This is an imperative aspect of business as it enables one to determine the profitability of investment and thus carry out proper and efficient decisions based on the findings. It also helps determine the effectiveness of programs instituted such as in the case we are going to study below. A scenario of Specialty Global Coffee is done, and a case in which it undertook to develop a job aid is investigated, and the outcomes analyzed to determine the return on that investment. (Wilson, 2010).
Global Coffee Speciality
This company has made plans to develop employment opportunities in languages such as English snd Fresh. This is a fresh initiative within the company that is geared towards helping the services provided to the customer. The Training Vice President as well as the Customer Service Vice, made this decision in order to make imporvements in the performance at Seattle, Montreal and Wroclaw. After a brief meeting discussion on the introduction to the company is when we will have job-aids distributed.
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Costs Involved
A price amounting to about $25,000 will be used for designing and in the printing of job-aid and $400 per performance intervention and delivery training hour. An estimation was made of about $15,000 will be used in the training of representatives. Their purpose will be to do the introduction of job-aid. Moreover, this representative cohort will distribute the job-iad at the time when fifteen temas will be allocated about 30 minutes time to complete. About 300 affected workers will receive a salary of $50,000 on average.
Analysis
This seems like a bright idea as the leaders know that good customer service will go a long way in maintaining current customers and attracting new customers. They believe that well-trained customer service representatives will be able to handle situations appropriately and in a polite manner. This served as the core for them to tap a large market which would give them a strong foothold in the market. This seemed like an excellent idea though they did not consider the fact that it entirely depended on the customer service representatives’ emotional state and attitudes. Personality varies, and thus some people have a certain mindset and maybe discriminatory which also affects their work. They should also have acted to improve other avenues such as complaints raised against workers and means of having the customers rate the client service representatives based on their experiences.
Return on Investment (ROI)
It is a measure of performance and is used in evaluating the efficiency of a performance by measuring the amount of investment from a return that is the benefit about the investment’s cost. It is the most common profitability ratio and very popular because of its versatility.It can be very easy to calculate and interpret and also applies to many kinds of investments. The amount of money invested in a company is the ROI and the profit that is realized on that money is the measure of the business performance. The measurement of pricing policies as well as inventory investments are ways that can be used in the measurement of the business performance. It is used as a rudimentary gauge of an investment’s profitability. It is obtained by subtracting cost of investment from gain from investment. The cost of investment then divides the result. In the case of Specialty Global Coffee, the total cost of investment is $96,000. They expected performance to increase by 5% thus expected $100,800.
ROI= (100,800-96,000)/96,000 which gives us a ratio of $4800:$96000.
The results imply the company made a profit and that the investment paid off and thus can be considered as a worthy cause not only for the enterprise but also for the customer service representatives who learned invaluable lessons. It also serves as a means of the company trying to apply better programs and benefits packages for other workers in different sectors as a means of motivation. (Wilson, 2010)
Challenges Faced by an Evaluator
The ROI method captures different types of data categories which include the impact on business for example and intangible benefits. This implies that various methods of data collection will be used on the data hence making it expensive. The data collection methods include surveys, questionnaires, quizzes, interviews, action planning, simulations, and observations. The data collection program begins simultaneously with the rolling out of the program for effectiveness hence also expensive as it has to cover the entire period of the program. Some data collection methods have to be done immediately after the program and thus if done later lose the authenticity of the first time opinion. The memory may also be affected as the participants may forget some details. With the use of questionnaires, their effectiveness is usually at risk for insincere answers based on the type of questions answered. The number of items also plays a significant role as too many questions may tire the respondents.They may also leave out details they perceive not important. The data captured should mostly focus on business impact which may not be the focus sometimes as people may concentrate on personal experiences ideas. Insufficient resources also play a prominent role as they will have to cope with and utilize the limited resources available which may lead to inaccurate results. (Phillips, 2016).
Difference between ROI and Cost Savings
Cost saving is an action that results in fulfillment of objectives at a cost lower than projected cost. It is calculated by subtracting the actual amount spent on the expected cost. The expected value then divides the result. This implies that less money than the one allocated to the project is used and thus no profits or losses incurred but only minimizing down on costs. On the other hand, ROI is calculated by subtracting cost of investment from gain from investment. The cost of investment then divides the result. This hence implies that ROI can be used to determine any profits or losses made whereas cost saving shows the ability of the company to cut down costs and hence the money can be used in other ways.Training professionals help organizations to understand this and not mistake any price saving for profit or benefit obtained from the program which serves as a way of enabling them to make right managerial decisions that will benefit the company. (Frank & Wilson, 2000).
Implications of using ROI
The use of ROI in evaluation is efficient as it uses numbers and is hence accurate. It helped the Specialty Global Coffee Company determine whether it made a profit and also the effectiveness of the program. It may also be used for comparing between different business entities. Another advantage is that there is a possibility of chaning it to suit the occurrence depending on the inclusion like returns and price. Some disadvantages include; it can lead to incorrect conclusions of profit as it is a cursory comparison of investment and does not take time into consideration which is a paramount factor, especially in comparison.
References
Frank, K., Wilson, R. (2000). Why cost benefits analysis is controversial., Published by University of Chicago Press, Chicago. Journal of Legal Studies, Pg. 913-930. Doi: 10.1086/468099.
Phillips, M. (2016). Measuring ROI: Challenges and Issues. Phillips’ Edge. Retrieved from www.humanresourcesiq.com/hr-technology/columns/measuring-roi-challenges-and-issues.
Wilson, K. (2010). Business Insider. How to calculate a return on investment. Retrieved from www.businessinsider.com/how-to-calculate-a-return-on-investment-2010-1?r=US&IR=T&IR=T
