Models and Approaches of Evaluating Return on Investment - Case Study Example

Models and Approaches of Evaluating ROI Date: Models and Approaches of Evaluating ROI Introduction Evaluation is an important element in training design models since it elaborates how training activities tends to fulfill the needs and objectives of the business. In essence, evaluation is conducted to determine whether a particular instructional design is efficient by analyzing its deliverables as compared to the needs and goals of the business in general. However, despite the high degree of importance that has been placed on evaluation methodologies, still they are still missing or rather least practiced due to a number of underlying factors. Some firms fail to implement evaluation or implement assessment techniques that are consistent with the business needs due to insufficient allocation of funds to such activities while others cite limited time as the reason evaluation is not efficiently implemented in their organization. However, for most firms a sense of blind trust of training programs has been the primary reason assessment either inconsistent or missing (Stone, 2011). They tend to believe over the training solutions that are in place to the point that they cannot evaluate them since they assume they are in-line with the needs of the business. That notwithstanding, evaluation is complex in nature as it incorporates a number of changing elements in regard to training, learners, and instructional technologies are concerned. Evaluation activities are multi-faceted in nature as they serve to attain a number of goals that include; assessing instructional materials, checking the efficiency of transfer of training, evaluating students’ learning and computing return on investment. The paper compares the Philips’ return on investment model with the Bruce Aarons’ V model. 1. Philips’s ROI Model The model is comprehensive as it is founded on a number of notable theories i.e. Kirkpatrick’s learning evolutionary model and Philip’s ROI methodology. The approach is mainly concerned with building a chain of impact by linking the effects to the various levels of real training activities and their impact on return on investment. It tries to elaborate measurement of the impact of training investment as it can come from any form of training activity i.e. from management and leadership programs that give rise to coaching skills to training activities that develop advisory skills. The various impacts that are felt at different levels have some form of financial effect attached to them, thus creating an impact on the return of investment arising from the training activities (Phillips, 2010). Reaction and satisfaction of the planned training activities are the first levels of this model. At this phase, the evaluator checks to establish whether the individuals participating in the coaching or training exercise are satisfied with the process. Do they perceive it to be important as far as their organizational roles are concerned? It also establishes whether the subjects have learned new concepts, ideas, knowledge or skills that are relevant or rather add value to their roles in the firm. Additionally, the level seeks to determine if the individuals involved in the training activities are committed to implementing the skills and knowledge acquired in their routine roles at the organization. Learning comes in as the second phase in the ROI model (Phillips, 2010). The stage is precisely meant to measure the level of knowledge and skills gained from the training exercise and determine the degree to which the overall knowledge base of the participants have improved concerning what they have learned. The third level in the model is the application and implementation phase that specifically deals with measuring the degree of organizational change, changes that can be attributed to the behaviors of the participants and on-the-job application in regard to the skills acquired as a result of the training. It is at this level that the efficiency of the training program is determined, by the degree, to which the skills and knowledge will be transformed into actual job implementation will depict that indeed the training session was relevant. The fourth phase deals with the business impact that the training process has had on the organization in general. After the skills and knowledge acquires as a result of the training activities has been implemented in the firm’s operations it will affect the business either positively by translating to better results or negatively by causing a negative deficit. The final level involves computation of ROI. Here a comparison is made between the capital the organization utilized in the training investment and the overall business outcomes that have been acquired out of the implementation of skills and knowledge from the training activity (Phillips, 2010). ROI is computed as follows; (Total Program Benefits – Total Program Costs) / Total Program Costs x 100% Based on the model when a training program is implemented it should be able to create a chain of impact at the five levels. For instance; the knowledge and skills that are learned at level 2 should be implemented, on level 3 of the model, to develop business impact at level 4 that can eventually be translated to return on investment. Otherwise, if measurement of the impact of training is not determined at each level, then it would be difficult to substantiate the overall business impact of the program. Relatively, in case where a negative ROI is obtained it implies a broken link was experienced at some point between the levels i.e. the subjects did not learn or were not in a position to implement the skills acquired in the business setup. 