Cost-Benefit Analysis of an Executive Development Program
Corporations rely on the intellectual and interpersonal skills of their employees for enhancement of their performance. The Human Resource department is, therefore, an integral pillar in the achievement of this goal. Prevalence of diverse market forces has necessitated the need for continuous improvement in the productivity of workers. This scenario has led to an increase in the frequency of conducting training programs for numerous businesses. Executives and workers involved in such initiatives are bound to the envisioned objectives which include better performances at their tasks. Research has shown that companies which observe such routine procedures have realized various outcomes. A cost-benefit analysis helps in the evaluation of risks that a company will face upon the introduction of certain policies. It also aids in the determination of the rewards the firm is bound to receive (Desimone and Werner 51). It provides an avenue for measuring the costs of certain transactions and their benefits. Likewise, if the latter outweigh the former, the senior executive team would consider the investment a terrific opportunity for the growth of the business and embark on its implementation without delay.
Examination of business data across a wide range of industries reveals that executive development programs are both beneficial and costly to firms.
Rationale for the Choice of an Executive Development Program
The global business arena is experiencing a paradigm shift in the management of the various corporate cultures (Desimone and Werner 8). Societal values have also been altered and replaced with new systems of beliefs. The current dynamic workplace requires a constant reorganization of personnel responsibilities and skills to match the ever-changing needs of the marketplace. Scrutiny of the socioeconomic effects of training programs is a vital step in affirming the commonly-held belief that human capital is the most important aspect of a business. Workers are in charge of the day-to-day operations of the company by internalizing its vision, implementing the firm’s policies, meeting the needs of consumers, and actualizing their corporate goals. Such executive development courses are, therefore, integral in the provision of strategic direction for the companies. The choice of this arrangement is thus predicated on its overwhelming control on the performance of firms and the domino effect such exercises have on the various stakeholders.
Economic gains achievable under these programs can be associated with lower costs and enhanced values. Any increase in profitability arising from these initiatives is bound to dwarf the socioeconomic capital spent in holding such forums. For instance, the growth of revenue streams and higher income-generation projects would significantly blur the expenses undergone in pursuing these ideals. In fact, the corporation’s success in raising the sales volumes would justify the resources used during the executive development courses because the surplus would be channeled into other developmental areas.
The expenses adduced above would be understandable and tolerable because the substantial emerging benefits would symbolize a reawakening. Additionally, the corporation gains value from the accrued skills imparted to its employees. Such workers emerge from the sessions determined, committed and able to face challenges that might arise (Sanchez and Heene 24). They are better prepared to deal with any eventualities and are equipped with the right tools to make realistic projections about the industry, which is helpful in the creation of contingency measures. Such circumstances raise the firm’s profile and enhance the individual worth of the workforce. The management merits greater confidence in steering the company to more significant achievements.
Potential Cost Categories
Training programs require investments in finance and time. The former entails the monetary resources that cater to the venue, coaching fees, catering, and other logistical needs such as transportation. All these factors are essential in ensuring the sessions run smoothly. Most corporations prefer on-the-job training models which guarantee that workers develop a multitasking skill for both individual and corporate benefits. Such people are still eligible for salary payments despite their absenteeism during specific periods. In fact, the company is bound to lose certain revenue streams from such inattention and will be attributable to the participation of these individuals in similar initiatives. The latter represents the duration of the courses. It is indicative of the period that employees stay away from their company responsibilities for the sake of attending these meetings. Working hours are well-known, and any alteration would ordinarily influence the level of productivity within the workforce.
A perusal of different balance sheets would be insightful in the determination of the financial implications of such courses. It would be instrumental in the judgment of the exact expenses incurred for these programs and offer a detailed analysis of the receivables. For instance, the exercise would reveal all the outsourced features and their respective costs. An examination of specified employee logs would significantly expose the duration that such activities accrued (Sanchez and Heene 33). It would highlight the total working hours dedicated to the courses for easier comparison with the subsequent productivity levels of the workers upon completion of the exercise. The monetary values are forms of fixed costs while the time factor is variable. This notion is reinforced by the fact that the corporation must pay all charges to facilitate the attendance of their employees. Likewise, time spent in these meetings fluctuates depending on the agenda, and the ability of participants to grasp the concepts determines the level of success of the programs.
