Get the ROI calculation right!

Improving Productivity Through Training and Goal Setting.

The program was evaluated and the results were delivered like this:

“The first productivity metric was “time-to-produce,” and the overall organizational performance in the six months leading up to the launch of the new initiatives was 6.2 hours.  In the six months following the launch of the new initiatives, the “time-to-produce” fell to 5.6 hours –an improvement of 9.67 percent.  The second metric was “errors-per-customer delivery.”  In the six months leading up to the launch of the new initiatives, this was 0.09 (meaning an average of 0.09 errors per 100 products produced).  In the six months following the launch of the new initiatives, errors-per-customers delivery fell to 0.06 –an improvement of 33 percent!  The organization knew what the costs per efficiency improvement and the costs of a customer claim meant to the organization.  The improvements saved the organization $81 million dollars annualized in the first year that the initiatives were put into place.  The investments in these initiatives totaled $6.2 million dollars.  Our analysis showed that the productivity metrics had a 0.19 impact (beta weight) on profits.  If we take 19 percent of the $81 million dollars, that yields $15.39 million in impact attributed to the initiatives: $15,390,000/$6,200,000 = 248 percent ROI.”

2.48:1 is the Benefit Cost Ratio and the ROI is calculated as Net Benefits over Cost x 100 – expressed as a percentage it is 148%