Calculating Return on Investment (ROI)
One of the challenges within Training and Development is providing decision makers with the bottom-line outlook regarding the programs of discussion. Leaders often wonder how much a training or development program will cost and what the short term or long-term impact will be of the training program. Practicing the skills needed to determine return on investment (ROI) and then presenting that to leadership is important for individuals in the field of training and development. For this assignment, you will read a brief scenario and calculate the return on investment (ROI) following the directions below.
Scenario:
Big Box Stores implemented a training program to increase sales of tools and other home improvement items in their stores in one region of the U.S. The training focused on enhancing displays of items needed for common home improvement projects and encouraging cross-selling of tools needed by customers to do the project. The training was a two-hour distance learning class originated from the corporate training complex to one-hundred employees at fifteen store locations in the southeast region. The employees earn an average of $12 per hour, with benefits being an additional 25% of salary. Sales in the home improvement departments at these fifteen store locations combined averaged $6,000 per week before the training and $7,500 per week after the training. Other costs involved in
the program included:
1. Instructor wages: $8,000 (Only one instructor used)
2. Instructor benefits: 25% of salary
3. Distance learning costs (equipment and usage fees): $5,000
4. Materials: $60 per trainee
Directions:
1. Compute the return on investment (ROI) for this training program for one year and provide your computations.
2. Describe how you computed return on investment (ROI).
3. Determine what additional data you would want to have to assess the return on investment (ROI) for this type of training program and explain why return on investment (ROI) is so important to a business.
4. Explain why it is important to know the return on investment (ROI) in the initial phase of training and development, prior to establishing a contract.