Measuring the Return on Investment of your Apprenticeship programme
Posted on 7th April 2022 at 13:10
Large businesses with a pay bill of over £3m have been paying the Apprenticeship Levy since 2017. Some departments may have seen real benefits from investing in apprenticeships and have lots of positive success stories. But it isn’t always easy to communicate those benefits to senior leaders or to departments that aren’t using apprenticeships.
A great way to raise the profile of apprenticeships and ensure you are getting value for money is to measure your Return on Investment or ROI.
For example, investing in your staff and their training makes them more likely to stay with your business. This is a key issue for many Boards at the moment in the context of ‘The Great Resignation’. You can demonstrate that you are tackling this problem through your investment in apprenticeships.
The areas you choose to focus on will depend on the objectives of your programmes. Employers can measure their financial Return on Investment across 3 broad areas:
Employee progression and succession planning
You may also want to track softer measures, such as Employee Engagement.
How to Measure your Return on Investment
1. First collect your baseline date.
a. For Employee retention this would be your turnover rate in the relevant roles
b. For Employee progression and succession planning, you could capture the ratio of internal to external hires in the roles your apprentices are looking to progress to
c. Productivity measures will vary greatly across different roles. For Sales Assistants in Retail a baseline measure could be Revenue per week. For a Procurement team you could measure the number of employees needed to manage £1m of spend.
2. Periodically measure again. We recommend you collect data again at the midway point, at programme completion, and 1 year after completion.
3. Convert the change into cash terms. For example, an improvement in retention directly reduces recruitment and training costs.
4. The Return on Investment (ROI) is then calculated by assigning all the relevant costs to the programme. This includes money spent from the levy, and internal costs incurred that are over and above what you normally spend on this team, such as programme management or additional mentoring.
ROI = Net Return on Investment (Cash Benefits) / Total Cost (Cash Invested) x 100%
5. Don’t forget you may also want to capture soft benefits, that align with your corporate strategy. For example, employee morale, as evidenced by surveys, or increasing social mobility.
6. Communicate the benefits. Your Board will appreciate seeing the benefit of apprenticeships in pounds and pence, and it might encourage new departments to utilise the levy budget.
7. Refine your programme. Through this process you might identify ways to improve your apprenticeship offer or notice gaps that aren’t being served. For example, you may find that other departments are lagging behind on Employee Retention and could benefit from additional development opportunities. This exercise should provide focus to your apprenticeship strategy and ensure that your apprenticeships provide value to the business.
Don’t forget that the apprenticeship levy has been in place since 2017. Therefore, many large employers now have 3-5 years of experience in using the levy. You may have the data available now to look back retrospectively on the value that you have created through apprenticeships.
Contact us to find out more about the benefits of apprenticeships or how you can measure your ROI.
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