Assignment:
Case Study DATAIN
DATAIN is a company started by two students who saw an opportunity to make some money and help pay for their education. As an increasing number of organi-zations today survey their customers and employees, the two saw a need for data input and analyses. With a loan from their parents, they rented space, purchased 20 used computers, and set up shop. They hired other students to do data input and analyses and began advertising their services. Within a relatively short period of time they were having trouble keeping up with demand. In fact, business was so good they had to hire more students and purchase more computers. After about six months, however; they began to notice some problems. The data files were often full of mistakes, and the data analysis was often incom-plete and incorrect. As a result, almost 40 percent (20 jobs per month) of all jobs had to be completely redone. This turned out to be a rather costly problem. Each job took approximately 10 hours and cost the company $150 (students were paid $15 per hour). To make matters worse, they began to notice that their new hires were quitting after only a few months on the job. In the last six months, they had lost an average of four employees a month. Every time an employee quit, they had to replace him/her and the cost of this was beginning to get very expensive. The cost of advertising, interviewing and hiring a new employee was estimated to be about $5,000. In order to cut down on these unanticipated costs, DATAIN decided to invest in a training program to reduce the mistakes and errors in data input and analyses and to improve employee retention. They hired a training con-sultant to conduct a needs analysis, design and deliver a training program, and conduct the training evaluation.
Based on the figures provided by the consultant, DATAIN thought it would be a good idea to determine whether the training program would be a worth-while investment. The consultant estimated that the needs analysis and training evaluation would each take about 20 hours at a cost of $100 per hour. The fee to purchase the actual training program would be $5,000. The training program itself would be forone day (8 hours) at a cost of $200 per hour to the consultant. In addition to the consultant fees, DATAIN would also have to give its 25 employees one full day (8 hours) of pay ($15 per hour); lunch that would cost $10 per employee; and coffee and snacks at a cost of $50 for the day. The training would take place at DATAIN so the only cost for classroom space would be a portion of the cost associated with room heating, lighting, and maintenance, which was estimated to be $100 for the thy. As well, some administrative support work would be required to prepare and plan for the training, which would involve about two days (8 hours per day) of work on the part of DATAIN's secretary, who is paid $15 an hour According to the training consultant, DATAIN could anticipate an 80 percent drop in mistakes and errors and a 90 percent reduction in turnover In other words, instead of 20 jobs a month only four would have to be redone, and instead of four quits a month there would be on average fewer than one. This sounded like a great investment; however, DATAIN was concerned about the loss of a hill day of work while employees attended the program. So they decided to get an estimate from another vendor that specialized in e-learning training programs. The e-learning vendor told DATAIN that she could design an e-learning program for $25,000. The program would take four hours to complete and would include interactive exercises and opportunities for practice. Employees would be able to take the course on their own time and at their own pace. The anticipated benefits are a 90 percent reduction in mistakes and errors and a 60 percent reduction in turnover. DATAIN does not know how to calculate the potential benefits of the two training programs and as a result, they do not know what training program to purchase.
Questions
1. Calculate the costs of the consultant's training program in terms of the different categories for determining training costs. What is the cost of each category and the total cost of the training program?
2. Calculate the benefit, net benefit, benefit-cost ratio, and return on invest-ment of the two training programs. Based on your calculations, are the training programs a good investment? Which one will you recommend and why?
3. What other factors should the company consider in deciding whether or not to purchase each of the proposed training programs?
4. If the company wanted to conduct a utility analysis, what additional information is required? How can this information be obtained? In other words, what would DATAIN or the consultant and vendor have to do to obtain the necessary information?