How to Calculate the ROI of Team Building Days

Feb 22 2017

We've previously talked in general terms about measuring event success, but what about team building days in particular? How does one measure their ROI? That's the subject of today's post.

Whilst many business team managers understand how team building events can be a valuable way to engage teams, professional team building events are of course not without cost. Understanding how to calculate the actual return on what might, in the case of large teams, actually be a considerable investment, can benefit not just understanding of how the investment might work, but why it is an essential spend when it comes to business growth and development.

Study the statistics

Whilst any and all statistics relating to staffing, training and costs vs productivity and profits are relevant when calculating the return on most kinds of business investment, Sheffield University have undertaken significant research into calculation of ROI of training and development programmes.

As a result they have developed a calculation model based on:

  • Engagement
  • Learning
  • Application & Implementation
  • Business Impact

Calculations within each area are then used to produce a final ROI calculation. Although this model relates directly to ROI in relation to training and development programmes, it certainly offers potential as a useful starting point for calculating ROI of specific team building events and the overall budgets for these, particularly if needing to justify elements of the budget or spending to stakeholders and board members.

Measure the metrics

However, the ROI of a team building strategy can also be calculated to a lesser depth but equal relevance by taking the three essential elements of business investment - time, money and staffing - and measuring the metrics which help to quantify these:

  • Money - money metrics should be regularly scrutinised but can be additionally applied when trying to calculate ROI. Useful money metrics include:
    • Cost of team event (or costs allocated to overall team building budget);
    • Cost of productivity time lost during event;
    • Profits prior to events;
    • Increased productivity and overall profits (after events);
    • Costs of recruiting and training new staff;
    • Rates of overtime (particularly if paying existing staff extra to cover shortfall arising from high staff absence or turnover).

  • Staffing - useful metrics relating to aspects of staffing include:
    • Rates of employee retention and turnover, recruitment, work-ready training, CPD and appraisal;
    • Breakdowns of staff absence and reasons for these;
    • Metrics for staff involvement with wider aspects of their work, including becoming involved in activities which are not directed time, such as any charitable events the company supports.

  • Time - in the context of ROI of team building events, all time relevant to the investment should be included in calculations, not just the time ‘lost’ from on a working day to participate in team-building activities. Metrics to support this could include:
    • Number of hours involved in event;
    • Number of hours regularly lost prior to the event, such as staff absenteeism and poor productivity (particular features of teams where work-morale is low and stress is high);
    • Number of hours spent recruiting and training new staff;
    • Relevant time factors as identified in any time and motion studies – including productivity and efficiency of working practice.
    • Additional time gained through increased efficiency and productivity following team events.

Quantifiable vs. Qualifiable

Whilst quantifiable, statistical information is valuable when it comes to calculating ROI, it is of course also important to look for evidence of ROI from outcomes which are qualifiably (non-numerically) measured. Outcomes which could be explored for qualifiable evidence of positive ROI can include:

  • Improved engagement - this may be evident through teams and their managers demonstrating a greater understanding of their place in the workforce, the relevance of their roles and how this enables the wider efficiency (and success) of the organisation. Improved engagement can also manifest in increased motivation, trust and communication, all benefits of corporate team building events and activities which can have a direct impact on employee retention.

  • Enhanced team communication – poor communication has a direct cost to profits via efficiency: the better the communication within and between teams, the more efficient and productive these teams become. Team building days within and between work teams can be a real forum for developing and improving lines of communication which could make team-members far more confident, competent, collaborative and efficient when back in the office.

  • Improved creativity - generally creativity can only be measured by results and the speed of them, and the collaborative nature of team building days is often a spur for improving individual as well as team creativity.

  • Improved team skills and practice - a day where the team can ‘be away and play’ for team building events can have a positive impact on individual practice as well as team performance once back in the corporate environment.

After all, although team building and team training activities are not the same thing, neither are the two mutually exclusive. Where an event can incorporate an element of vocational training, such as building communication and problem-solving skills, this can often be a more productive and inspiring way to help your team hone skills and develop practice.

Similarly, introducing a competitive team building event can help your team to develop a sense of the competitive nature of business whilst developing their own ways of trusting and supporting each other towards team (and therefore company) success.

Investment return vs. investment value

Ultimately, whilst evaluation models, metrics and both quantifiable and qualifiable evidence can help to calculate the Return on Investment of team building events, when used as part of a team-building or staffing strategy, calculating the value outcome of this investment is another matter.

As with qualifiable evidence, gaining value for money from an investment in team building activities can be less easily accounted for, but more easily evidenced through intangibles, such as perception, for example. The value the team place on their own roles is based on the value they perceive the management puts on their contributions - and they may even make assumptions about the level of this perceived value as being evident from the standard and quality of the team building events laid on for them: as such, poor quality, low value investment can only ever offer the same kind of return.

This is why it may be doubly important to run team building events during paid work time rather than insisting on weekend attendance or staying late, as employees perceive an additional, enhanced sense of being valued when companies give them the chance for learning whilst still earning, something which can offer a valuable return on investment in the form of those other vital intangibles - goodwill, loyalty and sense of collaborative common purpose.

Overall then, ROI can be best ascertained by calculating the quantifiable alongside considering the qualifiable - all in the context of the overall team goals and business aims. Careful calculation of all factors will provide information which not only reflects the outcomes of investing in the team, but also of the team’s own investment in the business’s growth, as even where the numbers do not quite add up to additional profit in the short term, any outcomes which demonstrate improved practice and more robust employee involvement in the business values and strategies could be deemed to be a worthwhile ROI of team building days as investment into future business and staffing strategies.

Content provided by Team Tactics, team building & corporate hospitality experts with over 20 years of experience.