Despite the current economic slowdown, the newspaper industry still faces a huge worker shortage as many of its veteran press crews retire over the next few years.

How can you do more with less during this economic downturn and still keep your employees loyal when the economy improves? Training.

Yet training often happens only when managers can quantify how it contributes to the bottom line.

As with justifying capital expenditures or new employees, training requires a concrete return on investment. Here’s a simple, three-step process to quantify training’s ROI.

Step 1

Calculate the total direct and indirect costs associated with training.

Before-training costs might include any one of the following: frequency of errors, labor hours per unit of production or service, cost of scrap materials, number of rejected or defective color photos, volume of lost ad sales, absentee rates, turnover rates or customer dissatisfaction.

Another way to measure costs is to compare groups of employees receiving training with a control group that has not, then measuring each group’s productivity and performance.

To isolate training’s benefits, identify key factors driving employee performance and business outcomes. You can do this by conducting focus groups, handing out questionnaires or observing how tasks are performed. Possible contributors include interrelated employees and groups in a process.

Remember to carefully consider all indirect costs, such as staff time, use of existing materials, equipment and classrooms. The term “fully loaded costs” is sometimes used to designate that the cost of a program includes both direct and indirect costs. Fully loaded costs could include course development, implementation wages and salaries for trainers and staff, loss of revenue during training, course materials and equipment and incidentals such as travel, food and lodging.

Step 2

Calculate the quantitative and qualitative benefits of each training course. Qualitative effects of training on the bottom line should always be identified, quantified and converted to dollars.

Keep in mind qualitative effects include both tangible and intangible benefits, frequently described as hard and soft data, respectively.

Hard data is quantitative in nature — statistical, number-oriented and easily translated into monetary benefits. Examples might include upfront costs, the cost of rejects, the hours of downtime caused by equipment failure, the amount of wasted newsprint and the nature and number of injuries or “light duty” work.

Soft data, on the other hand, includes qualitative, intangible benefits that are subjective and more difficult to measure. Many of the gains are accrued over time, such as decreasing the time required to learn a job (in estimated dollar savings), improving job satisfaction, improving teamwork, increasing organizational commitment and more clearly defining promotion opportunities.

The hard and soft data monetary values are added together to determine the worth — that is, the net program effects value — of your training program.

Step 3

Compare the benefits of the total training program to the incurred costs. This equation uses the effects data and the incurred costs data.

(Net Program Effects Value/Total Incurred Costs Value) X 100 = ROI

For example, if the net program effects value of one training program is $15,000 and the total incurred costs are $10,000, then:

($15,000/$10,000) X 100 = 150%. s

Ken Columbia is the Newspaper Association of America’s director of industry staff development. He can be reached via e-mail at coluk@naa.org. This article originally appeared in the January/February 2002 edition of TechNews and is reprinted with permission.