Chapter 12 The Costs and Benefits of Training Programs PDF

Preview

Summary

Lecture notes for Training and development, taught by Rocco Giovanni in 2018....

Description

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs True / False 1. The training program described in the MW Canada chapter-opening vignette had two main objectives: decrease equipment downtime and improve product quality. a. True b. Fals e ANSWER: True 2. To calculate the impact training has on the bottom line, trainers or program designers must be able to calculate the costs and benefits of training programs. a. True b. Fals e ANSWER: True 3. Direct costs include the trainer’s salary, food and refreshments, cost of travel, and the basic costs associated with doing a needs analysis. a. True b. Fals e ANSWER: Fals e 4. Given that trainees are already being paid by the company, their salary should NOT be included in a training program cost structure. a. True b. Fals e ANSWER: Fals e 5. A training program costs $10,000 to deliver. An evaluation of the program determines a decrease in employee turnover from 20 percent to 10 percent. This would be classified as a cost-effectiveness evaluation. a. True b. Fals e ANSWER: Fals e 6. If a training program is expected to reduce the amount of scrap in the production of a product, then a cost-effectiveness evaluation would indicate how much the training program costs and the impact on the bottom line caused by the reduction in scrap as a result of training. a. True b. Fals e Cengage Learning Testing, Powered by Cognero

Page 1

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs ANSWER: True 7. Often, the benefit–cost ratio of a training program will be the same as the return on investment ratio. a. True b. Fals e ANSWER: Fals e 8. Return on expectations is a comparison of the cost of a training program relative to its benefits that involves dividing the net benefit by the cost of the training program. a. True b. Fals e ANSWER: Fals e 9. A training program is expected to cost $1,000 and the “gross benefit” of the program is $2,000. Given that the return on investment in this scenario is positive, management should NOT invest in this program. a. True b. Fals e ANSWER: Fals e 10. 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. a. True b. Fals e ANSWER: True 11. The effect size measures the difference in performance between trained and untrained employees. a. True b. Fals e ANSWER: True 12. A training program costs $10,000 to deliver and produces a “utility value” of zero. By definition, this program will break even. a. True b. Fals e ANSWER: True 13. If untrained employees are performing at relatively similar levels, the effectiveness of a training program tends to be Cengage Learning Testing, Powered by Cognero

Page 2

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs less in dollar terms. a. True b. Fals e ANSWER: True 14. The utility of a training program equals (T)(N)(td) × [(SDy – (N)(C)]. a. True b. Fals e ANSWER: Fals e 15. A break-even analysis allows you to find the value at which benefits equal costs and so utility is greater than zero but less than one. a. True b. Fals e ANSWER: Fals e 16. Break-even analysis can be calculated for any variable in the utility formula. However, the most valuable break-even calculations should be based on the “effect size.” a. True b. Fals e ANSWER: True 17. Break-even analysis can be very useful because it helps eliminate the uncertainty associated with the estimates of the various parameters used to calculate utility. a. True b. Fals e ANSWER: Fals e 18. Because cost-effectiveness evaluations are NOT dependent on assumptions and opinions, the results should be considered 100 percent accurate. a. True b. Fals e ANSWER: Fals e 19. When making estimates of training benefits, it is recommended that human resource departments use both internal and external experts. Cengage Learning Testing, Powered by Cognero

Page 3

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs a. True b. Fals e ANSWER: True 20. Calculations of ROI and utility could be described as “one part science and one part art.” a. True b. Fals e ANSWER: True Multiple Choice 21. As explained in the chapter-opening vignette, MW Canada introduced the Technical Skills Certificate Program (TSCP) to its workforce in an effort to accomplish which of the following? a. adapt to increasingly competitive markets b. reduce top line results c. reduce overall training costs d. align its training programs to Canadian national standards ANSWER: a 22. How would you describe MW Canada’s Technical Skills Certificate Program in terms of program design? a. apprenticeshi p b. on-the-job c. blended d. off-the-job ANSWER: c 23. What may be concluded from the chapter-opening vignette about MW Canada’s Technical Skills Certificate Program as it relates to training cost effectiveness? a. it was a poor financial investment with negative utility b.it was a good investment given a conservative 17 percent return on investment c. no conclusion may be made as the return on investment was zero d.given that a return on investment calculation was not made, it is impossible to determine the program’s cost-effectiveness ANSWER: b 24. According to the textbook, what percentage of CEOs would like to see training and development linked to return on investment data? a. 47 percent b. 68 percent Cengage Learning Testing, Powered by Cognero

