What is the ROI on This Training, Andrew?
It’s probably one of the more common questions I get asked by CFOs or L&D teams when we are talking about the upskilling of their finance teams.
It’s a valid question, but I suspect they ask me because they think it’s impossible to quantify, and they have convinced themselves it’s too expensive.
Well, it’s not.
And when you break it down, the case for the training becomes even more compelling.
Breaking Down the ROI Calculation
So let’s make it easy and show you ways you can work this out. Because it will be different for every client.
The first part of working out the ROI is the investment. That’s easy. You know how much you are paying for the programs we deliver.
They will be anywhere from a couple of hundred dollars per employee up to around $3k per employee.
Let’s say for 10 people, a solid program expected to deliver change may be $20k.
Determining the Return
Now the return: how do you determine that?
Once we have finished our programs, one thing we recommend is an incremental tracker to isolate and quantify the exact value the finance team is delivering.
Keep track of every project, initiative, process improvement, etc., that finance was involved in, and track the incremental value finance brought by being part of those things.
A bit like what Procurement does: they track the savings they bring to each negotiation between the starting price and the final negotiated price.
Now this won’t feel like a lot initially or time well spent. But track it over every initiative finance is involved in over the space of a year, and regularly keep it updated and spoken about as a team, and it soon adds up.
You have to make it a way of working.
Calculating the ROI
Then it’s simple maths: divide the second number by the first and you have your ROI.
Over the past 8-9 years, we consistently see finance teams improving bottom line impact by approximately 1-1.5% of revenue. And that’s conservative and should be your goal at the very minimum.
Real-World Example
For a $200m turnover business, you probably have a team of 10 you would put through our programs.
Conservatively, 1% of $200m is $2m in improvements they should be able to realize over a year.
$2m divided by $20k in investment = 10,000% ROI!!! And that’s being conservative.
Conclusion
I don’t know about you, but I would sign off on any business case that provided that sort of return!!!