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Research Developments from ACER

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Return on investment in language, literacy and numeracy training

Research by ACER for the Australian Industry Group is helping employers identify the quantifiable return on investment of language, literacy and numeracy training for their workers, as Phillip McKenzie and Justin Brown explain.

ACER is developing return on investment (ROI) instruments to document the productivity benefits arising from employer provision of language, literacy and numeracy (LLN) training for employees, and the costs involved in such training, in order to provide a basis for estimating the return to employers from investing in LLN training.

The ROI indicates the extent by which the benefits or outputs of training exceed the costs or inputs. The higher the ROI, the greater the pay-off to employers, and the stronger the case for investing more in training.

Purposes

The project builds on recommendations from the Ai Group’s 2012 When Words Fail: National workforce literacy final report, which demonstrated the importance of employer engagement in the provision of LLN training in the workplace. Employers identified indicators that would represent successful LLN training for them in their workplaces. That project’s emphasis was on the perceived outputs and improvements arising from training, and did not involve formal collection of data from companies.

This research is intended to strengthen the knowledge base about the economic pay-offs from workplace training in foundation skills, and thereby help guide employers in their investment decisions and policymakers in their initiatives to encourage such forms of workplace training.

The instruments are also intended by the Ai Group to be a resource that employers can use to evaluate the pay-off from their existing training programs and to help plan future training investments.

The Commonwealth Government through the Department of Industry, Innovation, Science, Research and Tertiary Education is funding the work. The research will be completed in mid-2014.

Framework and design

The instruments are being trialled in selected Workplace English Language and Literacy programs. Workplaces have been selected to provide a range of industries, training programs and locations. The participating workplaces include manufacturers, construction firms, aged care providers and utilities.

The focus is on drawing together information that is already available in the workplace and minimising the burden of any new data collection. Generic ROI instruments, based on a simple spreadsheet format, are specifically tailored for participating workplaces, depending upon industry and enterprise characteristics, and already existing data.

In general terms the benefits of training are more difficult to conceptualise and measure than the costs. In particular, it can be difficult to attribute a monetary value to training outcomes, many of which are intangible and hard to relate directly to enterprise performance. The practical challenges of collecting and analysing such data suggest that the benefits documented in evaluation studies almost certainly underestimate the full value of training and hence the ROI.

The research is collecting data on four main categories of training benefits that directly affect a company’s bottom line:

  • labour savings
  • productivity increases
  • non-labour cost savings, and
  • other income generation.

These categories are not necessarily mutually exclusive; in some respects they provide alternative ways of looking at the same underlying benefit. Care therefore needs to be taken in classifying various indicators and avoiding double-counting.

It can be difficult to attribute a monetary value to training outcomes, many of which are intangible – such as improved self-confidence – and may be difficult to relate directly to enterprise performance. The practical challenges of collecting and analysing such data suggest that the benefits being documented will almost certainly underestimate the full value of training and hence the ROI.

ROI calculations need to be kept in perspective. Enterprises are complex entities operating in challenging and dynamic environments. It is difficult to isolate the impact of training on employee behaviour and enterprise outcomes when so many other factors are potentially at play. Decision making that draws on ROI calculations needs to recognise that these are estimates that are critically dependent on the quality of the data available on benefits and costs, and on other information about an enterprise’s operations and environment. The research is intended to develop a set of resources that enable ROI to be documented and disseminated in a more systematic way. â– 

Find out more:
Download the 2012 Australian Industry Group report, When Words Fail: National workforce literacy report.

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About the author

Dr Phillip McKenzie is a former ACER Research Director. 

More [rd] articles by Phillip McKenzie

View selected works of Phillip McKenzie

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About the author

Dr Justin Brown is a Senior Research Fellow in ACER's Tertiary Education research program. 

More [rd] articles by Justin Brown

View selected works of Justin Brown

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