Using training as a retention tool means investing in people’s development to lower the chance that they leave. Whether it pays off cannot be settled by a figure lifted from someone else’s report. You have to set the cost of the programme against what departures cost your own company, and check whether people stay longer than the payback period.
Quick Overview
What you will learn:
- What research says about the link between professional development and staff turnover
- Which items to include in the cost of training and the cost of losing an employee
- How to use the Kirkpatrick model and the Phillips ROI method to judge whether it pays off
- Who in the organisation should supply the data for the calculation
Who this article is for:
- HR specialists and HR business partners
- Managers asking for a training budget
- Finance staff reviewing spending on development
Reading time: 7 minutes
What the Research Says About Training and Turnover
A systematic review by Brook and colleagues (pubmed.ncbi.nlm.nih.gov) covered 53 studies of programmes designed to keep nurses in their first years of practice. The most promising were internship, residency and transition-to-practice programmes lasting between 27 and 52 weeks, combining teaching with support from a preceptor and a mentor. The authors caution, though, that methodological weaknesses in the studies limit how far the conclusions can be pushed, and they name cost-effectiveness as the next thing to evaluate.
A study by Zhang and colleagues (pubmed.ncbi.nlm.nih.gov) shows the other side of the coin. Individually negotiated development opportunities made employees feel more employable both inside their current organisation and on the wider job market. Feeling valued internally went with a lower risk of leaving; feeling attractive to other employers went with a higher one. What tipped the balance towards staying was the sense that new skills could actually be put to use in the current organisation.
The practical lesson is simple. Training on its own does not keep people. Your odds improve when development comes with somewhere to apply it: a new assignment, a project or a broader role.
What It Costs: Items to Count
We deliberately give no figures here, because they depend on the role, the labour market and the company itself. An average from someone else’s survey says nothing about your team. It is more useful to collect your own data in two columns.
Cost of the development programme:
- course fees, certification exams and materials;
- participants’ working time, i.e. salary for the hours spent learning;
- cover for absent staff and deadlines that slip while they are away;
- mentor or supervisor time, if the programme includes it;
- HR effort to set up and run the programme.
Cost of losing an employee:
- recruiting a replacement: job ads, recruiter and manager time, any agency fees;
- onboarding the new hire and the period in which they work more slowly than their predecessor;
- overtime or delays in the team until the role is filled;
- lost knowledge about customers, systems and processes.
HR and the training budget usually hold the data for the first column. The second has to be pieced together from recruitment records, time sheets and managers’ estimates.
Is It Worth It? How to Run the Numbers
The Kirkpatrick model evaluates training at four levels: reaction, learning, behaviour and results, as described by Lee and Song (pubmed.ncbi.nlm.nih.gov). Retention belongs to the results level. Neither participant satisfaction nor test scores tell you anything about who will leave.
The Phillips ROI method adds the financial side. Matthews and Jackson (pubmed.ncbi.nlm.nih.gov) combined the Phillips return-on-investment model with a standard financial model to build a business case for certifying their staff, working out the payback period, the benefit-cost ratio and the rate of return. Their key conclusion for retention: the investment was profitable provided that the employee stayed with the organisation for longer than the payback period.
Choosing what to count as a benefit is the hard part. A scoping review by Jeyaraman and colleagues (pubmed.ncbi.nlm.nih.gov) catalogued outcome and ROI indicators from 223 studies on leadership in healthcare, starting from the observation that evidence on how well leadership development programmes work was scarce. The review was meant to inform the design of an evaluation instrument, so treat lists like this as a menu to choose from rather than a ready-made standard.
You can build the calculation for your own company step by step:
- Measure past turnover in the group the programme is aimed at.
- Work out the cost of a single departure from the second column, using your own data.
- Add up the full cost of the programme from the first column.
- Compare turnover after the programme with a group that did not take part, or with the period before it started.
- Check whether participants stay longer than the payback period.
Keep one limitation in mind. A drop in departures after a programme does not prove that the programme caused it. Pay, the job market or a new line manager may have changed over the same period, which is why a comparison group matters more than the headline result.
Who Is Responsible for What
- The HR business partner gathers turnover and recruitment cost data and runs the calculation.
- The line manager decides whether there will be work after the training that uses the new skills.
- The financial controller checks the assumptions and how the payback period is calculated.
- The mentor supports participants in programmes that include one.
Read Also
- IT Training ROI: How to Calculate and Present It — making the case to the board
- Measuring training effectiveness: the Kirkpatrick model in practice — the evaluation levels applied
- Planning an annual company training budget — where the money comes from
Build Your Skills
Two courses take the topic further: The war for talent - an advanced workshop on talent management in an organization and Maintain commitment and motivation. The first covers, among other things, budgeting and costing a talent management programme and career paths; the second deals with how managers sustain motivation in their teams. Get in touch and we will tailor the scope to your organisation.
Frequently Asked Questions (FAQ)
What does employee retention mean?
It is an organisation’s ability to keep the people it wants to keep. It is usually measured by the number of leavers over a given period, broken down by job group. Training is one retention lever among several, alongside pay, working conditions and the relationship with one’s manager.
Does mentoring help keep employees?
In the review by Brook and colleagues (pubmed.ncbi.nlm.nih.gov), the most promising programmes for early-career nurses combined teaching with support from a preceptor and a mentor. The authors stress, however, that the studies had methodological weaknesses. Treat mentoring as one element of a programme whose effect you still need to measure in your own organisation.
How can you track the risk of people leaving?
Start with data you already have: departures by role and length of service, the outcomes of development reviews and what leavers say in exit interviews. It also helps to ask regularly whether people have a chance to use their new skills. In the study by Zhang and colleagues, it was exactly that belief that strengthened the path associated with a lower risk of leaving.
How do you calculate the return on training?
Set the full cost of the programme against the benefits you can put a value on, such as the cost of departures you avoided. The Phillips ROI method, as applied by Matthews and Jackson (pubmed.ncbi.nlm.nih.gov), gives you a payback period and a benefit-cost ratio. For retention, the deciding question is whether participants stay longer than the payback period.