? All effective models essentially include
1. Deciding on the impact you expect, and therefore what you need to measure
2. Measuring it
3. Analysing what you find
4. Reporting on ROI

Have a look at the Phillips Ten Step Model; it’s a good generic approach. (page 2).

We’ve been involved in several projects however where a valid ROI model was applied, and then ignored. Why? Because it didn’t measure the right things for the decisionmakers that mattered. Make sure your model gathers data that is meaningful to your organisation.