Return on Investment of Employee

H

hsd222

Dear All,

I am trying to calculate ROI of employees, especially shop floor operators and supervisors.
I know how to calculate ROI for some new purchases or something of that kind.
But this is getting harder as I am digging in.
The main part where I am stuck is the tangible and intangible benefits from an employee.
If we consider Production per unit time as a tangible benefit and Effeciency/Effectiveness as intangible benefits, I wonder how I can quantify intangibles.
Also, am I going right on this???
Also my company's management wants that ROI, what exact data should they capture herewith???

Please help.:thanx:
 

RoxaneB

Change Agent and Data Storyteller
Super Moderator
Dear All,

I am trying to calculate ROI of employees, especially shop floor operators and supervisors.
I know how to calculate ROI for some new purchases or something of that kind.
But this is getting harder as I am digging in.
The main part where I am stuck is the tangible and intangible benefits from an employee.
If we consider Production per unit time as a tangible benefit and Effeciency/Effectiveness as intangible benefits, I wonder how I can quantify intangibles.
Also, am I going right on this???
Also my company's management wants that ROI, what exact data should they capture herewith???

Please help.:thanx:

I love Randy's response! But saying that might not be a smart move for your own employment. ;)

Calculating ROI for an employee implies that there has been some "I" in the first place. What kind of investments are being taken with these employess and what are the costs associated with these investments?

For things like Six Sigma training, I've heard that companies want the project portion of that training to be equal to or more than the cost of the training. There's your "R". :)

If you're talking about leadership/teamwork training for your supervisors, consider the costs to train new employees and avoiding the need to do that because your supervisors are just so gosh-darn awesome.

Happy, job-satisfied employees tend to stick around, avoid sick days, be more productive, etc. Take a look at turnover, sick day numbers, productivity numbers.

I doubt you'll find a hard-and-fast way to calculate ROI for employees unless their training has a direct connection to a project or activity.
 
B

BethP

This sounds like an exercise to determine which employees are most valuable. Is a layoff being planned?

Some other factors to consider:
1. Time to proficiency (how long does it take new employee or existing employee rotating to new area to reach target productivity numbers)
2. Number of skill sets (how flexible is the employee to rotate between different areas based on need?)
3. Tribal Knowledge / SME (who are the go to people for providing OJT or to work on special projects or to answer questions on how / why things are as they are?)
4. Work accuracy

Upper management sometimes make the mistake of looking at averages and saying this person is equal to that person. However, people are not always interchangeable.
 
K

kgott

Dear All,

I am trying to calculate ROI of employees, especially shop floor operators and supervisors.
I know how to calculate ROI for some new purchases or something of that kind.
But this is getting harder as I am digging in.
The main part where I am stuck is the tangible and intangible benefits from an employee.
If we consider Production per unit time as a tangible benefit and Effeciency/Effectiveness as intangible benefits, I wonder how I can quantify intangibles.
Also, am I going right on this???
Also my company's management wants that ROI, what exact data should they capture herewith???

Please help.:thanx:

I find this an interesting question. How would or could ROI be calculated for a support person such as a quality manager/coordinator or HSEQ person etc??
 
H

hsd222

Now let me tell you the way I am approaching.

STEP 1 : Calculating the Total Cost i.e. CTC as fixed plus variable costs, which comes out to be Total Costs incurred on an employee.
STEP 2: Calculating Productivity Gain .
- Suppose in a shift on 8 hrs an operator produces 100 pieces. So,100/8=12.5 units per hr are produced.
- Consider total hourly cost as 100 bucks and value added cost at the operator's work station be 40 bucks. So, operator returns 40*12.5=500 bucks per hr.
- gain = (output/input)*100= (500/100)*100= 500% returns.
Now, this is Performance Evaluation technique.

Calculating ROI on quality managers is indeed a tough job.
But that can be done once one knows how he can quantify managers KPIs.
 
K

kgott

Now let me tell you the way I am approaching.

Calculating ROI on quality managers is indeed a tough job.
But that can be done once one knows how he can quantify managers KPIs.

I'd like to how because then I can put it in my resume.
 
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