ROI (Return on Investment) Calculation of Employees

H

hherryjohn

#1
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.
 
Last edited by a moderator:
Elsmar Forum Sponsor

dsanabria

Quite Involved in Discussions
#2
Re: ROI calculations of employees

ROI - Return of Investment?

Most company focus on cost of quality rather than ROI -

is that where you are heading?
 

Bev D

Heretical Statistician
Staff member
Super Moderator
#4
Before you slide down the slippery slope to 'heck', why do you feel that you need to calculate the ROI? I think we can give you far better advice if we understood what you were trying to actually do...
 
Last edited:
S

Sequence_Barry

#5
Just a couple of thoughts. As opposed to ROI, we typically see "revenue per employee" as a measure of productivity. While not often segregated into job functions, you can easily do this. If your shop floor personnel are completely responsible for all of you revenue, i.e., they make everything you sell, then ROI could be easily considered as revenue divided by headcount cost. This number should be going up if you are becoming more efficient. However, to do this for any given employee or over the tenure of any given employee would be difficult at best.
 

Randy

Super Moderator
#6
Just a couple of thoughts. As opposed to ROI, we typically see "revenue per employee" as a measure of productivity. While not often segregated into job functions, you can easily do this. If your shop floor personnel are completely responsible for all of you revenue, i.e., they make everything you sell, then ROI could be easily considered as revenue divided by headcount cost. This number should be going up if you are becoming more efficient. However, to do this for any given employee or over the tenure of any given employee would be difficult at best.
That's only a wee part of the picture, there are other ways to determine ROI other than making the company widget...From 1997 - 1999 the greatest ROI for the part of ITT I worked for across the entire business of our location was found in the EHS department through cost avoidance...We didn't produce diddly squat, but 3 of us created and managed a process that reduced costs more than $6.5mil from 1996-97 operations...We were the Safety guys!...Got an ITT Ring of Quality award to prove it
 

Jen Kirley

Quality and Auditing Expert
Staff member
Admin
#7
Such good responses so far! :applause:

Probably one of the last things I would want to do is try to figure individuals' ROI, because how many of us single-handedly create value? Almost all of us interact with at least one other person, use tools and/or inputs from elsewhere, and/or get unseen assistance of some kind. A Pulitzer prize-winning publication is no good without the (usually underpaid and poorly recognized) delivery person.

But if you simply must calculate employee cost, I put a calculator for employee turnover in a thread titled Conquering Employee Turnover Costs. If you want to measure ROI based on events, the personnel compensation costs are a component of my calculator in the QA Inspection Gate - QA caught defect in the buy-off stage? thread.

Those calculators are dynamite. No I don't mean they are so excellent, because I am sure there are better calculators out there. I mean the subject can be explosive and really damaging unless you know very intimately and minutely from whom your value originates, where and when. Every internal customer relationship, every potential opportunity for error that a caring person avoids, every unsung hero from start to finish. No one knows that, but some people get paid like they think they are all of them!
:2cents:
 
S

Sequence_Barry

#8
That's only a wee part of the picture, there are other ways to determine ROI other than making the company widget...From 1997 - 1999 the greatest ROI for the part of ITT I worked for across the entire business of our location was found in the EHS department through cost avoidance...We didn't produce diddly squat, but 3 of us created and managed a process that reduced costs more than $6.5mil from 1996-97 operations...We were the Safety guys!...Got an ITT Ring of Quality award to prove it
Great stuff Randy & kudos to you and your team. In this instance, if all savings were attributable to your team, your yearly ROI was huge ;) This cost savings would show up in the complementary metric of profit per employee which undoubtedly rose as a result of your efforts!
 
