Calculation of the costs and benefits of training

Exercise: Calculation the costs and benefits of training

Assume you work in the HRD function for a large manufacturing facility. Employees have been placed into work teams, and top management is now considering providing additional formal cross-training to team members, so that people will be able to do a variety of different tasks within their teams. However, the lowest possible cost available for a high quality-training program is determined to be 7,500 SR per employee. In the light of this cost, management has asked you to estimate the potential value (utility) of this training program. Initial training will be provided to thirty team members, and their performance will be compared to thirty other who have not been trained. To be conservative, you have decided to assume that the effect of training last for one year.

After training, you find that the trained employees can now produce an average of 26 unit per day, while the untrained employees produce 22.5 units per day. The standard deviation in units produced turns out to be 5 units per day. From your company recorded you found that the financial value of untrained employees was 37,500 SR.

Using the formula from Cascio that we took in this course, what is the projected benefit to the organization of training those thirty team members? What was the cost? What is the estimated change in utility of the training? How would you present this information to the top management, as they consider whether to use the training program for others employees in the organization?