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ROI of Human Capital Interventions A Practice Toolkit

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Page 1: ROI For HR Practice Toolkit

ROI of Human Capital Interventions

A Practice Toolkit

Page 2: ROI For HR Practice Toolkit

Description Icon

Relevant quote

Concept/Framework

Tools, Techniques

Template

Page 3: ROI For HR Practice Toolkit

Step 1

Presenting Problem to Real Problem

Page 4: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

The first task of the practitioner is almost always analysis

Starts with a “presenting”

problem – not a “hunch” but a

problem … as it presents itself

Page 5: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Example…

Let's take an example – higher staff turnover for

Graduate Engineers (let say compared to an

industry standard)

The first question should not be, what skills and knowledge are required. It should be which metric(s) are affected negatively.

Page 6: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Example…

Unit cost per replacement

Cost of 'covering' a vacant position

(Calculated costs of other employees

'filling in' while the position is vacant)

Cost to fill a vacant position

On boarding & Orientation cost

Cost of productivity ramp-up

Page 7: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

1.1 Calculating benchmark employee cost

Nr Metric Element Description Example

1. Departing employee annual base salary

N/a 100,000

2. Calculated annual benefits cost Estimated at 20% of base salary

20,000

3. Calculated monthly salary + benefits 10,000

4. Calculated daily salary + benefits Based on 230 (8hr) working days

522

Page 8: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

1.2 Cost of 'covering' a vacant position (Calculated costs of other employees 'filling in' while the position is vacant)

Nr Metric Element Description Example

1. Number of days until the vacant position is filled

N/a 90

2. Calculated daily cost of 'covering' a vacant position

33% of departing employee's daily salary + benefits

522/3

3. Total cost to 'cover' vacant position 15644

Page 9: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

1.3 Cost to fill a vacant position

Nr Metric Element Description Example

1. HR/Hiring manager's annual salary N/a 200,000

2. Calculated HR/Hiring manager's hourly rate Based on 230 (8hr) working days and 20% fringe rate

130

3. Cost of advertising (online and/or print) Enter cost 3000

4. Cost of resume screening HR/Hire manager hours * hourly rate

50*130=6500

5. Cost of interviews (telephone screening, 1st and 2nd)

HR/Hire manager hours * hourly rate

50*130=6500

6. Cost of behavioural and skills assessments Enter cost 3000

7. Cost of background checks (criminal, credit, reference, education)

Enter cost 4000

8. Cost of travel/moving expenses (if applicable) Enter cost 5000

9. Total cost to fill a vacant position: 28,000

Page 10: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

1.4 On boarding & Orientation cost

Nr Metric Element Description Example

1. Trainer/Manager annual salary: N/a 100,000

2. Calculated trainer/manager daily rate Based on 230 (8hr) working days and 20% fringe rate

522

3. Total training days Enter number of days 10

4. Total on boarding and orientation cost N/a 5220

Page 11: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

1.5 Cost of productivity ramp-up (During the first 3 months, an average new employee performs at 50% productivity of a tenured top performing employ

Nr Metric Element Description Example

1. Daily employee cost (salary + benefits) N/a 522

2. Number of working days during first 3 months: Enter number of days (avg. 58 days

50

3. Cost of productivity ramp-up N/a 26100

Page 12: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

1.6 Unit cost for filling a vacancy

R 74964

Two important learning points:I. Know your metricsII. Negotiate, and even request help from your client to determine the right metrics. They are

closer to the business and at the same time you obtain by in for the intervention.

Page 13: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

1.7 Total cost of replacing graduate engineers

R 74964 x 6 = R 449784

Let's assume that we had to replace five graduate engineers the past six months

Page 14: ROI For HR Practice Toolkit

Analysis and Definition of

Business Need

Identification of Performance

NeedCompetence Gap

Solution Generation

Intervention Strategy

Presenting Problem/

Opportunity

Non Training Solution

Step 1. Presenting Problem to Real Problem

Now we can move on to analysis

We know now which metrics are affected

Consultant speciality

Page 15: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

The basic tasks in analysis

4. Perspective and information for decision making

3. Data analysis

2. Data consolidation

1. Data gathering

Page 16: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Two types of data

Data

Quantitative

Qualitative

” More about context, how people experience in their own words”.

