ROI NPV HRV DIF or payback time? Ways to calculate cost benefit analysis

B

Bill Pflanz

#11
Paul Vragel's explanation of the various finance terms is a very good summary. I agree a basic finance book will give more detail.

I have never seen the utility gain calculation. It may sound very scientific until you get to

dt = the difference in job performance between the average trained and the average untrained in std deviation units.
Defining what job performance is and how it directly correlates to training is very subjective. If all else was equal for the workers, the job etc. then maybe you could determine the effect of the training but the problem is that there are too many other factors that can effect performance. In addition, it ignores the huge effect of management on the process and its outcome.

Bill Pflanz
 
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Randy

Super Moderator
#12
jessica said:
dear mr vragel


dt = the difference in job perfromance between the average trained and the average untrained in std deviation units.

SDy = the std deviation of job performance of the untrained group in pounds
These are variables that can only be quessed at due to the "Human Factor" of the equation. You can have cases where an untrained person, because of individual ablilities or personal attitude, can out perform trained people doing the same task.

We only need to look back into some military history for evidence. The Army of the Potomac (professional and at the time well trained) was unable to defeat time and again the Army of Northern Virginia (well managed and motivated but not as well trained as its northern counterpart) until the weight of Northern logistics ability came into play.

More recently look back on the events in Afghanistan from 1979-1989. The Muhajidin defeated a much larger, better equipped and trained Soviet Army. The major factors weighing in on the side of the Afghan's were motivation and faith.

When we try to develop some formula like the one presented we essentually have to "SWAG" the standard deviation stuff, because many times the human factor is not considered.
 
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