Training and Development

Nichole Bowker HRM 420 DeVry University 1. Training return on investment (ROI) is a calculation of economic return on a project. Refer to the lecture for the formula. Review this problem. An organization lost 125 employees last year, at a cost of $5,000.00 each. (Value is derived from cost to rehire and fill opening, as well as lost investment in the employee.) You suggest that a one-time investment in a training program (costing $250,000 up front) will reduce turnover by 50%. Calculate the following numbers using historical figures as your assumptions. 1. Total savings that the program stands to create Total Cost of the lost employee training= (125*$5000) =$625000 Total cost of the investment in training program =$250000 As investment in training program will reduce turnover by 50%, so the total savings the program stands to create is $312500. Total savings= ($625000*0.50) = $312500 2. Net savings the first year in place Net savings=Total savings-total costs Net savings= $( 312500-250000) = $62500 3. Return on investment after one year ROI= (Net Savings/cost)*100 ROI= ($62500/$250,000)*100 =0.25 or 25.00% Using the ROI formula, for every dollar invested in the training, there was a return of $25 in net savings after one year. 4. Return on investment after two years As last year total employees lost were 125 at a cost of $5000 each. After investing in training program, turnover will be reduced by 50%. This turnover will be reducing every year by the assumption. So, after first total cost savings from lost employees will be (125*5000*.50) = $ 312500 It is also assuming that after two years, 50% of turnover will also be reduced from the remaining employees and so forth. Total savings after two years= (savings in year one + Savings in year two) =$312500 + ($312500*.50) = $ 468750 ROI= (Net Savings-cost/cost)*100 ROI= (468750-250000)/250000*100 =0.875 or 87.50% Using the ROI formula, for every dollar invested in the training, there was a return of $85.50 in net savings after two years. 5. Return on investment after six months (assume half of the employees/but all of the cost) (5 points) Assuming, half of the employees but all of the cost means total cost saving in 6 months will be: Total cost savings= (125/2*5000) = $312500 Total cost of the training program = $250,000 ROI= (Net Savings-cost/cost)*100 ROI= (312500-250000)/250000*100 =0.25 or 25.00% Using the ROI formula, for every dollar invested in the training, there was a return of $25.00 in net savings after two years. 2. Cost-benefit analysis presents data as a ratio to determine financial impact on company profitability. The formula is: cost-benefit ratio = value of projected benefits divided by cost. We have estimated that a training program on sexual harassment will cost $14,000 and result in a savings of $70,000 (the cost of the two settlements we paid last year). 1. What is the cost-benefit ratio of this training? (2.5 points)

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