Home » Business » Performance Initiative

# Performance Initiative

The calculation of  Return on Investment (ROI) involves identification of the cost and revenues associated with the project. The investment cost and income are then applied in the calculation of ROI as shown by the formula below.

Return on Investment (ROI) = (Investment Revenue – Investment Cost)/ Investment Cost.

In the process of calculating the ROI, we begin by identifying the cost and revenues from the job aid in English, French, and Japanese. In this case, \$15000 was required for the introduction of job aid, \$25000 for design, development and printing and \$400 was the fixed cost per hour performance. Summing these cost produces a total investment cost of \$40,400. Also, the job aid initiative would generate benefits and salaries to three hundred workers totaling to \$50,000. The other benefit would be the increase in the customer service representative performance by 5%, but since this cannot be quantified, we do not include it under revenues. Therefore, the project produces total revenues of \$ 50,000. The total investment cost and income are shown in the table below.

Cost and income from the Global widget performance project.

 Cost Revenues Job aid introduction \$15000 Salary and benefits \$50, 000 Designing and development cost \$25000 Fixed cost \$400 Total \$40, 400 Total \$50,000

Using the values in the table above, we can calculate the values of the ROI using the formula below.

Return on Investment (ROI) = (Investment Revenue – Investment Cost)/ Investment Cost

= {(\$50,000-\$40, 400)/ \$40, 400}*100

= 23.76%

The development of a job aid in English, French, and Japanese has a good return as depicted by a positive ROI of 23.76%. The project recoupled it cost, and there was some profit totaling to \$5600 left over. The Global widget performance by the Vice President Customer service and that of HRD was efficient as shown by the positive ROI.

However, since the process involved in the calculation of ROI does to take into account the time value of money, it would be prudent for the HRD to incorporate the calculation of present value so as to identify the value of the project accurately after its specified duration. Besides, the HRD team could reduce the cost of the investment by minimizing the cost of design and printing (Tenopir et al., 2009). The design cost is the highest among all the available cost and has a significant effect ROI. The project managers could minimize this cost by using cheaper materials. Reduction in this cost by 30%, for example, would reduce the cost of investment by \$7500 to \$32900. With the reduced cost, the ROI would increase to 51.98% as shown below.

The investment cost would reduce by 30% under the new recommended plan

= 30% of \$40,400   = \$7500

The investment cost would reduce to \$32900 (\$40,400-\$7500)

Thus, the new Return on investment would be 51.985 as shown below.

Return on Investment (ROI) = (Investment Revenue – Investment Cost)/ Investment Cost

= {(\$50,000-\$32,900)/ \$32, 900}*100   = 51.98%

Scroll to Top