Consider a situation in which you, a trainer for an organization that manufactures sportswear, must present information on the costs and benefits of a training program to management, which is about to decide whether the program will be implemented organization-wide. You have already designed the training program and delivered it to one group of employees and you want to being offering it to the rest of the organization. How will you present the information to management? Will you present information on the net benefit, BCR, ROI, and/or utility analysis? Will you present cost-benefit information or cost-effectiveness information? What are the advantages and disadvantages of presenting information on each of these? What are the advantages/disadvantages of trainers presenting financial information about the benefits of training to management?
To present information on the costs and benefits of a training program to organization, I will present information on both the net benefit, BCR, ROI, and utility analysis. It is important to present all this information because they all affect the cost of training programs and as a result would help the organization know whether they are on the right tract to attain goals.
Net benefit is the estimated value of the benefit minus the cost of the training program. Benefit-Cost Ratio (BCR) is the benefit divided by the cost of the training program.
Return on Investment (ROI) is a comparison of the cost of a training program relative to its benefit by the cost of the training program.
Utility analysis is a method which can be used to forecast the financial benefits that result from human resource programs such as training and development (Saks &Haccoun, 2013).
I will also present information on cost-benefit. Cost-benefit evaluation is a comparison of the monetary cost of training to the benefit of training in monetary terms. Cost benefit analysis is used to evaluate the total anticipated cost of a project compared to the total expected benefits in order to determine whether a proposed project is worthwhile for a company or team (Plowman, 2015). Presenting information on cost benefit is important because through the use of cost-benefit analysis in financial services regulation, regulators can determine if their proposals will actually work to solve the problem they are seeking to address (U.S Chambers of Commerce [USCS], 2013). Although cost-benefit evaluation is good it also has a couple of short-comings which include; potential inaccuracies in identifying and quantifying costs and benefits, increased subjectivity for intangible costs and benefits, possibility for inaccurate calculations of present value resulting in misleading analyses, and it might turn in to a project budget (Plowman, 2015). I would not present information on cost-effectiveness because it is less effective and often used in the field of health services, where it may be inappropriate to monetize health effect (Gold, Siegel, Russell, & Weinstein, 1996).
Trainers presenting financial information about the benefits of training to management has an advantage of encouraging management to be able to choose a training model which I beneficial to the organization and therefore set up budget in a way that will not place the organization on a loss. The advantage with trainers presenting information about benefits of training to management is because this information could discourage management from accepting training because they may consider it expensive (Kudik, 2017).
Discussion post #2 (Student 1-Oleg)
In order to calculate the benefits of training programs, specific quantifiable measures have to be developed that are consistent with a training program and its objectives. As well, some of these measures will need to be converted in to monetary terms. For each of the following training programs, identify some of the benefits and how they can be measured for the purpose of cost-benefit evaluation and cost-effectiveness evaluation:
Sales training can be evaluated by increased number of cold calls, increased number of sale closures, and, to a degree, increased customer satisfaction score. The first two measurements can be evaluated as cost-effectiveness evaluation, whereas the last one is cost-benefit evaluation (Saks & Haccoun, 2013).
Ethics training can be evaluated by decreased number of ethic code violators. An effective ethics program provides tremendous benefits, including detecting and deterring unethical behavior that can devastate an organization. This is cost-benefits evaluation (Saks & Haccoun, 2013).
Customer service training efficacy can be examined as hard number of customers serviced (cost-effectiveness), or as customer satisfaction scores tendencies (cost-benefits) (Saks & Haccoun, 2013).
Health and safety training
Health and safety training can be assessed through number of unsafe incidents and lost work time. As the numbers of incidents decrease and employees do not miss work due to health reasons, then the training was successful. This is cost-effectiveness evaluation (Saks & Haccoun, 2013).
Total quality management training
Quality management is measured by the amount of faulty product that reaches customer. This is cost-effectiveness evaluation. One must be careful not to institute quality control detection thresholds, as such expectation could create false positive QA results, contributing to lost productive time and slower production rates (Saks & Haccoun, 2013).
Sexual harassment training
This kind of training can be approached from both cost-benefits and cost-effectiveness viewpoints. If an organization is facing a number of sexual harassment lawsuits, and such training can reduce the number of future lawsuits, then it is cost-effectiveness. If such training reduces turnover, and creates more inclusive and safe work environment, thus increasing production, then it is cost-benefits (Saks & Haccoun, 2013).
Success of the training can be evaluated based on how inclusive the trainees become. Cultural diversity in business provides many advantages, allowing organizations and teams to benefit from multiple perspectives, knowledge and ideas. This is cost-benefits evaluation.
Converting data to monetary value is very important in the ROI model and is absolutely necessary to determine the monetary benefits from a training program (Phillips & Phillips, 2010). The process is challenging, particularly with the conversion of soft data, but can be methodically accomplished using multiple techniques. A number of techniques are available to convert data to monetary values. The selection depends on the type of data and the situation.
Convert output data to profit contribution or cost savings. With this technique, output increases are converted to monetary value based on their unit contribution to profit or the unit of cost reduction. These values are readily available in most organizations and are seen as generally accepted standard values (Bedinham, 1998).
Calculate the cost of quality, and covert quality improvements directly to cost savings. This standard value is available in many organizations for the most common quality measures (such as rejects, rework, and scrap) (Phillips, 1991).
Use the participants’ wages and employee benefits as the value for time in programs where employee time is saved. Because a variety of programs focus on improving the time required to complete projects, processes, or daily activities, the value of time becomes an important and necessary issue. The use of total compensation per hour provides a conservative estimate for the value of time (Phillips, 1991).
Use historical costs when they are available for a specific variable. In this case, use organizational cost data to establish the specific value of an improvement (Phillips, 1991).
Use internal and external experts, when available, to estimate a value for an improvement. In this situation, the credibility of the estimate hinges on the expertise and reputation of the individual (Phillips, 1991).
Use external databases, when available, to estimate the value or cost of data items. Research, government, and industry databases can provide important for these values. The difficulty lies in finding a specific database related to the situation (Phillips, 1991).
Ask participants to estimate the value of the data item. For this approach to be effective, participants must understand the process and be capable of providing a value for the improvement (Phillips, 1991).
Require supervisors and managers to provide estimates when they are willing and capable of assigning values to the improvement. This approach is especially useful when participants are not fully capable of providing this input or in situations where supervisors or managers need to confirm or adjust the participant’s estimate (Phillips, 1991).