The integrity of the data collection process is a vital principle, and its maintenance is anchored on the use of reputable sources such as certified financial statements from the respective companies. It would, therefore, be prudent to scrutinize the sources of information to ascertain their origin. Print and electronic platforms should bear the official mastheads of the organization to confirm the authenticity of the data. Cross-checking of the contents will be mandatory to retrieve vital excerpts that will corroborate the already acquired material. For example, visiting company websites and perusing newsletters would be helpful in the attainment of this objective. Follow-up calls to the respective corporation are also advisable because one is bound to get first-hand information concerning the above topic. Such intensive interactions with actual employees would provide room for clarifications and the inclusion of additional information that is relevant to the project. Collation of statistics from distinguished figures of the industry and multi-agency bodies would be a proper approach to the gathering of valid data. One may also furnish the corporation with the collected data for their authentication, which would provide enough proof of their validity.
Potential Benefit Categories
Training programs are beneficial to both the company and the employees. Such benefits can be categorized into tangible and intangible segments. It is indisputable that acquisition of better skills would result in greater income generation for the corporation and higher financial rewards for the top performers in the form of incentives. The personnel would have better sales pitches leading to an increase in volumes (Desimone and Werner 20). A heightened level of output would also be noticeable amongst the workers. In fact, such behavior would be anchored on the improvement of self-esteem and ambition for corporate progression. The former focuses on the physical indicators while the latter is concerned with the personalities of the workforce. As such, it would be vital to make comparisons of the performance of each executive before taking the course and differentiate with his/her output afterward. This information is also available in the corporation’s official accounting records.
Intangible benefits are discernible from an examination of employee progress reports contained in company files. Each worker is assigned an official record which includes his/her appointment letter, contract, appraisal documents, and disciplinary correspondence where applicable. Gaining access to such material would be integral in unraveling the behavioral patterns of different executives (Desimone and Werner 52). One can determine the positive influence that executive development programs have on employees by processing the acknowledged character traits contained in the files. Compilation of random reviews from customers and industry critics would also be helpful in this process because it would offer insight into the renewed form of customer care and workplace environment. These changes would signal the positive influence that such training initiatives have on the management and paint an accurate picture of the inherent progressive corporate culture. The social benefits emanating from such experiences are also integral in the decision-making process. For example, scrutiny of reports containing efficiency and staff morale observations is vital.
The integrity of the data will be ascertained by acquiring the information from relevant officials within the organization and requisite paraphernalia. It is also possible to access the opinions of different clients through avenues such as social media. These outlets would provide additional context on the changes in management and their effects on consumers. Reports from investigative journalists would also increase the impetus for making informed decisions concerning specific individuals. Comparisons from these sources would help in revealing the extent of influence that such programs have on the participants’ behavior.
Calculating the ROI
Calculation of the ROI of executive development programs is a complex exercise that would involve several parameters. It would be prudent to list the unexpected costs that arose during the duration of the training program. Such expenses are significant because they display the level of commitment that an organization has to the policy. Any benefits that may not have been anticipated should also be included in the overall analysis before embarking on the actual study. For instance, the cost of designing and developing the course will be keenly tabulated, the monetary value of acquiring materials for all participants will be included, and the facilitator’s fees will also be cataloged. Particularly, his/her duration of preparation and delivery time will be analyzed. It would be necessary to factor in the costs of hiring or constructing the facilities used for the training. Travel expenses, accommodations, and costs of meals would be looked at where applicable. Employee benefits and salaries for motivating a higher rate of participation amongst the workforce would be considered too.
Overhead and administrative costs of the program would be relooked as well. These variables will be calculated using the benefits/costs ratio which evaluates the value of the investments. For example, managerial, supervisory, and sales training elements will be examined further based on their contribution to the firm’s bottom line. Conversion of data into monetary value will be the guiding principle. Moreover, intangible benefits will feature prominently in this activity. For instance, the cost-benefit analysis would scrutinize issues such as improved teamwork, reduction of complaints, enhanced job satisfaction, improvement in customer services, lower level of conflicts, and increments in employee commitment to the organization. Such soft data would be instrumental in evaluating the significance of the training and the costs incurred in its optimization. The above procedure would consider multiple time periods that would aid in the development of a more precise perspective about the practice. It would offer a reinforced view of the corporation’s ROI (Sanchez and Heene 47). The time value of money would also be considered because the intangible benefits under consideration are only observable over a given duration. The lull that follows the training program and the subsequent revelations in lifestyle changes amongst the employees provide a window for accruing larger monetary values. Investments are often made with varying objectives, and training programs are not exceptions. The management envisions a more productive employee pool within a conducive working environment.
