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Human Resources - Return on Investment The tight labor market is making it difficult to find qualified and experienced employees Retaining those already present is much more cost-effective than replacing them Innovative means of enabling employees to balance work and home life can have a greatly positive effect both on employee morale and on the organizations bottom line There are various ways to calculate and measure the benefits of training and development The firm must make a cost benefit assessment and according to the results initiate the training programs A firm can accomplish this through the measure of a businesss overall performance in relation to its investment capital or Return on Investment Link and Boger 15 Return on investment ROI is the information a company looks for to determine the value of a business plan Human resource departments must show a return on investment like any other organizational department and performance measurements are key to accomplishing this objective The standard ROI measurement which many training professionals use is a formula that divides net program benefits total benefits less costs by program costs multiplied by 100 The result of this calculation shows that for every dollar invested in the training program there is a return in net benefits of a certain amount of money In figuring the ROI the human resources function can gain credibility as managements true strategic business partner by quantifying its contributions to the organizations in terms of dollars and cents Through the measurement of its return on investment HR can demonstrate that it supports the companys financial goals and objectives It can therefore avoid being considered as overhead a function that consumes resources without adding value and gain legitimacy as a strategic business partner or a business unit that directly contributes to the bottom line HR areas that lend themselves to ROI measurement include employee training compensation management modified work structures employee recruitment total quality management and employee support programs Training programs
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