Thread starter Similar threads Forum Replies Date
J ROI (Return on Investment) Excel Spreadsheet example Excel .xls Spreadsheet Templates and Tools 1
P ROI (Return on Investment) for Reducing Order to Fullfillment Lead Time Manufacturing and Related Processes 1
J Metrics for measuring Return of Investment (ROI) in Safety training ISO 9000, ISO 9001, and ISO 9004 Quality Management Systems Standards 1
G ROI (Return On Investment) Calculator Misc. Quality Assurance and Business Systems Related Topics 5
N Evidence: Has 9001 Registration Increased ROI (Return On Investment)? ISO 9000, ISO 9001, and ISO 9004 Quality Management Systems Standards 33
J Six Sigma Value and ROI (Return on Investment) Six Sigma 8
Randy ISO 14001 Implementation Return on Investment (ROI) Miscellaneous Environmental Standards and EMS Related Discussions 16
Marc ROI - Return On Investment News Group - Measuring HRD/HR programs & activities Misc. Quality Assurance and Business Systems Related Topics 0
M Augmented Reality (AR) ROI Lean in Manufacturing and Service Industries 4
C Document Control Software - ROI - Need Help Document Control Systems, Procedures, Forms and Templates 4
T EMS Implementation and ROI + Book Question - Selling EMS to Management Miscellaneous Environmental Standards and EMS Related Discussions 4
Y Benchmarking and Success Rate Survey (ROI) from ISO 9001 Implementation Benchmarking 11
J Measuring quality management system ROI ISO 9000, ISO 9001, and ISO 9004 Quality Management Systems Standards 15
J ROI NPV HRV DIF or payback time? Ways to calculate cost benefit analysis Misc. Quality Assurance and Business Systems Related Topics 11
Pflanz A Return to the Cove Coffee Break and Water Cooler Discussions 5
G AS9145/APQP return on investment APQP and PPAP 6
S Can we still manufacture whilst awaiting return of our CE Mark? Other Medical Device Related Standards 1
S Customer Property - If at all the customer return the product ISO 13485:2016 - Medical Device Quality Management Systems 2
L Handling Sort/Return Requests Customer Complaints 8
A Users won't return devices from pre-CE performance evaluation study EU Medical Device Regulations 3
B NB won't issue CE Certificate or return phone calls CE Marking (Conformité Européene) / CB Scheme 3
A Return information production and post production ISO 13485:2016 - Medical Device Quality Management Systems 1
L Return of Product Process - Procedure or Flowchart Misc. Quality Assurance and Business Systems Related Topics 14
H Return on Investment of Employee Human Factors and Ergonomics in Engineering 7
K CMM Productivity and Internal Rate of Return (IRR) to justify a new Acquisition Inspection, Prints (Drawings), Testing, Sampling and Related Topics 5
Q Return Material Authorizations - Documentation of Approval or Not Approval ISO 13485:2016 - Medical Device Quality Management Systems 1
Q Work at USA or return to Mexico? Career and Occupation Discussions 4
M Procedure for Handling Customer Return Part (Defective Part Return) IATF 16949 - Automotive Quality Systems Standard 1
B What Customers Return Survey Results? Customer Complaints 1
B Can we stop Customer Surveys as they are generating low return rates ? Customer Complaints 16
S Reworked DOA (Dead On Arrival) Return back to Inventory as New? 21 CFR Part 820 - US FDA Quality System Regulations (QSR) 7
M Supplier Defective Product Return and Corrective Actions. AS9100, IAQG, NADCAP and Aerospace related Standards and Requirements 4
R Return Material Authorization (RMA) Metrics - Examples Customer Complaints 9
K Organization's Rights vs. Customer's Rights - Product Return vs. Replacement Customer Complaints 13
D Return to Service after Contract Maintenance Federal Aviation Administration (FAA) Standards and Requirements 5
J What to do when the auditors guide does not return General Auditing Discussions 69
U The difference between ?Aircraft Return to Service? and ?Aircraft Airworthiness" Federal Aviation Administration (FAA) Standards and Requirements 3
B Who is responsible for cleaning medical devices before return for repairs? Other US Medical Device Regulations 13
Q RMA (Return Material Authorization) KPI's (Key Performance Indicators) and Metrics ISO 9000, ISO 9001, and ISO 9004 Quality Management Systems Standards 3
arios Customer Return or Advisory Notice? ISO 13485:2016 - Medical Device Quality Management Systems 6
P Automating RMA (return merchandise authorization) process - heard/aware of any? Document Control Systems, Procedures, Forms and Templates 13
N COTS (commercial off-the-shelf) Computers - Warranty return rate? Benchmarking 3
R Nonconformance Material - Return to Vendor (Supplier) Procedure Nonconformance and Corrective Action 4
Howard Atkins Return to India Imported Legacy Blogs 1
T Return to Stores (RTS) - Examples of a Return to Stores (RTS) form Document Control Systems, Procedures, Forms and Templates 3
Project Man Do I need both a Supplier Return form and a Supplier Corrective Action Report form? Quality Manager and Management Related Issues 17
F RMA (Return Material Authorization) system improvement - Real issues? Nonconformance and Corrective Action 6
A Return Goods Evaluation form Document Control Systems, Procedures, Forms and Templates 3
K Mock Audit Log Form Template for Product Recall/Return at Food Plant Document Control Systems, Procedures, Forms and Templates 8
G Sample Approval by Customer - Customer doesn't send/return their approval IATF 16949 - Automotive Quality Systems Standard 10

Similar threads

Top Bottom