”The truth is in a number” – however does not say much about context

Page 17: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Data gathering

I. QuestionnairesII. SurveysIII. TestsIV. InterviewsV. Focus groupsVI. ObservationVII. Performance recordsVIII.Knowledge and skills testingIX. Program follow upX. Project assignments

Before intervention

After intervention

Before intervention

After intervention

Page 18: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Data gathering

I. Target population/participants;II. Supervisors of target

population/participants;III. Subordinates of target

population/participants;IV. Peer Group;V. HRD Staff;VI. Documentation:

• Organizational Performance Records:

• Disciplinary records;• Safety records;• Scorecards

Before intervention

After intervention

Page 19: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Contextual factors to consider when selecting data collection methods

I. Time for participants to respond;II. Costs;III. Amount of disruption of normal

activities;IV. What is the level of certainty that

you will achieve with the result;V. Practicality;VI. Culture/Philosophy – example the

10% syndrome.

Before intervention

After intervention

Page 20: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Requirements for effective data collection instruments and techniques

I. Construct validity ( methods, techniques and test instruments should be evaluated in terms of its theoretical grounding);

II. Predictive validity (methods, techniques and test instruments should be evaluated regularly in terms of its ability to predict what it purport to predict);

III. Face validity – for line management very important!

Before intervention

After intervention

Page 21: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Requirements for effective data collection instruments and techniques

Reliability:I. Produce consistent results

over time, that differentiates effectively, and are independent of the assessor/data collector, or context.

Before intervention

After intervention

Page 22: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Data consolidation

Data Consolidation Techniques are Wide and Varied

Descriptive statistics

Qualitative description, using organizational and other models and concepts

Page 23: ROI For HR Practice Toolkit

Step 1. Presenting Problem to Real Problem

Data analysis

Data Analysis Varies According to Situation

Descriptive and inferential statistics

Qualitative decisions about the situation, based on decision making and techniques

Page 24: ROI For HR Practice Toolkit

Note the following !• Because this toolkit does not aim to transfer knowledge about

analysis as such the previous slides provides a brief and high level overview, for the sake of a clearity… for the sake of the toolkit we assume that the analysis provided clarity about the problem….

Page 25: ROI For HR Practice Toolkit

Brief Exposition of ProblemOur analysis shows that the HR and line managers involved in selection decisions do interviews in a haphazard and nonscientific fashionSolutionFollowing discussions with consultants, HR experts and line all agreed we need to implement competency based interviewing

Step 1. Presenting Problem to Real Problem

Lets assume this based

on the core example

Page 26: ROI For HR Practice Toolkit

The training department is instructed to develop an appropriate program and put all line and support staff through training – they however indicate that a change in results is required quickly and that ROI for the training need to be justified soon after implementation…

Step 1. Presenting Problem to Real Problem

Lets assume this based on the core

example

Page 27: ROI For HR Practice Toolkit

Presenting Problem to Real Problem

So we have addressed this even before we asked any questions about training – and

now we can move on to the next step

Starts with a “presenting”

problem – not a “hunch” but a

problem … as it presents itself

Page 28: ROI For HR Practice Toolkit

Step 2a

Planning the Intervention (Starting With the End In Mind)

Page 29: ROI For HR Practice Toolkit

Step 2a: Planning the Intervention (With ROI in Mind)

When we plan an intervention – considering that we want to measure ROI- we really reverse engineer (or start with the end in mind) – We use the Kirkpatrick Model to achieve this

4. Impact

What is the business impact we need to achieve (refer step 1 where we got a firm grip on the metric that must change)

3. Transfer

What is the work place behaviour that must change

2. Learning

What knowledge, skills and attitudes need to be acquired

1. Reaction

What is the required reaction of the learner to the intervention

Page 30: ROI For HR Practice Toolkit

Step 2a: Planning the Intervention (With ROI in Mind)

Back to our case study to show how we plan “backwards” – remember these objectives and measures for clarification, based on our core example/case study (re graduate engineers)

Kirkpatrick Level Objectives Measures

Impact Train target population (define) in behaviour based interviewing techniques, with the aim to:a. Improve predictive validity of selection decisionsb. Driving down cost of filling vacancies for graduate

engineers

25% reduction in total cost of filling vacancies for graduate engineers

Transfer Correct application of behaviour based interviewing techniques by target populations during selection interviewing

Expert observation with the aid of checklists show that all involved in selection interviews use the correct interviewing structure (agenda) and questioning techniques at least 85% of the time. Observation is conducted for two months following the initial training and corrective coaching is implemented where required, following interviews.

