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Return-on-Training-Investment Tool

Objective

In the 2005-2007 period, the CTHRC conducted three independent studies addressing the question of financial benefits of employee training. Specifically, the objective was to develop a generic easy-to-use practical measuring tool for estimating Return on Training Investment (ROTI). The study was conducted from the point of view of business owners or business operators.

Methodology

The CTHRC National Occupational Standards were used as the basis for examining the occupations in the Tourism sector.  All the occupations for which National Standards exist were classified into five main industry groups:

• Food and Beverage
• Accommodation
• Recreation and Entertainment
• Travel and Tour Services
• Transportation

As a large part of the project, extensive research was conducted on several leading academic studies dedicated to training. The results of the studies were analyzed, compared, summarized, and brought to test in real tourism establishments.

As part of the project, consultations and interviews were held with a number of selected experts and business owners to obtain further insights and opinions in the development of the ROTI measures. The people to be interviewed were selected by the CTHRC.

It was agreed that the most useful source of information for estimating ROTI was management judgment and observation, considered to be an aggregation or amalgam of information from the other sources.

Information was collected from operators and managers who have a good understanding of the impact that training might have on their own organization.

Training Outcome Conclusions

The results of the analysis suggested that the measures that best reflect the impact of training on tourism-related organizations fall into the following categories:

• Customer impacts – what happens to customers and how they feel about it
• Direct organizational impacts – what happens to productivity and efficiency, and cost reductions in the organization, including changes to employee behaviour, and
• Sales and revenue impact – what happens to revenue and sales in the organization.

Recommended Measures

Based on the research and interview findings, as well as on preliminary conversations with the CTHRC, the following measures were proposed:

Customer Satisfaction

Increased customer focus and customer satisfaction was identified as the primary benefit of training. Admittedly difficult to quantify, customer satisfaction of the employee performance was to be measured as a percentage value and recorded ‘before’ and ‘after’ training.

Employee Competence

Employee competence was outlined as one of the most important benefits of training. Also difficult to quantify, employee competence was also assigned a percentage value, to be recorded ‘before’ and ‘after’ training.

Cost savings

Much of cost savings is seen to come from reductions in the costs associated with recruiting and training new staff. Cost savings reflect the reduction in costs produced as a result of having trained employees perform more efficiently and productively. Combined with increases in sales, cost savings produce most of the direct financial benefits of training.

Labour Turnover

Reductions in labour turnover are seen as one of the primary benefits of training.  The labour turnover rate needs to be measured within a specific period of time. The labour turnover rate is calculated by number of employees who left over the last 6 months divided by the total number of employees currently employed.

Sales

Sales values ‘before’ and ‘after’ training were identified as one of the most important training benefits.

Upselling

Upselling received a strong endorsement as a measure of the benefits of training.  Businesses are recommended to offer financial compensation for upselling, not only to food and beverage servers, but also to reservations agents and front desk operators who can upsell hotel rooms from the mid-range to higher priced rooms.

Example of White Point Beach Resort in Liverpool, Nova Scotia

Thomas, the Tourism and Guest Services Manager at the White Point Beach Resort in Liverpool, decides to send some of his staff for training. After they are trained, he wants to find out whether this training benefited his business. He is particularly interested in the impact of training on his organization. He collects the information he has available to compare the situation before and after training, and uses his own expert judgment where data are not available. All the calculations are done for him on this easy-to-use spreadsheet and he leaves with a summary statement and a good understanding of the benefits of training.

The Results of Training

After gathering relevant ‘before’ and ‘after’ data and analyzing it with the ROTI tool, Thomas observed a significant increase in business profitability and employee satisfaction. Here are the concrete numeric figures that illustrate the financial return on investment on employee training at the White Point Beach Resort:

• Average sales volume per employee per week after training increased 30% (from $6,512.00 to $8,173.00)
• Staff turnover in the six-month period before training was 10%. It dropped to 0% after training, generating a decrease of 10%
• Percentage of fully competent employees after training increased by 10% (from 90% to 100%)
• The Cost Savings value per employee per week was calculated to be $400.00

Apart from financial benefits, Thomas also saw an increase in customer satisfaction manifested by the number of repeat customers and increase in word-of-mouth referrals.

What’s Next

The Canadian Tourism Human Resource Council (CTHRC) has released its online Return on Training Investment (ROTI) tool for use by members of the tourism sector. Available free of charge at employersofchoice.ca, the tool provides the true value or cost of investment made in training or related activities for any department or occupation at a tourism establishment.