Chapter 12

Kinds of Costs

Direct Indirect Developmental

Costing Approaches Stages

Needs analysis Program development Delivery Evaluation

Break even Analysis

Finding the value at which benefits equal costs and utility is equal to zero.

Indirect Costs

Supports training activities but not directly linked to a program. Advertising the training program.

Benefit Cost Ratio (BCR)

The benefit divided by the cost of the training program.

Trainee Compensation

Salaries and benefits paid to trainees while attending programs. Costs of temp workers who replace trainees.

What concept refers to costs that are NOT part of any one particular program but that are needed to support training activities and cannot be recovered even if the program is cancelled?

indirect cost

Credibility of Estimates

1. Take a conservative approach. 2. Use Crediable and reliable sources. 3. Explain approaches and assuptions . 4. Results must appear realistc. 5. Use hard data.

Overhead

Associated with all training programs. Equipment maintenance

What formula should be used to calculate benefits to cost ratio?

BCR = (Benefits of the Program)/(Cost of the Program)

Return on Investment

Comparison of the cost of a training program relative to its benefits. Benefits - Cost of the program / cost of program must be positive

Cost-Benefit Evaluation

Comparison of the cost of training in monetary terms to the benefits of training in non-monetary terms.

Cost-Effectiveness Evaluation

Comparison of the monetary cost of training to the benefit of training in montetary terms.

Developmental

Design of the program. Needs analysis

Many organizations in Canada tend to view training as an investment.

FALSE ( cost not investment)

Direct Costs

Linked to a training program. Trainer's salary Meals

Utility Analysis and Break Even Analysis

Method of forecasting the financial benefits that result from HR programs.

Costing Training Programs

Process of identifying all the expenditures used in training

Net Benefit

Value of the performance improvement minus the cost of improving performance benefit-cost

If ROI is 2.0, what does this mean for a training program?

that there is a return of $2 for every $1 spent on training

If a training program costs $2,000 per employee and the benefit of the program is $5,000 per employee, then the ROI is 1.50 or 150 percent.

true

In order to calculate the net benefit of a training program, a training administrator would subtract the training cost from the financial benefit of the program.

true

When making estimates of training benefits, it is recommended that human resource departments use both internal and external experts.

true