Page 31: ROI For HR Practice Toolkit

Step 2a: Planning the Intervention (With ROI in Mind)

Back to our case study to show how we plan “backwards” – remember these objectives and measures a merely examples

Kirkpatrick Level Objectives Measures

Learning Using Blooms Taxonomy of Learning Objectives here are a few examples of the objectives that will be outlined here:a. The learner should demonstrate that they can

analyse a CV, with the aim to develop behaviour based questions for an interview;

b. The learner should demonstrate the ability to develop interview questions according to the behavioural interview format

c. Etc. etc…

100% compliance with the Bloom Taxonomy, alignment with SAQA Unit Standards and also SAQA guidelines and requirements for assessment and moderation;Learners score 75% on theoretical paper to pass and 80% on practical simulation interview.

Remember this is a snapshot – there is a whole learning map and course development process underlying these objectives

Page 32: ROI For HR Practice Toolkit

Step 2a: Planning the Intervention (With ROI in Mind)

Back to our case study to show how we plan “backwards” – remember these objectives and measures a merely examples

Kirkpatrick Level Objectives Measures

Reaction The reaction to the learning material, environment, perception of preparation, facilitator style and

Using a Likert type scale participants rate the following on average no less than “agree”:a. Preparationb. Facilitator stylec. Learning environmentd. Participatione. General expectations met

Page 33: ROI For HR Practice Toolkit

Step 2a: Planning the Intervention (With ROI in Mind)

What have we achieved by planning the intervention this way?

4. ImpactWhat is the business impact we need to achieve (refer step 1 where we got a firm grip on the metric that must change)

3. Transfer

What is the work place behaviour that must change

2. Learning

What knowledge, skills and attitudes need to be acquired

1. Reaction

What is the required reaction of the learner to the intervention

A path – trail linking the business need w

ith the intervention

Results

Results

Results

Results

ROI ?

Page 34: ROI For HR Practice Toolkit

Step 2a: Planning the Intervention (With ROI in Mind)

We can also go some steps further and plan where we will get the information to evaluate the intervention and how…

Kirkpatrick Level Objectives Measures Where Will We Find Information For Evaluation

In What Format

Impact See previous slides See previous slides

HR Budget vis ActualStaff Turn Over Records

Business Report

HR ReportTransfer See previous slides See previous

slidesAudit/Observation results Possibly checklists

Learning See previous slides See previous slides

Test scoresPractical simulation scores

Tests papers and answer sheetsSimulation checklists and grading papers

Reaction See previous slides See previous slides

Survey results Possibly tabulated and presented in graphs

Page 35: ROI For HR Practice Toolkit

Step 2b

Planning the Intervention (Planning Beyond Training – With ROI In Mind)

Page 36: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Usually once we have done the planning and developed the training intervention we are ready to implement…

a. With ROI in mind our planning needs to go some steps further…

b. We need to determine what technique(s) we will use to show that the intervention actually had an impact

Page 37: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

We need to determine what technique(s) we will use to show that the intervention actually had an impact – but our dilemma is this…

External Factors

ManagementAttention

Incentives

Systems/ProceduresChanges

Here is our trainingprogram

AND YES THERE ISIMPROVEMENT

AFTERPROGRAM

IS IT THETRAINING PROGRAM?

OR SOMETHING

ELSE?

Page 38: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

We have to isolate the effects of our intervention!

I. Isolating the results/effect of our intervention is the most difficult and also most

important element of building the case for value (ROI);

II. Because of this, value at the higher levels is seldom determined;

III. However, the credibility not only of your study to show value, but also the training

function is based on this element.