Page 4

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs c. 74 percent d. 96 percent ANSWER: c 25. Which of the following would be an appropriate method of categorizing the cost of a training program according to the textbook? a. based on the number of participants b. using two separate categories, indirect and fixed costs c. based on hard costs, soft costs, and variable costs of the training program d. according to the specific stage of the training process ANSWER: d 26. What costing concept refers to costs that are not part of any one particular program but are needed to support training activities and cannot be recovered even if the program is cancelled? a. developmental costs b. overhead costs c. indirect costs d. standard costs ANSWER: c 27. You have decided to use a costing scheme that separates costs according to the nature or kind of cost. In which category would you include the cost of doing a needs analysis and the cost of evaluating a training program? a. developmental costs b. overhead costs c. indirect costs d. direct costs ANSWER: a 28. What would be an appropriate explanation for classifying clerical and administrative salaries as an indirect cost in the Wood Panel Plant example? a. those costs are directly associated with this particular training program b. those costs would have been incurred even if the program were cancelled by management c. this classification decision was the authors’ choice d. clerical and administrative staff support many different departments, not just HR ANSWER: b 29. Which of the following is a strong rationale for putting together a process to identify costs of a training program? a. demonstrates that a positive return on investment is likely to happen Cengage Learning Testing, Powered by Cognero

Page 5

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs b. demonstrates that the training “effect size” will be positive c. they can be used to prepare a budget for a training program d. they can be used to calculate return on equity ANSWER: c 30. Which of the following statements best describes the concept of cost-effectiveness? a. compares costs of training in dollars to benefits in dollars b. compares non-dollar cost of training to non-dollar benefits c. provides a ratio of net benefits to training costs, divided by the number of participants d. compares net monetary cost of training to net benefits in non-monetary terms ANSWER: a 31. What approach did Accenture use to demonstrate the value of its training initiatives? a. cost–benefit evaluation b. return on investment c. benefit–cost ratio d. return on expectations ANSWER: b 32. Which of the following statements is NOT supported by content in the textbook relating to “training and the bottom line”? a. calculating the return on investment of a training program tends to increase the program’s effectiveness b. companies increasingly want to know the return on their training investments c. the training function faces increased pressure to justify the costs of training programs d. 74 percent of CEOs want to see ROI data supporting training initiatives ANSWER: a 33. How does Cisco collect the data that it uses to calculate ROI for its e-learning programs? a. production results b. Web-based surveys c. observations d. interviews ANSWER: b 34. What could be the rationale behind the low percentage of companies that undertake Level 5 calculations for their training programs? a. given that training initiatives are geared toward people, Level 5 calculations are simply not appropriate b. results associated with Level 4 evaluations are much more relevant c. C-level executives simply are not concerned with Level 5 results d. Level 5 calculations tend to be complex Cengage Learning Testing, Powered by Cognero

Page 6

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs ANSWER: d 35. What formula should be used to calculate benefits to cost ratio? a. BCR = (Benefits of the Program)/(Cost of the Program) b. BCR = (Cost of the Program – Benefits)/(Benefits of the Program) c. BCR = (Benefits – Cost of the Program)/(Cost of the Program) d. BCR = (Cost of the Program – Benefits)/(Cost of the Program) ANSWER: a 36. The Wood Panel Plant example depicted in Table 12.2 resulted in a return on investment outcome of 5.78. What can management conclude from that number if the assumptions underpinning the ROI calculations are correct? a. management should expect a $1.00 return for every $5.78 invested in training b. management should expect to receive $5.78 for every dollar invested in training c. management should expect a $1.00 return for every 58 cents invested in training d. the break-even point on this training program will required a 578% “effect size” ANSWER: b 37. If training costs are $2,500 per employee and the financial benefit of training is $2,000 per employee, what is the ROI of the training program? a. (20 percent) b. (25 percent) c. 20 percent d. 25 percent ANSWER: a 38. If ROI is 2.0, what does this mean for a training program’s utility calculation? a. that $2 was spent on the program, which should provide a negative $2 in utility b. that there is a return of $1 for every $2 in utility c. that $1 was spent on the program for every $2 received as net utility d. that there is a positive utility result ANSWER: d 39. What is another way to express an ROI of 1.0? a. 10 percent b. 100 percent c. 1.0 percent d. 1,000 percent ANSWER: b Cengage Learning Testing, Powered by Cognero

Page 7

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs 40. What is the net benefit of a training program if the benefits are $500,000 and the costs are $700,000? a. ($200,000) b. $200,000 c. ($1,200,000) d. $1,200,000 ANSWER: a 41. You are given the following five pieces of information about a training program: training will have an impact on performance for two years; 10 employees will be trained; the effect size of the program is 2; the standard deviation of untrained employees in dollars is 100; and it costs $50 to train one employee. What is the dollar value of this training program? a. $4,000 b. $1,500 c. $3,500 d. unable to determine as some of the direct costs have not been provided ANSWER: c 42. What is the concept that fundamentally attempts to attach a dollar value to the effectiveness of a training initiative? a. cost–benefit analysis b. break-even analysis c. utility analysis d. benefit–cost analysis ANSWER: c 43. When calculating utility, what is the concept that measures the true difference in performance between average trained and untrained employees in standard deviation units? a. the standard deviation of untrained employees in dollars b. the benefits–cost ratio c. the effect size d. return on investment ANSWER: c 44. What does it mean when the utility factor for a training program is zero? a. the organization should not implement the training program b. the training program’s development costs equal the net benefits of the program c. the benefits are greater than costs d. the program breaks even ANSWER: d 45. How is the utility of a training program defined? Cengage Learning Testing, Powered by Cognero

