Short Case 2-Training ROI and

payback period

Mindtrap Incorporated, an MNC headquartered at Mumbai, hired 50 new management trainees in November 2015 from
few premier business schools of India. The HR Head, leading a team of four HR executives, decided to conduct a five-day
long training programme for the new joiners to better facilitate the orientation process. The team identified the training
needs of the participants. They came to the conclusion that the training can be best imparted by an external training
consultancy possessing the requisite skills. The in-house HR team communicated the proposal to the training firm Xyler
Ltd, a professional company in the business of imparting professional training workshops located in New Delhi, and asked
quotation for their charges. Xyler officials replied back that their charges would comprise of a one-time `30,000 payment
for the external resource person provided by Xyler Ltd. Additionally, Xyler would rent a hotel for conducting the
programme which would cost `10,000/day for 8 hours/day. Furthermore, Xyler has given a requisition for a one-time
stationery cost of `30,000 in lieu of providing the training kit materials (licensed software, copyrighted measurement tools,
notepad, brochure, pen and so on).

Xyler also communicated that the food and lodging cost of the programme would have to be borne by Mindtrap
Incorporated. Their HR staff estimated that to cover the food cost of 50 participants in the training, an approximate daily
expenditure of `15,000 would have to be incurred. Accommodation of the participants in a hotel would cost `1,500 per
participant per night and to and fro AC 3-tier railway fare for each participant from Mumbai to New Delhi and back will be
`2,500.

The management insisted that one internal trainer would also accompany the trainees to monitor the process. This would
mean that for the five days of the training the HR personnel will not be productive for Mindtrap Incorporated. The average
salary of an executive (including HR executive) at Mindtrap is `100/hour per day. Typical working hours of ABC is from 9:00
am to 6:00 pm. Similarly, it is to be considered that the 50 participants will also not be contributing to Mindtrap’s
productivity for the five days of training. If we consider the travel time, it will be seven days of on-duty leave for the
participants and the HR executive. Mindtrap’s HR head pointed out that they would have to consider other overhead costs
such as local conveyance and food consumed during travel as well plus some other amenities. The team allocated an
additional `20,000 as overhead cost.

Xyler promised guaranteed savings in terms of the following factors as an output of their well-tested training module. The
benefits may be listed as: (a) Expected Labour savings = `1,000 per participant per month (in terms of efficiency, project
completion rate), (b) Productivity increase = `2,000 per participant per month (in terms of new product development, new
customer acquisition and so on), (c) Other cost savings = `500 per participant per month (in terms of punctuality, deadline)
and (d) Other income generation = `500 per participant per month (through innovation, patents).

Mindtrap’s HR team sat down together to analyse the proposition. Would there be sufficient gain from this initiative?
What will Mindtrap benefit out of this? What will be the approximate period for the benefits to be appreciated? The team
decided to crunch some numbers to understand how long it will take to get return on this training investment considering
12 months from training completion as a time frame.

Question: Calculate training ROI and payback period for the firm and suggest whether they should pursue the training
programme for the new joiners.

[Banerjee, Pratyush/Pandey, Jatin. Practical Applications of HR Analytics]