Page 39: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

We have to isolate the effects of our intervention!

I. The complexity of isolating the effect, is a function of the variables that are in play at

any moment in time in an organization;

II. The analyst should however always try to prove a causal relationship to an

acceptable degree of accuracy;

III. Acknowledging the forces that influence individual, group and business

performance is the first step in this process.

Page 40: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

We have to isolate the effects of our intervention!

Remember that we are trying to isolate the effect of out intervention to an acceptable

degree of accuracy – this makes very important to involve and agree with the client:

a. What metrics should change as result of the intervention (see step 1)

b. What isolation technique will be used (because they differ in terms of accuracy)

Let’s consider the isolation techniques…

Page 41: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Let's look at the techniques!

a. Trend line analysis of performance data;

b. Control groups;

c. Participant’s estimation of impact;

d. Supervisor’s estimation of impact;

e. Management’s estimation of impact;

f. Use of previous studies

g. Subordinate’s report of other factors;

h. Estimating the impact of other factors;

i. Use of customer input.

With these techniques we try to isolate the effects of our intervention

Page 42: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Let's look at the techniques!

a. Trend line analysis of performance data;

b. Control groups;

c. Participant’s estimation of impact;

d. Supervisor’s estimation of impact;

e. Management’s estimation of impact;

f. Use of previous studies

g. Subordinate’s report of other factors;

h. Estimating the impact of other factors;

i. Use of customer input.

With these techniques we try to isolate the effects of other interventions and then declare the rest as due to our effort

Page 43: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Trend Line Analysis

I. Draw a trend-line using previous performance data as a base;

II. When intervention is conducted, actual performance is plotted and compared to the trend line;

III. Improvement in actual performance over what the trend line predicted can then be reasonably attributed to the intervention.

Page 44: ROI For HR Practice Toolkit

Advantages Disadvantages

I. Show quick results

II. Easy to calculate

III. Easy to understand

IV. Inexpensive

V. Not difficult to organize (basically just

monitor changes in metrics)

VI. A good first order analysis

I. Uses only one factor to isolate the effect

of the intervention (time- before and

after implementation)

II. Thus less accurate and client could be

sceptical to accept only an analysis of

the trend line.

Trend Line Analysis- Advantages and Disadvantages

Step 2b: Planning the Intervention (With ROI in Mind)

Page 45: ROI For HR Practice Toolkit

Example- Not from our central case study…

Step 2b: Planning the Intervention (With ROI in Mind)

AveragePost Program 35

AveragePre Program 55

TIME

COM

PLAI

NTS

SexualHarassment

Prevention Program

O N D J F M A M J J A S O N D J F M A M J J A S O

Effect of the intervention

Page 46: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Control Groups Technique

I. Similar to classical research the control group method, involves an experimental group and a control group;

II. The so called experimental group will be the target of our intervention;

III. The control group would be a group that is paired with the experimental group, but would not undergo the intervention;

IV. Important things to remember with this method are:

a. Paring need to be thought about carefully so as not to dilute the impact of the intervention;

b. Although not as rigid as classical research key factors that could dilute the impact or assessment of the impact of the intervention need to be controlled.

Page 47: ROI For HR Practice Toolkit

Advantages Disadvantages

I. More accurate than most techniques

II. If the pairing and control of variables are

agreed with the client the outcome has high

level of credibility

III. With this control groups, given the level of

accuracy it is possible to benchmark the ROI

of certain interventions given a

predetermined set of variables

I. More complicated

II. Require more planning, negotiation, control

and monitoring

III. As result of above many practitioners are

unwilling to use this technique

IV. Requires absolute agreement with the

client environment that variables will be

kept constant for the duration of the ROI

evaluation.