Calculation of the cost/benefit ratio outlined above would involve the length of payback time before the corporation breaks even. This element is more pronounced immediately after the completion of the course because immediate changes are easily noticeable. As such, an incremental analysis will be made based on the division of the grand cost of any project by the projected revenue within specific periods. A linear progression of these figures would signal a higher return on investment and reaffirm the success of the training. It would assuage any misgivings that the top management might have had concerning the budgetary allocations channeled to the program. Additionally, it would provide a basis for championing the continuity of such initiatives for the benefit of all stakeholders.
Presentation of Findings to the Senior Executive Team
Presentation of the cost-benefit analysis findings to a senior executive team would require the meticulous organization of the data to tackle all the relevant departments within the organization. For example, it would be sagacious to begin by identifying all the stakeholders that would be involved in the exercise. Furthermore, categorization of the board, investors, and members of staff, customers, and the community within which the firm operates would form part of the highlighted group. The contribution and importance of these demographics to the well-being of the company will be noted as a source of inspiration for conducting the training program. It will also be necessary to notify the audience of the objectives of the executive development course to the respective recipients to ascertain its viability in the short-term and the long-term. Selection of the cost-benefit elements espoused above will be made with an emphasis on the tangible and intangible benefits.
The financial costs of making the program functional will form the thrust of the discussion. Notably, the projected outcome of the course will be provided as an indication of the market’s strengths and weaknesses. It is imperative that such information is compartmentalized by making a comparative analysis of the charges amongst a wide group of suppliers of similar services and products. Such an approach would exhibit the level of background checks conducted to facilitate the corporation’s commitment to attaining value for money. It will then be vital to offer an assessment of the actual costs and benefits emanating from this endeavor (Sanchez and Heene 64). This evaluation is achievable through the conversion of all interests and expenses into a generic form of currency that would simplify the comprehension of the findings. For instance, one can identify the monetary value accrued from a highly motivated workforce by collating the revenue generated from an increase in sales volumes because such figures portray a surge in employee output.
Application of the yearly effective discount rate will then be made as an expression of the total amount of interest earned/paid at the conclusion of the period (Desimone and Werner 48). Said assertion should be done in percentage form to provide a mental picture of the situation. Additionally, the net present value of the available options for the project will be calculated. Such measurements of the cash flow into and out of the company will aid in the establishment of the scope of profits and losses incurred by the firm during the specified period. Similar indices realized before the commencement of the program will be given. The glaring differences in the cash flows affecting various income-generating initiatives run by the business will be revealed to justify the continuity of the training program or modification of a few areas. Consequently, the performance of a sensitivity analysis test will then follow. Notably, this juncture of the presentation will offer an in-depth focus on the relationship between the input of the forum and the output exhibited by the participants upon resuming their day-to-day activities within the corporation. Recommendations will be highlighted towards the end. These should involve the provision of affirmation for specific practices that have proven profitable and a readjustment of existing programs that have a minimal positive influence on the overall performance of the workers and the business at large. Making monetary connections between the forecasts, policy guidelines, and annual corporate revenue should be accorded the highest priority because such perspectives are essential sources of evidence for continuity of the executive development program.
The corporate environment has undergone numerous changes in its quest to facilitate better systems of “supply and demand.” It has, however, maintained its unequivocal conviction that a company’s workforce, managed by the human resource department, is the greatest asset towards meeting its stakeholder obligations. This mentality has informed the inclusion of executive development programs which primarily seek to reinforce the skills of employees to meet the various challenges in the field of their operations. Such training initiatives rely on the performance of a cost-benefit analysis that offers a clear indication of the importance of particular policies. It is incumbent upon the management to make accurate observations regarding the costs of these ventures and the inherent benefits they spur to justify the frugal usage of available resources. The collated data should be valid because the outcome of such a test will form the basis of future investments. Quantification of social capital is a challenging feat but monetizing these traits using the revenue generation mechanisms adopted by the corporation will adequately handle such hurdles. It is, therefore, vital for businesses to perform this task because it aids in the development of better corporate strategies, higher financial returns, and greater stakeholder confidence in the value of the organization.
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Desimone, Randy and Jon Werner. Human Resource Development. South-Western Cengage Learning, 2012.
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Sanchez, Ron and Aimé Heene. Enhancing Competences for Competitive Advantage: Volume 12. Emerald Group, 2010.
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