Page 8

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs a. Utility = [(C)(N)(dt)(SDy)] – (N) (T) b. Utility = [(T)(N)(dt)(SDy)] – (N) (C) c. Utility = [(T)(N)(SDy)] – (N)(C) d. Utility = [(T)(N)(C)] – (N)(SDy) ANSWER: b 46. You are given the following four pieces of information about a training program: training will have an impact on performance for two years; 10 employees will be trained; the standard deviation of untrained employees in dollars is 100; and it costs $50 to train one employee. What must be the effect size so as to allow the program to break even? a. 50 b. 25 c. .25 d. 1.25 ANSWER: c 47. If break-even occurs with an effect size of 2, what conclusion can you make about utility if the effect size changes to 2.5 (assume all other utility variables remain constant)? a. utility will increase b. utility will decrease c. utility will be zero d. utility will not be impacted ANSWER: a 48. After doing an evaluation of a training program, you determined the effect size of the training program was 50% less than expected. Assuming all other utility variables remain constant, what conclusion can you draw from this decrease in effect size? a. an increase in utility b. a decrease in utility c. no impact on utility d. program cost increased ANSWER: b 49. Which of the following statements is NOT one of the steps needed to convert benefits to monetary values for the purpose of calculating the return on investment? a. focus on a single unit, such as time savings, increase in output, decrease in errors, etc. b. determine a value for each unit c. determine the change in performance post-training d. obtain an annual amount and multiply that amount by the effect size ANSWER: a Cengage Learning Testing, Powered by Cognero

Page 9

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs 50. The textbook offers a few strategies to strengthen credibility of data. Which of the following strategies was NOT discussed in the textbook? a. use reliable sources for data b. use hard data if available c. do not adjust the data if the estimates appear too optimistic d. disclose assumptions ANSWER: c Subjective Short Answer 51. Explain the differences between cost-effectiveness evaluation and cost–benefit evaluation. ANSWER Cost-effectiveness evaluation involves comparing the monetary cost of training to the : benefit of the training in monetary terms. Examples of benefits of training that could be expressed in monetary terms would be the dollar value of increased production or of the reduced rate of scrap as a result of the training. In other words, it expresses a direct financial relationship. Cost–benefit evaluation is a comparison of the cost of the training in monetary terms to the benefits of the training in non-monetary terms. Examples of these benefits would be things like a reduced rate of turnover, or increased customer satisfaction—things that are difficult to assign an actual dollar value to. 52. a) Briefly describe five things that can be done to increase the credibility of estimating the benefits of a training program. b) Why have cost-effectiveness calculations been described as “part art and part science”? ANSWER a) A trainer can help to increase the credibility of their estimates of the benefits of a : training program by: i. Taking a conservative approach when making estimates and assumptions ii. Using the most credible and reliable sources for estimates iii. Explaining the approaches and assumptions used iv. Adjusting numbers to more realistic values when they appear overstated v. Using hard data whenever possible b) The appearance of quantitative rigour is just that—an appearance, as the majority of calculations are based on assumptions and/or the opinions of experts. Hence, the validity and reliability of the calculations are only as good as the level of accuracy provided by experts and having assumptions actually materialize. In fact, ROI calculations are based on some future benefit(s) which may or may not materialize. 53. An appropriate approach to costing a training program is to group costs according to the nature or kind of cost. Using one of the approaches described in the textbook, identify potential groupings of costs and provide at least two examples of cost that would naturally fit into each of the groups or categories. ANSWER One of the appropriate methods would involve grouping costs under the following : headings or groups: direct costs, indirect costs, developmental costs, trainee compensation costs, and overhead costs. Students will then identify logical costs under each of these five headings/groups. As an example, direct costs may include trainers’ wages and benefits, equipment rental, cost of travel (if needed), etc. Cengage Learning Testing, Powered by Cognero

Page 10

Name :

Clas s:

Dat e:

Chapter 12 - The Costs and Benefits of Training Programs 54. Define the term “return on investment” and explain how ROI on training is calculated. ANSWER Return on investment (ROI) of a training program involves comparing the cost of a : training program relative to the benefits received as a result of the program. The investment refers to the cost of the training, and the return refers to the financial benefits of the training program. ROI on training is calculated dividing the net program benefits by the cost of the program. For example, if cost of training is $10,000 and the net financial benefit is $15,000, then the calculation is $15,000 divided by $10,000 with a resulting ROI of 1.5. 55. a) Briefly describe at least three reasons why many managers avoid the costing process when it comes to training. b) What might senior management do to “encourage” training programs to include costing and some element of quantifiable benefits associated with specific training programs? ANSWER a) Some managers avoid the costing process because: : i. It can be complex and time consuming ii. They are skeptical about the theoretical underpinnings of the process iii. They believe that many of the benefits of training (such as job satisfaction and improved communication) cannot be expressed in terms of a dollar value b) Senior managers should ask that costing and benefits (quantifiable) be included when requests for funds are made by training departments. Furthermore, they should ensure that training departments have the required skills to undertake such activities.

Cengage Learning Testing, Powered by Cognero

Page 11...