Control Groups- Advantages and Disadvantages

Step 2b: Planning the Intervention (With ROI in Mind)

Page 48: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Schematic Explanation of control groups design

Control Group

ExperimentalGroup M1 Intervention

M2

M2

M1

*M = measurement

1. Pairing 2.

Control Variables

Page 49: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Looking at pairing and control of variables

Select your experimental and control group

carefully

Note:I. Too small then meaningful pairing is not

possible – too big then you are not going to be able to control the variables during and after the implementation of your intervention;

II. Remember we go for reasonable accuracy therefore you pair the major elements and also control the major variables!!

III. The above makes it very important to agree upfront with your client environment what how pairing will be done and which variables will be controlled.

Note:I. Too small then meaningful pairing is not

possible – too big then you are not going to be able to control the variables during and after the implementation of your intervention;

II. Remember we go for reasonable accuracy therefore you pair the major elements and also control the major variables!!

III. The above makes it very important to agree upfront with your client environment what how pairing will be done and which variables will be controlled.

PAIRING

VARIABLES

Page 50: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

So what do you typically pair?

Negotiate creafully

Size

Nat

ure

of w

ork

Lead

ersh

ip st

ype

Perf

orm

ance

leve

l

Gen

eral

dem

ogra

phy

Pair for (Primarily)

Page 51: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

So what do you typically try to control?

Negotiate creafully

Size

Nat

ure

of w

ork

Lead

ersh

ip st

ype

Perf

orm

ance

leve

l

Gen

eral

dem

ogra

phy

Changes in:

Negotiate creafullyst

ruct

ure

Func

tion

Reco

gniti

on a

nd re

war

d

Turn

ove

r

Syst

ems

and

proc

edur

es

Changes in:

+

Page 52: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Remember your decision about pairing and control of variables….

= (f) (your knowledge and judgement) + agreement with

the client environment + practicability

Page 53: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)Estimation of impact by third parties ( this technique can include an estimation of the

perceived impact of the intervention, by participants, participants supervisors, participants managers)

This technique provides participants with a questionnaire, and based on the improvement ask them to respond to the following:

I. What percent of this improvement can be attributed to the application of skills/techniques/knowledge gained in the training program?

II. What is the basis for this estimation?

III. What confidence do you have in this estimate, expressed as a percentage?

IV. What other factors contributed to this improvement in performance?

V. What other individuals or groups could estimate this percentage or determine the amount?

Page 54: ROI For HR Practice Toolkit

Step 2b: Planning the Intervention (With ROI in Mind)

Estimation of impact by third parties – how do you increase the confidence level for this technique?

I. Individuals who do not respond to the questionnaire or provide non- usable data on the questionnaire are assumed to report no improvement/impact;

II. Extreme data and unrealistic claims are omitted from the analysis;

III. Only annualized values are used, it is assumed that there are no benefits from the program after the first year of implementation;

IV. The confidence level, expressed as a percent, is multiplied by the improvement value to reduce the amount of the improvement by the potential error;

V. If value is expressed it is also factored by the confidence value.

Page 55: ROI For HR Practice Toolkit

Advantages Disadvantages

I. Easy to implement;

II. Based on the assumption that participants

are capable of determining or estimating

impact;

III. Although an estimate, this value will usually

have considerable credibility with

management because participants are at the

centre of the change or improvement;

IV. High face validity.

I. Less accurate than control groups

II. Based on perceptions – could be

regarded as Return on Expectation

rather than ROI

III. Could become victim of “group think”

Estimation Of Impact By Third Parties - Advantages And Disadvantages

Step 2b: Planning the Intervention (With ROI in Mind)

Page 56: ROI For HR Practice Toolkit

Example from an actual coaching intervention- Not from our central case study…

Step 2b: Planning the Intervention (With ROI in Mind)

All indicators were pre agreed with the client

Participants and management agreed which the respective groups will rate

Page 57: ROI For HR Practice Toolkit

So now we can complete our plan

Step 2b: Planning the Intervention (With ROI in Mind)

