Assignment: Customer-Driven HR Costs and Benefits: Assessing the Business Case for Training

Read "You Manage It! 2". After reading the case, complete the following items:

• Write a summary of the case,
• Answer the critical thinking questions, and
• Elaborate on two key learnings from the case related to training and development and its integration with the organization. Be sure to clearly state the two key learnings and defend them in well-organized, scholarly responses.

A key learning is defined as significant knowledge gained from reading the case. You may choose to explain your key learnings by offering a real-world application, personal insight, your thoughts and opinions about what was stated, how it is handled at your company, etc.

Please arrange your summary, questions, and key learnings in a well-organized, scholarly response of 2-3 pages.

You Manage It! 2: Customer-Driven HR Costs and Benefits: Assessing the Business Case for Training

No matter what your business, to stay in business you have to attract and retain customers. How do you do that? One way is to deliver a quality product or service in a high-quality manner. In other words, it is a combination of what is offered and how it is offered that determines whether a buyer will become a loyal customer. Training is one way to make sure that employees' technical skills and customer-service skills meet customer expectations.

When making a business decision, two basic elements are typically considered: costs and benefits. In the case of training, the issues are: (1) how much does the training reduce costs? and (2) how much does the training increase revenues? If the training sufficiently reduces costs and/or increases revenues, then there is a strong business case to conduct the training. Your ability to identify the potential sources of revenue and costs and to estimate their levels can be an important business skill. It can be the basis by which you can successfully make the case for needed training for your employees.

Critical Thinking Questions

1. Given your answers to the previous questions, estimate the combined impact on the bottom line of direct and indirect savings generated by training. Extrapolate this number over a one- or two-year time period.

2. As you have read, training can increase revenue. The revenue could come from increased quality of the customer experience due to the impact of training. Consider, as an example, the following table of customer survey responses before and after training.

The numbers are percentages of customers in each satisfaction category six months before and six months after employees received their training. A key change is a reduction in the "Very dissatisfied-will never return" category of customers, which fell from 15 to 5 percent.

a. What will this 10-percent change mean to the bottom line?

Assume that the average revenue generated per month by a customer is $500.00. Also assume that you have 500 customers.

b. What is the increased revenue due to the training for the past six months?

c. What would be the revenue generated if you had 1,000 customers?

Training can also impact the bottom line by reducing a number of direct costs. For example, employee costs may be reduced because fewer overtime hours will be needed due to improved performance. Another cost reduction can be seen in reduced returns, because training may reduce errors or damage that can occur when the product or service is provided.

3. Make assumptions about the costs in each of these direct cost categories and any other direct costs you can think of. Also assume that you can expect a 10-percent reduction in each of these categories. Generate the direct cost savings estimate due to the training.

Training can also impact the bottom line by reducing indirect costs. These are costs that may not be obvious, but that are still important. For example, the safety of work processes or equipment can be improved due to training if workers handle materials or equipment more safely. Employee turnover can also be reduced, because of improved job satisfaction due to the training.

4. Assume that training results in a 10-percent reduction in your turnover rate. Also, assume that the cost of a turnover is 1.5 times the departing employee's salary. For a given average employee salary of your choosing, estimate the reduced costs due to the reduction in turnover.

Team Exercise

1. With your teammates, choose a business and a type of training. Estimate the revenue and cost reductions that you could expect due to the training. Estimate the cost of the training. Consider alternative ways to offer the training that could reduce its cost. Share your estimates with the rest of the class. Which approach to offering the training would your team recommend? Explain.

Experiential Exercise: Team

1. Join your teammates and consider the impact of training in technical and soft skills. For example, consider training in a production-related process and training in interpersonal skills.

a. Using the revenue and cost criteria discussed in this case, how do the two types of training stack up?

b. Does one training approach appear better in terms of increasing revenue?

c. Is another approach better at reducing costs? Share your team's findings and conclusions with the rest of the class.

Experiential Exercise: Individual

1. Create a spreadsheet, either electronically or on paper, that includes the revenue and cost criteria discussed in this case. Include in the matrix a comparison of training a technical skill (such as a production technique) and training a soft skill (such as interpersonal communication). Use the spreadsheet to assess the two approaches. How do the two approaches compare? Share your spreadsheet estimates and conclusions with the rest of the class.

Sources: Based on Howe, S. (2008). Training ROI revisited. Fleet Maintenance, 12, 32-33. Carman, M. (2013).Hitting the mark: Using training needs analysis to improve customer satisfaction.Training and Development, 40, 10-11; Mattox, J. (2011). ROI: The report of my death is an exaggeration. Training and Development, 65, 30-31, 33; Rogers, S. S. (2013). Great expectations: Making ROI successfully work for you. Training and Development, 40, 8-9.