2. V-Model for Learning and Management V-model employs a reflective analysis technique in that it identifies the metrics and requirements simultaneously through a top-down assessment of the various levels of the model. For instance; the business needs of an organization are achieved by coming up with performance capabilities that are enabled by the creation of personal performance attributes that, on the other hand, are actualized through learning. The stages on the left arm of the model are analytical metrics that will finally lead to the implementation of a solution that will be linked to the overall business need. The correlation of parameters between the various levels of the model provides an assertion to the real effect of training to business results. Symmetry is a major advantage of the design as it is designed in a manner whereby it can provide a direct link to the analysis and the measurement stage. Similarly, it ensures the right decision maker or sponsor gets only the results that are crucial to them (Morgan, & Duncan, 2008). Evaluation and Comparison Models or Approaches Seeming Similar or Compatible The two models are similar in the fact that both are designed in phases whereby each stage has its objective to satisfy but in pursuit of achieving the overall business need of the organization. Despite the differences that are exhibited in the various stages the overall objective or rather goal of the two models is determining the return on investment of the training activities. Similarly, both models employ a recursive analysis whereby each phase is evaluated individually by determining its impact on the overall business need. The activities at each stage have a direct effect on achieving the objective of the organization. Conversely, both of the models concur to the notion that if a disjoint occurs in between the levels of the model, then the business needs will not be accomplished as required. Models or Approaches’ Different Orientations However, significant differences are exhibited in the design orientation of the models. In Philip’s ROI model, a linear design is implemented whereby evaluation takes place recursively through the four stages before return on investment is computed in the fifth phase (Nickols, 2003). Conversely, the V-model employs a V design just like the name suggest whereby one arm represents analysis of the training needs that will develop metrics that will link them to results on the other arm. In between the two arms are the decision makers or rather the sponsors who will benefit most from the level’s results. During the evaluation process the V-model will tend to be a bit complicated as compared to Philip’s ROI model since the metrics that will be analyzed at each step are many and the model requires the correlation of each learning need with its corresponding result at that particular level. Thus, it provides an analysis that is more insightful as the relationship between the needs and results are elaborated in a more vivid manner (Gina Abudi, 2008). Models or Approaches Fitting the Organization I Work The V-model will be appropriate for my organization since the way in which its analysis is conducted together with the elements that are tested best fits the needs of our organization. Moreover, the model examine approach of top-down assessment to an organization need is in tandem with the company’s hierarchical organizational structure, design and employee training and development capabilities and requirements. Implications of Using Various Evaluation Models Evaluations are essential, especially when the organization is set to undergo certain strategic transformations that will affect its overall operations. Thus, evaluations will be conducted to ascertain the various impacts that those changes will have on the firm and devise the best techniques to address the situation. For instance when the organization wants to re-design the current training process that is implemented in the company an evaluation will be ideal. Other circumstances that also require evolutional activities include; situations when the company wants to develop alliances between various functions of the organization and when it seeks to re-evaluate the human resource duties that are needed for the evaluation of the training offered by the firm (Stone, 2011). Criteria to Determining Most Appropriate Model & Approach to Evaluation A number of criteria can be implemented when choosing the evaluation approach based on the needs of the organization. Based on time as the primary element the rules would involve issues such as; time used to rectify quality issues, the time it takes to train, and the duration of the product lifecycle. Similarly, based on development and promotion issues such as; the number of days spent in training and individually rated performance improvement will form the basis of the criteria. Both approaches tend to have similar impacts on the organization since they are both aimed at establishing the level of benefits that training activities will have on the overall business needs (Stone, 2011). Conclusion It is evident the use of the both Philips and V model for conducting evaluation in an organization are advantageous, even though, they differ in one way or another such as the placing of emphasize on one aspect while ignoring the other, thus creating room for assumptions to be made on some elements lieu of providing a thorough refinement process Therefore, it is imperative that a comprehensive evaluation involving a number of factors is done to ensure that each aspect of the models is examined in tandem with organizational training elements to determine the right model and approach of assessing the Return on Investment. References Gina Abudi, M. B. A. (2008). Using Return on Investment to Evaluate Project Management Training. Morgan, K. M., & Duncan, J. R. (2008). The ROI fieldbook: Strategies for implementing ROI in HR and training by Patti Pulliam Phillips, CPT, Jack J. Phillips, Ron Drew Stone, and Holly Burkett, CPT. Nickols, F. W. (2005). Why a stakeholder approach to evaluating training. Advances in Developing Human Resources, 7(1), 121-134. Retrieved from http://www.nickols.us/stakeholder.pdf Phillips, P. P. (Ed.). (2010). ASTD Handbook for Measuring and Evaluating Training. American Society for Training and Development. Stone, R. (2011). ROI is like a box of chocolates. Read More