Kirkpatrick Level

Objectives Measures Where Will We Find Information For Evaluation

In What Format

When Purpose of Data Collection and Analysis

Impact See previous slides

See previous slides

HR Budget vis ActualStaff Turn Over Records

Business Report

HR Report

Six months after final course was presented

ROI and Training Evaluation

Transfer See previous slides

See previous slides

Audit/Observation results

Possibly checklists

Period of three months following training

Training Evaluation

Learning See previous slides

See previous slides

Test scoresPractical simulation scores

Tests papers and answer sheetsSimulation checklists and grading papers

Within one week following training

Training Evaluation

Reaction See previous slides

See previous slides

Survey results Possibly tabulated and presented in graphs

Within one week following training

Training Evaluation

Page 58: ROI For HR Practice Toolkit

Note – because the techniques related to isolating the impact of other factors are

not used often it is only referred to in this toolkit…

Step 2b: Planning the Intervention (With ROI in Mind)

a. Trend line analysis of performance data;

b. Control groups;

c. Participant’s estimation of impact;

d. Supervisor’s estimation of impact;

e. Management’s estimation of impact;

f. Use of previous studies

g. Subordinate’s report of other factors;

h. Estimating the impact of other factors;

i. Use of customer input.

With these techniques we try to isolate the effects of other interventions and then declare the rest as due to our effort

Page 59: ROI For HR Practice Toolkit

Step 3

Implementation and Data Gathering (With ROI in Mind)

Page 60: ROI For HR Practice Toolkit

Implementation and Data Gathering (With ROI in Mind)

Referring back to our original example (turnover in graduate engineers) – let us assume the following:

Mine AControl

Correct pairing

Correct control of variables

Agreement on metrics Mine B

Experiential

Correct pairing

Correct control of variables

Agreement on metrics

We opted for a control group evaluation method

Page 61: ROI For HR Practice Toolkit

Impact

Transfer-Evaluation completed

Learning -Evaluation completed

Reaction – Evaluation completed

Implementation and Data Gathering (With ROI in Mind)

Referring back to our original example (turnover in graduate engineers) – let us assume the following:

Six months after the intervention the

need for replacement of graduates were

down by 50% in the experimental

group

Page 62: ROI For HR Practice Toolkit

Impact

Transfer-Evaluation completed

Learning -Evaluation completed

Reaction – Evaluation completed

Implementation and Data Gathering (With ROI in Mind)

Referring back to our original example (turnover in graduate engineers) – let us assume the following:

In the control group the need for replacement of graduate engineers also down by 10%...possibly because of anticipation

of changes in HR approach

Page 63: ROI For HR Practice Toolkit

Impact

Transfer-Evaluation completed

Learning -Evaluation completed

Reaction – Evaluation completed

Implementation and Data Gathering (With ROI in Mind)

Referring back to our original example (turnover in graduate engineers) – let us assume the following:

In the control group the need for replacement of graduate engineers also down by 10%...possibly because of anticipation

of changes in HR approach

Page 64: ROI For HR Practice Toolkit

So because to the method we used we can assign the

change in te metric to our intervention, mainly because we

controlled major variables. We do this as follows…

Click icon to add picture

Page 65: ROI For HR Practice Toolkit

Step 4

Converting the Change As Result of the Intervention to Value and Calculating ROI

Page 66: ROI For HR Practice Toolkit

Step 4.a Converting the Change As Result of the Intervention to Value

Referring back to our original example (turnover in graduate engineers)…this is how it is dome…

Identify the unit of improvement

In our case study: Number of replacements of graduate engineers in the past six months

Value per unit =R 74964 (see slide 12 AND 13

Determine the performance level change

Original replacements = 6Six months after the intervention = 3Improvement of 50%

Original cost of replacement R 449784Our latest cost of replacement following interventionR 224892

Calculate the performance improvement

50% saving R 224892

Page 67: ROI For HR Practice Toolkit

Step 4.a Converting the Change As Result of the Intervention to Value

Because this is such a vast area to know here is some additional input re calculating the value of change in a metric..

Primary Measurementsof Improvement

OutputIncreases

Quality

Impro

vem

en

t

Time

Savings

CostSavings

Page 68: ROI For HR Practice Toolkit

Step 4.a Converting the Change As Result of the Intervention to Value

Always try to link to a metric – alternatively use the method of

Estimation Of Impact By Third Parties – See slide 55 and 56 (this method is also referred to as Return on Expectation)

Page 69: ROI For HR Practice Toolkit

Step 4.a Converting the Change As Result of the Intervention to Value

See whether one can link tangible values to these?

