Valuing the investment in organizational training

Abstract

Purpose

The purpose of this paper is to provide a better methodology for evaluating the value of corporate training to make it easier to compare with other organizational investments. The paper also seeks to propose and demonstrate how “time value of money” and “hurdle rate”, which are significant components of traditional investment valuation methods, can and should be incorporated into the valuation of organization training.

Design/methodology/approach

The training investment evaluation methods most commonly used by the training professionals were identified and compared to investment evaluation techniques used to measure the value of other investments made to improve and expand business activities.

Findings

The survey of training investment evaluation literature showed that there are two major problems in the methods utilized by the training professionals. One of the problems was associated with the measurement and monetization of costs and benefits of the training activity. The other was the non‐comparable return values’ generated by the non‐uniform methodologies used by the training professionals. Both of these issues were addressed and shortcomings of the currently used methodologies where changes should be made to improve this process were identified. A new methodology, which will make the evaluation process more acceptable to the company management, was developed and its use was demonstrated.

Research limitations/implications

Unfortunately, the issues associated with monetization of costs and benefits could not be fully addressed. This is much more organization specific and specific to the type of training provided. However, some examples were provided of how this activity could be uniformly applied.

Practical implications

The paper provides a new and more acceptable methodology for the use of training professionals and organizations to evaluate the value of training.

Originality/value

This paper applies a “financial analyst” or a Chief Financial Officer perspective to organizational investment in training and provides a tool for evaluating its value the same way organizations evaluate their other investments (e.g. acquisitions, factory expansions, product development).

Citation

Murray, L.W. and Efendioglu, A.M. (2007), "Valuing the investment in organizational training", Industrial and Commercial Training, Vol. 39 No. 7, pp. 372-379. https://doi.org/10.1108/00197850710829085