Costs and Benefits of HR Development Programs

Question 1

What is the logic of talent development?

Answer 1

1. Candidates for development must be prepared and motivated both to learn and to apply their learning at work.
   
   • This requires investments by the organization both in the preparation of development candidates (for example, through challenging job assignments) and in careful selection of candidates for development experiences, such as jobs or training programs.
2. After the development experience, there must be an environment that provides the opportunity and motivation for the newly developed individuals to apply or transfer their learning to their work.
   
   • This second condition requires that supervisors and higher level managers support employees’ attempts to use on the job what they have learned in training or development.
3. Individuals that apply or transfer their learning to their work will have improved performance. When employees have more knowledge/skills and opportunities to perform well, they are often more motivated and engaged with their work. This can also lead to reduced turnover and absence.

Question 2

Explain each of the variables in the training utility model equation:

ΔU = (N)(T)(dt )(SDy) - C

What does this formula tell you about a training program?

Answer 2

• ΔU is the gain to the firm in monetary units (such as dollars, euros, or yen) resulting from the program
• N is the number of employees trained
• T is the expected duration of benefits in the trained group
• d_t is the true difference in job performance between the trained and untrained groups in SD units
• SD_y is the standard deviation of dollar valued
  job performance among untrained employees
• C is the total cost of training N employees.

This formula tells you whether the benefits exceed the costs of investing in a training program. It helps you decide whether or not to invest in a training program.

Question 3

If d_t is calculated and turns out to be 0.5 SD, what does that mean?

Answer 3

• It means that the performance of the trained group is half a standard deviation better than that of the untrained group.
• It indicates that the training program was very successful in improving the outcome measured (e.g., knowledge attained, job performance, etc.)

Question 4

Suppose that 300 employees are trained, the duration of the training effect is expected to be 2 years, d_t = 0.55, and the per-person cost of training is $1,500. Interpret the breakeven analysis below.

Setting ΔU = $0.00 (breakeven) yields the following:

$0.00 = 2(300)(0.55)(SD y ) − 300 ($1,500)

SD y = $1,364

Answer 4

• If the standard deviation of dollar valued job performance among untrained employees is greater than $1364, this training program will yield positive benefits.
• Since the typical SDy reported in the research literature ranges from $28,000-$39,000 it is a good bet that this training program will produce positive benefits.
• Therefore, this training program will likely yield benefits far greater than costs.

Question 5

What are the four types of employee development plans that can be applied to specific employees based upon their (1) past job performance and (2) future job potential?

Answer 5

• Developmental Action Program (DAP) employees: high past job performance and high future job potential
  
  • Provide both training (for current job) and development for future jobs (especially supervisory/managerial) since investments will yield the greatest returns.
• _Maintainance Action Program (MAP) _employees: high past job performance and low future job potential
  
  • Provide only training (for current job) primarily to prevent job obsolescence since investments in development for future jobs (such as supervisory/managerial) will unlikely yield substantial returns.
• Remedial Action Program (RAP) employees: low past job performance and high future job potential
  
  • Provide minimal training since they are an uncertain bet. Primarily lay out a plan for them to prove their capability of performing (e.g., a probation period with specific goals/objectives that must be achieved). If they meet goals, they may move into a MAP category. If they fail to meet goals, they may move into a TAP category.
• Termination Action Program (TAP) employees: low past performance and low future job potential
  
  • Disinvest in these employees. Remove them from the organization. They are probably selection errors. They are not good investments. Furthermore, they may do more harm than good by keeping them.

Question 6

What are Kirkpatrick’s four levels of training evaluation?

Which level of training evaluation is the utility analysis formula used for?

Answer 6

1. _Reaction _- How well did the learners like the learning process?
2. _Learning _- What did they learn? (the extent to which the learners gain knowledge and skills)
3. _Behavior _- (What changes in job performance resulted from the learning process? (capability to perform the newly learned skills while on the job)
4. _Results _- What are the tangible results of the learning process in terms of reduced cost, improved quality, increased production, efficiency, etc.? The utility analysis formula is used for this level of training evaluation.

Question 7

What is an ideal training evaluation process?

Answer 7

• Pretest (Time 1)
  
  • The training group receives a pretest (evaluation of their knowledge before being trained)
  • The control group receives a pretest (evaluation of their knowledge before being trained)
  • There should be no difference in pretest scores between the training group and the control group
• Training (Time 2)
  
  • The training group receives training.
  • The control group does not receive training.
• Posttest (Time 3)
  
  • The training group receives a posttest (evaluation of their knowledge after being trained).
  • The control group receives a posttest (evaluation of their knowledge after being trained).
  • If the training was effective, the training group should score higher on the posttest than the control group.
  • If the training was not effective, the training and the control group should score about the same.