OUTPUTUnits ProducedTons ManufacturedItems AssembledMoney CollectedItems SoldForms ProcessedLoans ApprovedInventory TurnoverPatients VisitedApplications ProcessedTasks CompletedOutput Per HourProductivityNew Accounts GeneratedCOSTSBudget VariancesUnit CostsCost By AccountVariable CostsFixed CostsOverhead CostOperating CostsNumber of Cost ReductionsProject Cost SavingsAccident CostsSales Expense

TIMEEquipment DowntimeOvertimeTime to Project CompletionProcessing TimeBreak in Time for New EmployeesLearning TimeMeeting SchedulesRepair TimeWork StoppagesOrder ResponseLate ReportingLost Time DaysQUALITYScrapWasteRejectsError RatesReworkShortagesProduct DefectsDeviation From StandardProduct FailuresInventory AdjustmentsTime Card CorrectionsPercent of Tasks Completed ProperlyNumber of Accidents

Page 70: ROI For HR Practice Toolkit

Step 4.a Converting the Change As Result of the Intervention to Value

And these….WORK HABITS

AbsenteeismTardinessVisits to the DispensaryFirst Aid TreatmentsViolations of Safety RulesNumber of Communication Break-downsExcessive BreaksFollow-Up

WORK CLIMATE/SATISFACTION

Number of GrievancesNumber of Discrimination ChargesEmployee ComplaintsJob SatisfactionEmployee TurnoverLitigationOrganization CommitmentEmployee LoyaltyIncreased Confidence

CUSTOMER SERVICE

Customer ComplaintsCustomer SatisfactionCustomer DissatisfactionCustomer ImpressionsCustomer LoyaltyCustomer RetentionCustomer ValueLost CustomersEMPLOYEE DEVELOPMENT/ADVANCEMENTNumber of PromotionsNumber of Pay IncreasesNumber of Learning Programs AttendedRequests for TransferPerformance Appraisal RatingsIncreases in Job Effectiveness

INITIATIVE/INNOVATIONImplementation of New IdeasSuccessful Completion of ProjectsNumber of Suggestions ImplementedSetting Goals and ObjectivesNew Products and Services DevelopedNew Patents and Copyrights

Page 71: ROI For HR Practice Toolkit

Step 4.a Converting the Change As Result of the Intervention to Value

Or determining value on a case by case basis using historical data

Actual cost from records

Estimated additional from staff

Staff time;Management

time

Cost R 285,000

Total of 35 complaints

Legal fee;Settlement

cost

R 285,000/35 = Cost per complaint

Cost of Sexual Harassment Complaint

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Step 4.a Converting the Change As Result of the Intervention to Value

In our case example we did determine the value of

the change and can therefore now move on to

calculate cost benefit and therefore also ROI

Page 73: ROI For HR Practice Toolkit

Step 4.b Calculating ROI

First thing to do now is to determine the cost of the intervention – again back to our main example …

Cost element Notes ZAR value (for the sake of our example)

Development Costs If you use more than one trainer or one trainer on more than one project – pro-rate

R50,000

Program Materials R10,000

Instructor/Facilitator Costs If you use more than one trainer or one trainer on more than one project – pro-rate

R10,000

Facilities Costs R10,000

Travel and lodging R10,000

Salaries and time loss of participants Will need to consult HR and line and pro-rate R50,000

Administration costs R5,000

Evaluation costs R 5,000

Total cost of the intervention R150,000

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Step 4.b Calculating ROI

First thing to do now is to determine the cost of the intervention – again back to our main example …

Benefit/Cost Ratio =Net Program Benefits (R224892- R150,000)

Program Costs (R150,000)

Ratio = 0.499928

Page 75: ROI For HR Practice Toolkit

Net Program Benefits (R224892- R150,000)

Program Costs (R150,000)

Step 4.b Calculating ROI

First thing to do now is to determine the cost of the intervention – again back to our main example …

Benefits ROI =X 100

1

Benefit ROI = 50% thus for every R1 I spent on this

program you got your money back through saving as well as an additional 50 cents.