RETURN ON INVESTMENT EXERCISE

150 high potential middle managers from 20 different operating

companies of a multinational telecommunications company were
sent, in groups of 25, on a three-day management workshop.
The workshop consisted of group discussions to work out how the
company values could be more effectively implemented into
daily practice, sessions on the company strategic objectives and
how to achieve them better; sharing of best practice, and
training on employee engagement, managing change and the
coaching of employees towards better performance.

The direct cost per three-day programme (including travel and

accommodation) was £60,000. 50% of the managers led sales
teams and the other 50% ran a variety of costs centres such as
marketing, customer service, logistics, finance and HR.

In the six months after the Workshops the turnover of this highly
mobile group dropped from an annualised rate of 12% down to
8%. Typically, 50% of these are replaced by external recruitments
and it was reckoned that replacement of a middle manager from
outside cost about 9 months salary. The average managerial
salary (inc benefits and bonuses) is £100,000. In addition, the
motivation levels of two thirds of the group perceptively
increased, as reported by their bosses and supported by
anecdotal and written evidence from appraisal discussions.

External replacement of middle manager = 9 months’ salary

1-year salary = 100k
1-month salary = 8.33333k
9-month salary = 75k

150 manager’s total

150/25=6 three-day sessions
3 days (travel, accommodation, training) = 60k
60k x 6 = 360k

Turnover went from 12% to 8%

12% = 18 managers
9 managers external
75k x 9 = 675,000
50% of turnover are external recruits

8% = 12 managers
6 managers are external recruits
75k x 6 = 450,000

675,000 – 450,000 = 225,000

Saving of 225,000 in salary

Six months after there was also an increase in productivity of the

teams being led by the managers, as compared to the six months
before the Workshops. The revenues of the sales teams before
the programme averaged £500,000 p.a. in sales per team in the
previous years, and their productivity improved by 10%. The
average sales margin on revenues is 12%.

10% of 500k = 50k

Sales = 50% of 150 managers
50 x 75 sales managers = 3,750,000 million
Benefit of company is only sales margin = 12%
3,750,000 x 12% sales margin = 450,000k

The average cost centre had total costs of £200,000 pa. and the
changes the managers introduced as a result of the programme
led to an average of 5% pa reduction in costs.

Previous costs = 200k

5% of 200k = 10k
10k is the savings per call centre
200k – 10k = 190k costs per call centre
10k x 75 call centre managers = 750k

Total financial benefits:

Turnover saving = 225k

Productivity saving = 450k
Reduced call centre cost = 750k
225k + 450k + 750k = 1,425,000
1,425,000 / 12 = 118,750 per month
Return on Investment calculation = 1,425,000 - 360,000 /
360,000 x 100 = 296%
Payback period calculation = 360,000/118,750 =3 months

Evaluate the Value of the Financial benefits and calculate the

Return on Investment and the payback period.

List any other non-financial benefits that were probably

achieved; and decide whether this was an acceptable
investment.