Deon Oberholzer, CEO of Gestalt Growth Strategies and co-founder of ProudAfrique Human Capital, believes asking how a company can effectively see a return on investment (ROI) through skills development and training is the wrong question.
“The real question is: How can a company not see a significant ROI by investing in their own people. Businesses have to do their part to employ people with the potential to be skilled to meet their requirements and then invest in those people.”
He adds that companies must take ownership for developing their employees — and that a company is more likely to help a person who is already helping themselves.
Linda Chonco, senior manager of training and skills development at Transnet Port Terminals, is of the opinion that skills development in South Africa has grown exponentially due to progressive legislation that has allowed for a more inclusive and transformative approach.
Legislation has had an impact on the way organisations view training, its purpose and its value. Over the last eight years, South Africa has been investing substantially in skills development under the requirements of the South African Qualifications Authority Act, the Skills Development Act and Skills Development Levies Act.
Training budgets are growing and additional training and development programmes are being implemented as part of many organisations’ employment equity and workplace skills plans.
“The future of work requires new skill sets as well as robust transformative approaches. We have, over the years, embraced the opportunities offered by youth, women and persons with disabilities. We understand that through this inclusive approach, we can recognise their full potential,” says Chonco.
However, training and skills should not be the end state. It is imperative for line managers to take the lead in driving a life-long learning culture that translates learning into practice.
“Once a company or institution knows its baseline and the envisaged desired outcomes, they need to reinforce the learnings and offer stretch projects that will have an impact on the business. This ensures accountability and ROI. Through such applications, you can show the value of the programme.”
Chonco adds that Transnet has successfully achieved this through the implementation of Lean and Six Sigma projects that “translate into the reduction of waste in our processes”.
According to Jaco Posthumus, head of operations for LFP Training, there are many ways an organisation can achieve ROI through skills development. “Companies not only receive incentives through SARS (or funding from their Sector Education and Training Authority), but they will see an increase in productivity when employees apply new skills more effectively in the workplace.”
Posthumus adds that meaningful implementation of skills development will result in a sharp rise in a company’s B-BBEE levels, “which will ultimately result in more business”.
“By absorbing unemployed learners, companies receive bonus points for skills development. This could be the determining factor between your organisation and your competitors when it comes to obtaining business from government or private companies.”
Training is not a once-off event, but a continuous process in achieving organisational effectiveness. The ultimate aim of any training programme is to improve organisational performance that will add to effectiveness and profitability. How do you performance manage staff if training has not taken place? In order to measure performance, the monetary value of the performance in its current status must be determined.
After the training intervention has taken place, the employee’s performance must then be measured again to determine whether there was an improvement and, if so, the level achieved. ROI is then calculated through a cost-benefit analysis by determining the cost (investment in training) versus the benefit of the learning that has taken place.
“With a gap in the education system and a lack of skills, it’s vital that corporates come to the party by up-skilling and helping with the reduction in unemployment,” Posthumus says. He adds that preferring to do business with B-BBEE compliant companies only forces other organisations that aren’t compliant to come to the party.
“The codes incentivise companies to do business with qualifying small enterprises (QSEs) and exempted micro enterprises (EMEs), resulting in the growth of smaller organisations and ultimately creating more employment opportunities,” Posthumus adds. Training is a crucial part of this equation.
Measuring ROI is a powerful tool that enables managers to prove the value of training, and understand whether the value it provides is persuasive enough to justify further training and contribute to achieving organisational effectiveness.
The good news is that ROI can be determined by using a simple formula. It is the measure of the monetary benefits obtained by an organisation over a specific period in return for a given investment in a learning programme. In other words, it is the extent to which the benefits (outputs) of training exceed the costs (inputs).
ROI is a key indicator of the value of training investments and costs. It’s a ratio of net benefits to costs, expressed as a percentage. The formula is as follows: [(monetary benefits – the cost of the training) / cost of the training] x 100
ROI (%) = BENEFITS – COSTS / COSTS x 100