Are the HR productivity improvements worthwhile? Prepare a policy position that

Question

Are the HR productivity improvements worthwhile?

Prepare a policy position that addresses the issue, "Does it make sense

to invest in the productivity improvements offered by the HR module?"

Suppose that you apply the maximums to recruiting and training. Here

are the costs:

Recruiting costs per new worker are $5000.

Each employee trains 80 hours per year at $20 per training hour

Workforce complement increases by 4.2% to cover the 80 hours people are in training.

For this exercise you need a spreadsheet and both the Capstone Courier

and Annual Report. Use the Round 0 reports for the analysis. Human

Resources statistics like workforce complement and turnover are on

Courier page 12. Use Annual Report Income Statement's total Labor cost

to estimate payroll costs.

Assume the following productivity payoffs:

Round 1 - 102%

Round 2 - 105%

Round 3 - 108%

Round 4 - 112%

Round 5 - 115%

Round 6 - 118%

Therefore, in Round 6 each worker would be 1.18 times as effective as the beginning worker, and your workforce complement would fall to 1/1.18 or 85% of its current level.

For a quick evaluation, assume your total labor expenditure from the Annual Report Income Statement will stay flat for the next six years.

How much of a cost savings might you expect in the sixth year? For example, if the total labor costs on the Income Statement says

$29M, and costs stay the same for six years, then in the last year your costs would fall to $29/1.18 M.

Apply the same approach to years one through five to get a total savings over time.

Would this justify the necessary expenditures in recruiting and training made over time? Assume a turnover of 10% and no increase in workforce size. Since you are sending workers to training for 80 hours

or two weeks each year, you also need to expand the workforce enough to cover the workers that are in training. We are looking for a ballpark

answer, not a precise answer, so that you can decide whether or not a payoff in HR productivity justifies the expense.

So far we have assumed our workforce and labor contracts are constant. In practice the market is growing at about 14%, and your

labor contract has a 5% wage escalator. How does this affect the numbers?

At what level, if any, would you recommend that your company invest in recruiting and training? Are there any factors beyond the

6/24/2018 Courier/Fasttrack PRINT Annual Report Round nnual Report C98846 Baldwin Dec. 31, 2018 Balance Sheet y represents each item as a percentage of total assets Cash S3,434 ccounts Receivable nventory f that year. Cash:Your end-of-year cash positon $9,617 Refects the lag batwaen daliwery of your products, InventorisS: The curant l Current Assets 520,3 alue oryour invertory across al products. A zero indicates our company stocked out. Unmet demand would, of course $113,800 537,933) I to your competors. Plant & E The cumert Plant & Equipment lant. Accum DapreC: The total accumulated our plant. Accts Payable:What the perry currently owes supplers for materials and l Fixed Assets 575,86 t Dabt: Tha dabt the company is the naxt year of oparations, It includes pey u un out of cash presents the total value of your bonds, Common Stock; atal Assets $96,2 bans used to keep your company sclvent shouid the year. Long Term Debt: The pany's long tem debt is in the form of bonds, ard this ES & OWNERS' EQUITY he amour of capilal invested by shareholcers in the Payable S8,683 peny. Retained Earnings: The profits that the company Curre to keep instaad of paying to shanenolcers as 41,700 idends olal Labiities 548,2 $18,360 $29,582 arnings Total Equity 547.9 Total Lias.&O.; Equity $96,2 Cash Flow Statement sh Flow Statement examines what happened in the Cash Account during the e Income (Loes) r. Cash inecions appear as ?08itive numbers and cash withdrawals as negalve mbars. The Cash Flow Satement is an cxcclent tool for diagnasing amargancy loans 57,58 n negativa cash fiaws axcaed poeitivas, you are farced to soak emergency funding or example, if sales are bed and you find yourself carrying an abuncance of éxcess rventory, the reportwould show the increase in inventory as a huge negaive cesn now. oa much unaxpccod inmantory could autstrip your intlows, axhaust your starting cash and Apcounts Receivable 5307 to koa Net cash from oparatiare Cash Flows from Investing Activities: Pant Improvements Cash Flows from Financing Activitics: Dividends Paid Sales ofCommon Stock Purchase of Common Stock Cash from Reirement af long torm debt $8,4 Cash Flow Summary Baldwin C988486 ($4,000 6,000 4,000 2,000 m long term debt Change in current debt (net) Net cash from financing actvities Net change in cash position Closing cash position $4,000 $3,4 2,000 -4,000 Operations Finance Chg. Cash Operations ?Investment O Finance O Chg. Cash nnual R http:J/ww3.capsim.com/student/portalindex.cfm?template-reports.Reports.annual_frame_2004&&stu-st;&round-ksimid-C98846;&teamname; Baldwin

Explanation / Answer

The company needs to prepare a policy which will highlight how-its employees should be compensated for overtime work done. This will provide a basis for motivating the employees, which will in turn lead to increase efficiency and effectiveness in performance. It is a policy to train employees in order to improve ethical issues and also boost good code of conduct. Each and every employee introduced to this sector need to be taken through thorough training, in order to enhance competency is attached and enhance performance.

Cost incurred in training each new worker =$20/ hour

Each employee is trained 80 hours in a year.

Therefore;

Total cost of training one employee per year = 80 * 20 = $1600

The total cost of training in all the 6 = $443,200

But we need for the five years so we will subtract the 6th year

6th year = 43 * 80 * 20 = $68,000

Therefore for five years cost of training = $443,000 - $68,000 = $374,400

Total cost of recruitment for the last five years is = $275,000 + $240,000 + $230,000 + $200,000 + $225,000 = $1,170,000

However, there will be an increase in payoff as follows:

Round 1 – 102%

= (102/100) * $1,477,824 = $1,507,380.5

Round 2 – 105%

= (105/100) * $1,435,600 = $1,507,380

Round 3 – 108%

= (108/100) * $1,395,722 = $1,507,380

Round 4 – 112%

= (112/100) * $1,345,875 = $1,507,380

Round 5 – 115%

= (115/100) * $1,310,765 = $1,507,379.8

Totals = $7,536,902.4

Total labour costs is reduced to 1.18

Therefore cost savings = $29,000,000 + $7,536,902 – ($374,400 + 116,000 + $1,180,000)

                                            = $36,536,902 - $1,670,400

                                             = $34,866,502

According to the cost savings obtained, the company is justified to provide training to the employees. This is because it will lead to increase in the labour force and hence improved productivity. But in case there would be no workforce after training the workers are not inducing anything and the level of output doesn’t change, the company will find no benefit to engage workers in training.

If the turnover is 10%, then 10% * $374,400 = $37,440

An increase in wage to the employees would lead to reduced number of employees expected to be hired. If there is an all-round growth of 14%, then the company would not be able to make as much profit as before. For instance, in case the payoffs are 112%, then the company has a better income. I would therefore recommend the company to put in place policy measures which would have workers recruited for a period of one week per year in order to reduce cost of labour and also have manageable number of employees. The company should also supervise employees in order to ensure that the employees are working in the best interest of the organisation.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.