Answer The Four Following Problems And Submit All Questions

Answer The Four Following Problems And Submit All Questions In A Word

Answer The Four Following Problems And Submit All Questions In A Word

Answer the four following problems and submit all questions in a Word document. Include a title page with your name and APA (6th edition) information, headers, and references used. These problems are based on SHRM scenarios related to training ROI, cost-benefit analysis, and break-even analysis.

Paper For Above instruction

Effective training programs are crucial for organizations seeking to optimize employee performance and minimize costs associated with turnover and workplace issues. This paper addresses four core financial analyses — training ROI, cost-benefit ratio, ROI based on settlement savings, and break-even point — providing calculations, explanations, and the importance of these analyses in HR training initiatives.

1. Training Return on Investment (ROI)

The scenario involves an organization that lost 125 employees last year at a cost of $5,000 each. A proposed training program, costing $250,000 upfront, aims to reduce turnover by 50%. The goal is to calculate the total savings, net savings after one year, ROI after one year, ROI after two years, and ROI after six months.

Assumptions & Data:

  • Number of employees lost last year: 125
  • Cost per employee: $5,000
  • Training program cost: $250,000
  • Turnover reduction: 50%

Calculations:

1. Total savings due to reduced turnover: The number of employees saved = 125 * 50% = 62.5 employees.

Total cost savings = 62.5 employees * $5,000 = $312,500.

2. Net savings in the first year: Total savings ($312,500) - Training cost ($250,000) = $62,500.

3. ROI after one year: (Net savings / Training cost) 100 = ($62,500 / $250,000) 100 = 25%.

4. ROI after two years: Assuming the same savings annually, total savings over two years before deducting the initial investment: $312,500 * 2 = $625,000.

Net savings: $625,000 - $250,000 = $375,000.

ROI: ($375,000 / $250,000) * 100 = 150%.

5. ROI after six months: Half of the employees (62.5) implies half the savings in half a year, so the savings are approximately $156,250.

Net savings: $156,250 - ($250,000 / 2) = -$73,125 (initially negative—training investment is not yet recovered).

Alternatively, proportional calculations show a lower but positive ROI depending on the timeline which emphasizes the importance of ongoing savings.

2. Cost-benefit ratio of Sexual Harassment Training

The estimated costs are $14,000 with projected savings of $70,000, based on settlement costs avoided.

Calculation:

  • Cost-benefit ratio = value of benefits / cost = $70,000 / $14,000 = 5.0

The ratio of 5.0 indicates that for every dollar spent, the organization gains five dollars in benefits, signifying a highly favorable investment.

3. Return on Investment after One Year

The ROI calculation for the sexual harassment training is similar: ROI = (Benefits - Cost) / Cost 100 = ($70,000 - $14,000) / $14,000 100 = 400%.

This signifies a fourfold return on investment, emphasizing the financial effectiveness of such training programs.

4. Using Prior Year Settlement Costs as Savings Figures

While it might seem logical to use previous settlement costs as a measure of savings, this approach has limitations. Settlement costs are one-time or irregular expenses, often reactive to specific incidents, and not necessarily recurring or representative of ongoing savings. Relying solely on prior settlement figures may overstate the continuous savings potential of training programs. It's more accurate to project potential reductions in future settlements based on continued risk mitigation, employee behavior change, and improved workplace climate. Therefore, using historical settlement costs as an approximate measure can be a starting point but should be supplemented with forward-looking estimates and risk assessments.

5. Break-even Analysis Calculation

The scenario involves a program with an annual cost of $70,000, expected to generate savings of $80,000 annually.

Break-even point:

Break-even period (months) = (Cost of Program / Annual Savings) 12 months = ($70,000 / $80,000) 12 ≈ 10.5 months.

Thus, the program will break even roughly after 10.5 months, meaning the organization recovers its investment within the first year.

6. Importance of Estimating ROI, Cost-benefit, and Break-even Analyses in Training

Calculating ROI, cost-benefit ratios, and break-even points are vital for several reasons:

  1. Informed Decision-Making: These analyses help HR professionals and organizational leaders assess whether training programs are financially worthwhile, supporting strategic decision-making.
  2. Resource Allocation: They enable organizations to prioritize training initiatives with the highest return, ensuring efficient use of limited resources.
  3. Justification for Training Investments: Quantitative data provides tangible evidence to justify expenditures to stakeholders and justify continued or expanded training efforts.

References

  • Barmeyer, C., & Franklin, P. (2018). Evaluating the effectiveness of training programs: Practical approaches and applications. Journal of Human Resources Development, 12(2), 34-47.
  • Cascio, W. F., & Boudreau, J. W. (2016). The search for ROI in human resource initiatives. Human Resource Management, 55(3), 383–395.
  • Phillips, J. J., & Stone, R. D. (2014). The value of learning: How to quantify the ROI of training. Performance Improvement, 53(4), 17-22.
  • Noe, R. A. (2020). Employee training and development (8th ed.). McGraw-Hill Education.
  • Huselid, M. A. (2016). The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Annals, 10(1), 531-572.
  • Martinson, K. (2015). Cost-benefit analysis in HR: methods and applications. Journal of Organizational Effectiveness, 4(1), 45-59.
  • Gumbus, A., & Lussier, R. (2014). Business plan for a new venture: sample before and after assessment. Journal of Small Business Management, 52(4), 500-519.
  • Saks, A. M., & Burke, L. A. (2017). Work-related contextual factors and training transfer: A meta-analysis. Journal of Applied Psychology, 102(4), 626-644.
  • Rajendran, D., & Tallon, P. (2019). The financial implications of HR strategies. Human Resource Management Review, 29(3), 100693.
  • Holton, E. F. (2017). Toward an explanation of why ROI and evaluation are difficult. Human Resource Development Quarterly, 18(2), 213-226.

Related Assignments