How To Calculate The ROI Of Professional Development

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Increasingly, employees are requesting and requiring professional development programs as a condition of working for, or staying with, an employer. Companies that do not offer training as a benefit are struggling to hire and retain highly qualified workers, leading to higher costs and lower competitiveness.

Indeed, younger workers rank training and development 300% higher than cash bonuses as a motivator to commit to an employer. Given that these workers, the millennials, will represent fully 75% of the workforce by 2025, this is a trend no company can afford to ignore.

Is the ROI there, though? Does the cost of developing employees to achieve their maximum potential vis-à-vis functional competency, industry knowledge, leadership and management skills, deliver net-positive financial return?

In this paper, we examine the depth and breadth of the demand for training and tease out the true value of failing to meet this need.
We examine the impact that professional development can have on engagement and retention. We propose a model for evaluating the ROI of committing to a credible professional development program with special emphasis on the Office of the CFO. And we posit an approach that, if applied, can develop highly qualified, highly engaged employees at significantly lower cost for today’s leading organizations.

The Size of The Challenge - Direct Costs of Low Employee Engagement

Employee engagement—workers’ motivation and commitment to the company and tasks at-hand—is a fundamental building block of any organization. Often touted as a company’s “greatest asset,” its employees are truly what make an rganization thrive—or not. However, in recent decades an employee’s average tenure has dropped markedly. According to figures from the U.S. Bureau of Labor Statistics, the average length of time an employee stays in a job is 4.6 years. But for millennials, those born between the early 1980s and the early 2000s, average job tenure lasts just 3 years. Such high turnover comes at a high cost. PriceWaterhouseCoopers (PWC) highlights the costs related to turnover in its report “

Driving the Bottom Line & Improving Retention:

• Lost productivity during a vacancy
• Diminished productivity of the team and managers who are covering for a vacant position
• Diminished productivity of the team and managers who are training the new hire
• Increased labor costs due to overtime or contractor needs during vacancy and new hire training
• Hiring and onboarding costs
• Decreased customer satisfaction, increased future turnover and loss of institutional knowledge

According to PWC, these combined turnover-related costs represent more than 12% of pre-tax income for the average company. For companies at the high end of the spectrum, at the 75th percentile, turnover costs are equivalent to nearly 40% of earnings.

This white paper goes on to give a system to calculate the ROI of professional development/training.

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