Editor’s Note: This article was originally published by Web Marketing Today. Practical Ecommerce acquired Web Marketing Today in 2012. In 2016, we merged the two sites, leaving Practical Ecommerce as the successor.
All too often in the nonprofit world, budget constraints force organizations to make hard choices between funding programs and training employees. Important charity rating services like GuideStar.org and CharityNavigator.org weigh their evaluations heavily against high levels of “administrative spending,” and unfortunately employee training falls in this category. Nonprofits can, however, realize a good return on investment in training if they are careful to measure training outcomes as they relate to organizational goals.
McKinsey & Company, the international consulting firm, published the results of an interesting research study it conducted for Boys and Girls Clubs of America (BGCA). McKinsey concluded that training programs generated greater value for organizations when the subject matter related to key performance indicators for the organization and that “testing real-world outcomes” was crucial.
The BGCA study tested the value of leadership training. McKinsey conducted an extensive analysis of 50 aspects of organizational performance and identified four key skills that contributed the most to growth in membership and increased fundraising, which were top organizational goals. The training programs developed focused on these four skills: (a) “the leader’s ability to build an effective board, (b) find and pursue effective revenue-development strategies, (c) use an investor’s mindset toward programs and resource development, and (d) lead with personal tenacity and persistence.” McKinsey also carefully selected control groups so that they could compare the results of the training program.
The result of the nationwide training program was a 4:1 return on investment. McKinsey documented that the training resulted in increases in membership and revenue four times greater among the trained leaders than in the untrained, control group.
While not all nonprofit organizations can afford to hire outside consultants like McKinsey & Company or conduct extensive testing, there are valuable lessons to be shared from this study. BGCA identified measurable organizational goals — specific percentage growth in membership and fundraising revenue — and then identified employee skills gaps that could be improved to impact these areas. They then planned training programs that were linked to their organizational goals so that they were able to measure their return on investment in training. The training program more than paid for itself in ways that were tied to key performance indicators (membership and revenue) for BGCA. It should be possible for most nonprofits to duplicate this training process (but not the research study) on a small scale.
There are many good reasons to invest in training employees. But which training topics should your nonprofit invest? The answer depends upon your organizational goals. You may need to recruit a strong board, increase fundraising, win more grants, or retain more volunteers to meet your goals.
Some additional reasons to train include:
- Improve efficiency, productivity, save money;
- Reduce errors, liability, and risks (improve risk management);
- Increase job satisfaction and retain key employees, reduce turnover;
- Increase donor and volunteer satisfaction;
- Save supervisory and administrative time;
- Training and career development are important employee benefits.
While you should let your own key performance indicators, goals, or outcomes determine training topics, you also need to identify employee skills gaps. For example, BGCA found that lack of leadership skills was contributing to declining membership. In a different organization, the same problem might be due to a different skill gap, such as poor customer service. One simple way to identify skill gaps is to survey managers, front line employees, and clients.
Possible Training Topics
Training topics that are overlooked, but may be important contributors to organizational performance, include the following.
- Organizational values. This is especially important in the nonprofit world. Good training programs are the best way to be sure your employees know what your organizational values are and to emphasize that management places a high significance on them.
- Brand identity. Your brand identity represents the heart of your organization. Be sure your employees understand it and represent it well.
- Customer service. It can be easy in an nonprofit to forget that there are “customers.” These may be the people that we serve, our donors, volunteers, or fellow employees. Good customer service skills are important in all types of organizations and at all levels.
- Technology. Basic computer skills (such as computer skills) are required by many employees. The return on investment can be found in improved productivity and less need for administrative support. Some NPOs rely on specialized software or equipment. Ongoing training is especially important in such cases. In some organizations, such as healthcare, maintaining training and certification is a legal requirement. In these organizations, it may be worthwhile to invest in a learning management system, like Blackboard, that both delivers online training and tracks and reports learner progress.
- Critical thinking. This is a challenging to teach, but may be one of the most important skills for knowledge workers to possess. Training courses are available. Your local community college may be a good source for customized training or may already offer the classes your employees need. Sometimes special rates are available or can be negotiated for nonprofits.
Calculate your Return on Investment
Here is a description of one way to calculate your return on investment in training. You can calculate the ROI per person or for the entire training program. First, pick the goal or outcome where improvement is needed. Next, identify key performance indicators linked directly to this outcome. You might pick something easy to measure, such as revenue in a specific area, or something more difficult, such as donor satisfaction. Next, identify where employee skills may be improved so that this particular KPI will be affected in a measurable way. Before implementing training, however, it’s important to go back to the beginning and link the skill gap to measurable KPIs that relate to specific organizational goals.
Establish a baseline measurement — i.e., the KPI before the training program begins. Implement the training. Keep gathering data on the KPI. Then, 3-to-6 months later, analyze the data to measure the affect of the training program.
Follow these steps to calculate the ROI of training.
- Begin with cost of the course.
- Add the facility fee and trainer expense.
- Add staff wages that were spent during the course.
- Add the cost of staff time spent during the course. How would the KPI have been affected if employees had spent their time working instead of attending training? This is important if the training takes weeks to complete.
- The change in the KPI from your baseline represents your net gain: Net gain / Cost = ROI.
Be honest in your analysis. If the ROI is negative — i.e., the training program did not pay for itself — figure out why. Was the training not effective? Did you have the wrong trainer? The wrong curriculum? Did you train the wrong people? Perhaps you identified the wrong KPI and you were measuring the wrong outcome. Maybe the economic environment changed between the time you began planning and the time you completed the evaluation. Even if the ROI on one training program is negative, use the knowledge and experience gained to improve your training overall.
It is often challenging for nonprofits to find funding for employee training. Search online for available resources. The Small Business Administration offers free online training classes on general business topics, some of which may be useful for nonprofits. In “How to Get Government Grants for Training,” The Wall Street Journal offers links to funding sources. Ask your corporate partners if a few of your employees can participate in their training programs. If they have extra seats, they may be willing to let your employees attend for free or minimal cost. Grant funding may be available for training on specific topics; search by topic area rather than “training.”