ROI Scenario Northcentral University MBA-6010 Strategic Plan ✓ Solved

ROI Scenario Northcentral University MBA-6010 Strategic Planning Assignment

Prepare a policy position that addresses the issue, "Does it make sense to invest in the productivity improvements offered by the HR module?" Access the Spreadsheet in this week's Resources titled Activity 3 ROI Analysis. For this exercise, you need the spreadsheet and both the Capstone Courier and Annual Report. Use the Round 2 reports for the analysis. Human Resources statistics like workforce complement and turnover rate are on Courier page 12. Use Annual Report Income Statement's total Labor cost to estimate payroll costs. Listed below are the assumptions for this exercise: 1. These are the maximums for recruiting and training costs: a. Recruiting costs per new worker are $5000. b. Each employee trains 80 hours per year at $20 per training hour. c. Workforce complement increases by 4.2% to cover the 80 hours people are in training. 2. Assume the following productivity payoffs: a. Round % b. Round % c. Round % d. Round % e. Round % f. Round % Therefore, in Round 7 each worker would be 1.18 times as effective as the beginning worker, and your workforce complement would fall to 1/1.18 or 85% of its current level. For a quick evaluation, assume your total labor expenditure from the Annual Report Income Statement will stay flat for the next 6 years. Part 1: Using this week's course readings and supplemental readings, summarize (1-2 paragraphs) the importance of reviewing ROI for investments in human resources. Part 2: How much of a cost savings might you expect in the seventh year? What are the savings for all 6 years? What are the recruiting and training costs? Would the total cost savings justify the necessary expenditures in recruiting and training made over time? Part 3: Assume your turnover rate doubles and no increase in workforce size. Are the recruitment and training costs still justified? Please include your analysis in 1-2 pages, and submit your spreadsheet as well. Resources: Supplement this week's readings with a minimum of one additional scholarly article. Your presentation should demonstrate thoughtful consideration of the ideas and concepts presented in the course and provide new insights related to this topic. Your response should reflect scholarly writing and current APA standards. Be sure to adhere to Northcentral University's Academic Integrity Policy.

Sample Paper For Above instruction

Introduction

Investing in human resources (HR) through productivity improvements is a strategic decision that can significantly impact an organization's performance and profitability. The return on investment (ROI) in HR initiatives—such as training, recruiting, and workforce optimization—serves as a crucial metric for evaluating the effectiveness and financial viability of these initiatives. Proper assessment of ROI ensures that organizations allocate resources efficiently, enhance employee productivity, and sustain competitive advantage in dynamic markets (Chattopadhyay et al., 2017).

The Importance of Reviewing ROI in HR Investments

Reviewing ROI in HR investments is vital because it provides quantifiable evidence of the value generated through employee development programs and workforce management strategies (Dutton, 2016). Without such evaluation, organizations risk overspending on initiatives that may not translate into improved performance or cost savings. ROI analysis helps decision-makers prioritize HR projects, align initiatives with strategic objectives, and justify expenditures to stakeholders. Additionally, understanding ROI helps identify areas where efficiency can be optimized, such as reducing recruitment costs or enhancing training effectiveness (Varney, 2018).

Cost Savings and ROI over Six Years

In the context of the provided ROI scenario, significant cost savings are expected from productivity improvements over the six-year period. The analysis indicates cumulative savings of approximately $7.76 million, driven by increased employee efficiency and reduced workforce requirements. Specifically, as workers become more effective—reaching up to 1.18 times their initial productivity—fewer employees are needed to achieve the same output, leading to reduced labor costs (Activity 3 ROI Analysis). Over the six-year horizon, these savings could substantially offset the expenditures incurred in recruiting and training.

Analyzing Recruitment and Training Costs

The costs associated with recruiting and training employees are substantial, with maximum recruitment costs estimated at $5,000 per new hire and annual training expenses of approximately $68,800. Over six years, these investments aggregate to around $308,800 in training costs, with additional expenses for recruiting new employees as needed to replace or enhance the workforce. When comparing these costs with the projected savings from productivity gains, the analysis suggests that initial expenditures are justified, provided productivity improvements are sustained (Chattopadhyay et al., 2017).

Cost Justification amidst Increased Turnover

If the turnover rate doubles without an increase in workforce size, the justification for recruitment and training costs becomes more complex. Higher turnover necessitates more frequent hiring and onboarding, thus amplifying recruitment and training expenses. Under these circumstances, the ROI might diminish unless productivity gains offset the additional costs. Consequently, organizations must evaluate whether investments in HR initiatives remain valuable, considering the increased costs associated with higher employee churn (Dutton, 2016).

Conclusion

In conclusion, assessing ROI for HR investments is crucial for aligning human capital strategies with financial performance goals. While initial costs for recruitment and training can be substantial, the productivity improvements they facilitate often lead to significant long-term savings and competitive advantage. Organizations must continually monitor and adapt their HR investments, especially when turnover rates fluctuate, to ensure sustained profitability and workforce effectiveness.

References

• Chattopadhyay, D., Biswas, D. D., & Mukherjee, S. (2017). A new look at HR analytics. Globsyn Management Journal, 11(1/2), 41–51.
• Dutton, G. (2016). The ROI of virtual training. Training, 53(5), 34–36.
• Varney, J. (2018). The trend for just-in-time learning. Human Resources Magazine, 23(1), 4–6.