Soft Return Essays Example

For soft costs, assigning a dollar value is even more difficult as the process turn out to be very subjective, but we can identify some places to look at. The soft costs of a more well-organized training program –a training program is a set of rules used to deduce ROI analysis- one could take into account things like increased business productivity, safer work environment, decreased employee nonattendance, better client satisfaction, an enhanced status amongst the company’s client base, and higher worker morale. In all of these cases, it is rational to accept that a more efficient training program could help to the desired outcome, but it is very difficult to claim that the training program was exclusively accountable as well as assigning a fiscal value to the profit made.
One way to measure the soft costs of a training program is look at them in the background of the accomplishment of precise, computable goals. A firm using a novel training program could recognize areas where progress could be made and set an aim to focus on each area of concern. For instance, one intention might be to reduce the stoppage times of a paper machine. Figures and numbers calculating the machine’s stoppage times, before and after the training program is executed, can be linked thus offering a size of the training program’s soft costs measured. More complex analysis would take numerous factors into account—machine stoppage time as well as, costs from regulatory infringements, benefits on worker’s sick pay resulting from damages, and more—to find more soft costs of such a program.
For presentation purposes, let us accept that before applying a new training program, a company’s paper machine normally produced 8 tons of products per hour, and that product was retailed at a market rate of $3,000 per ton. Stoppage time and quality problems caused an overall machine productivity rating of 85%, meaning that the machine produced saleable products only 85% of the total time it was used. The 15% stoppage time over one year equates to $11,342,000 in lost income.
Now let us consider that the firm sets up and utilizes a new training program and sets an objective to increase the overall machine productivity by 3%. Supposing that the objective is met, the boost in the machine’s productivity will result in $293,175 of additional income only the first year. Over an six-year period, the increased income totals $1,759,050.
It is not reasonable to associate all of this augmented income exclusively to the training program, yet it is safe to assume that the training program had a crucial role and a large share of the increased income should be measured as a soft benefit of the training program. Some percentage of the $1,759,050 in increased income over the six-year time period could be granted as a soft benefit of the training program; each firm will make its own decision on how much this percentage seems to be.
Companies usually grant anywhere from 10-50% of the worth of their soft benefits to Return on Investment calculations as long as those calculations are done the right way. For presentation purposes, let us make the conventional approximation that only 20 percent of the soft benefits of reduced machine stoppage time can be granted to the training program’s Return on Investment analysis. That signifies that the training program’s soft benefit could be an increase in revenue of just over $380,000 over the six-year period.

We can now adjust our ROI calculation to the following:

Return on Investment = [(Hard Benefits + Soft Benefits)/ Costs] X 100
= [($170,000 + $370,000)/$410,000] x 100
= [$540,000/$410,000] x 100
= 1.31 x 100 = 131 percent over six years
The company can then translate the Return on Investment to an actual number for one year: 131/6 = 21.8 percent per year. Using this Return on Investment estimation, the break-even point of the training program is just below 5 years (100/21.8 = 4.58).
It is safe to accept that the training program would offer additional soft benefits beyond just the rise in paper machine operating time. To more correctly assess Return on Investment, those extra soft costs should also be taken into account. Examples could take into consideration such not so easy to measure elements as improved worker morale, greater client satisfaction, and the subsequent resulting rise in the firm’s public status. With these extra soft benefits to the measurements the Return on Investment would increase and the break-even point reduced even further.

Bibliography

Peter, A. (2011, Mach 11). The Use of Return on Investment (ROI) in the Performance Measurement and Evaluation of Information Systems.
Rebekah. (2009, October 11). How To Measure Soft ROI. Retrieved January 23, 2015, from Marketing ROI or Die!: http://www.marketingroiordie.com/2009/10/11/how-to-measure-soft-roi/
William, I. (2000, June). Calculating project management’s return on investment. Project Management Journal, σσ. 38-47.