Training and Development is a formal process of changing employee behavior and motivation in the way that will enhance employee job performance and then organizational overall performance. It is defined as the HRM function that formally and systematically provides new learning to increase employees’ capabilities so as to increase their current job performance and future job performance as well. It will contribute to achieve individual employee goals and organizational goals as well. It is a function that will give capabilities to employees so that they will be able to perform their jobs successfully.

Purpose of Training and Development

 Training helps the organization, the individual, and the human relations of the workgroup. They consider T&D as an investment the organization makes in employees and that investment pays dividends to the employee, to the organization, and to other workers. Hence purposes of T&D are many. They can be perceived as advantages of T&D. They are discussed from the point of organization and the point of employees. Followings are the point of the organization.

 

·         To increase the quality of the product (due to better understanding and better capabilities)

·         To increase the quantity of the product (due to improved understanding and capabilities)

·         To increase productivity (due to increased quality and quantity)

·         To reduce wastage (because of lowering mistakes, errors and disorders)

·     To reduce the number of accidents and resultant costs (because of the right workings and serious adherence to health and safety requirements)

·         To lower the cost of maintenance of equipment and tools (because of proper handling)

·       To reduce the degree of supervision (because of improved knowledge, skills, and right attitudes acquired by employees who are more dependable and responsible)

·         To improve employee motivation (enthusiasm of one employee)

·         To increase employee morale (enthusiasm of group of employees)

·         To prevent employees from obsolescence (due to modernizing knowledge and skills)

 

The relationship between training and productivity is positive and significant generally. When the degree of training increases the degree of productivity will get increased (assuming that other factors remain constant). When the degree of training reduces of productivity also gets reduced.   

Financial Return of Training and Development

With companies scrutinizing costs and tightening purse strings, how do they prove that training/education is worth the investment? A first-rate evaluation study may be necessary to justify the investment of time and capital in a training/education offering.

 The classic model to evaluate training/education offerings developed by Kirkpatrick

(1998) looks at four levels of assessment:

 ·         Student reaction,

·         Learning,

·         Behavior, and

·         Business results.

 When looking at the business results of training, many critics say the Kirkpatrick model does not go far enough in analyzing the impact of training/education on a company’s bottom line. Training/education offerings should be evaluated at a fifth level--financial return. There are several methods for evaluating training/education offerings based on financial return and these methods include both quantitative and qualitative assessments.

 Quantitative Assessments for Determining Financial Return on Training

 Experts in the field identify three methods for evaluating training/education offerings that provide a measure of the value of the offering utilizing a cost/benefit approach:

 

·         Benefit-Cost Ratio,

·         Return on Investment, and

·         Forecasting.

 

The information provided by using these models can be used to compare one offering to another based on its contributions to the overall return to the organization.

 

The methodology for Benefit-Cost Ratio and Return on Investment is similar in that both require the determination of costs and benefits and using that data to calculate the ratio or return. However, the results in the calculations are expressed differently and lend themselves to alternative presentations. For example, the results from the Benefit-Cost Ratio analysis can be presented in a ratio but also are easily communicated in a narrative. The results from Return on Investment analysis are always presented in percentages.

 Benefit-Cost Ratio

 Benefit-cost ratio (BCR) analysis allows decision-makers to determine the financial return on a training/education program by comparing benefits and costs. BCR is calculated by taking the program benefits and dividing those benefits by the program cost.

         


                                                        

                                                                

Program Benefits can be one or more of the following financial gains for training and development:

·         Time savings,

·         Increased productivity,

·         Improved quality of output, and/or

·         Enhanced personnel performance.

 

Program Costs can include the following expenses related to training and development offerings:

·         Course development or purchase,

·         Instructional materials,

·         Equipment and/or facilities,

·         Salaries of instructors and staff, and/or

·         Lost productivity due to training attendance

 

The result of the calculation is expressed as a ratio. For example, if the BCR calculation yields a ratio such as 4.5:1, this means for every one dollar of cost invested in training, there will be 4.5 dollars in benefits from the training program.

 

For any BCR that is less than 1:1 such as 0.80:1, the total monetary benefits are less than the total monetary costs and would indicate a less desirable offering. For any BCR that is greater than 1:1, the monetary benefits will be greater than the costs indicating a more desirable training /education of