Executive Summary A Study on Return on Investment of ... - Vikalpa

A BCR of one means that the benefits equal the costs. A
BCR of two, usually written as 2:1, indicates that for each
rupee spent on the programme, two rupees were returned
as benefits.
ROI Formula
Perhaps the most appropriate formula for evaluating
training investments is net programme benefits divided
by cost. The ratio is usually expressed as percentage
when the fractional values are multiplied by 100. ROI
can thus be expressed as:
38
Net Programme Benefits
ROI (%) = x 100
Programme Costs
The ROI value is related to the BCR by a factor of one.
This means, for example, that a BCR of 2.56 is the same
as an ROI value of 156 per cent. An ROI on a training
investment of 60 per cent means that an additional 60
per cent of the costs are reported as ‘earnings’. An ROI
on training investment of 150 per cent indicates that the
costs have been recovered and an additional 1.5 multiplied
by the costs is captured as ‘earnings’.
Payback Period
The payback period is a common method for evaluating
capital expenditures. With this approach, the annual
cash proceeds (savings) produced by the investment are
equated to the original cash outlay required by the investment
to arrive at some multiple of cash proceeds
equal to the original investment. Measurement is usually
in term of years or months.
Payback Period =
Total Investment
Annual Savings
DATA ANALYSIS AND RESULTS
The calculations are based on a series on impact questions.
Five adjustments are made to ensure that the data
is credible and accurate:
1) The participants who do not complete the questionnaire
or provide usable data on the impact questions
are assumed to have made no improvement.
2) Extreme and unrealistic data have been omitted.
3) Only annualized values are used as requested in the
responses.
4) The values are adjusted to reflect the confidence level
of participants.
5) The values are adjusted for the amount of the improvement
related directly to the programme.
These five adjustments create a very credible value that
is usually considered to be an understatement of the
benefits accrued due to the training imparted. Tables 3
and 4 give the estimates of training impact from participants
in the different programmes.
LIMITATIONS OF THE STUDY
The method chosen to isolate the impact of training is
meant to obtain information directly from the programme
participants. The effectiveness of this approach
rests on the assumption that participants are capable of
determining or estimating how much of a performance
improvement is related to the training programme. This
is one of the major methodological limitations of such
studies. Erroneous, incomplete, and extreme information
could have distorted the analysis. While calculating
ROI through this method, the participants should
know how much of the change was caused by applying
their learning from the programme.
Apart from this, the following limitations have been figured
out in the present study:
1) The exact figure for cost of participants’ time was not
available. Hence there is a possibility that the estimations
made are not accurate.
2) Suitable responses from all the participants were not
available. This means that the effectiveness of both
training programmes taken into consideration has
been an extrapolation of the responses, which were
made available. The assumption here is that similar
benefits would have accrued from the participants
who did not make their response available.
3) There was no possibility of even experimenting with
the control groups since the project commenced posttraining.
4) The participants of both the programmes were posted
all over the country, making distance a barrier for
conducting in-depth interviews.
The presence of participants across the nation also made
it difficult to obtain post-training data from more than
one source, i.e., the participants themselves. This was a
unique problem that was uncovered particularly with
the Threshold Programme participants. Since they primarily
occupy high leadership positions, they do not
A STUDY ON RETURN ON INVESTMENT OF TRAINING PROGRAMME IN A GOVERNMENT ENTERPRISE IN INDIA