Project Description and Significance
In the current competitive business environment, firms are under pressure to ensure that they maintain a team of highly skilled and experienced employees who can use emerging technologies to continuously improve their performance. Brewer and Dittman (2018) explain that recruiting talented employees is the first step towards realizing such a goal. The organization also needs to ensure that such employees are taken through rigorous and regular training to enable them to acquire new skills. Training helps in ensuring that the workforce emerging market trends, diversity, and new technology that directly or indirectly affect their productivity within the firm. It helps in reducing cases of resistance to change among workers.
In this proposal, ABC Company will commit its resources to train its workers as a way of enhancing their skills in different fields. The tight schedule of these workers and stiff competition in the industry makes it impossible for the firm to grant these workers study leave. As such, the plan is to undertake online training for all the 120 employees of the firm. The firm intends to pay for employees to participate in training online through Coursera. The platform would provide training to the fields appropriate to the employee, especially in finance and IT. The courses will be offered in the evening after work through the selected online platform. The HR department is convinced that regular training of these workers will make them highly efficient, and will enhance the competitiveness of the company in the industry. The first phase of the training, upon which this proposal is based, will last for five years.
Cost-Benefit Analysis
In every project that an organization undertakes, investors are always keen on ensuring that benefits will outweigh costs. Training of employees is one of the noblest and financially viable projects that an organization can undertake (Alpert, 2018). One of the main financial benefits of such a project is the elimination of wastage through improved skills of workers. They learn how to use emerging technologies and get to embrace new best practices in the industry. As shown in Table 1 below, the training will specifically focus on technology, emerging trends, and diversity. It means that workers of this firm will be in a position to work more effectively in a diversified environment after training than before they went through the process.
The researcher made some assumptions when defining the benefits of the project. One of the main assumptions is that all the employees will be retained to the firm during and after training. Another assumption is that when the training is complete, these employees’ performance will directly reflect the investment that the firm has made. It is also assumed that the gained skills will remain relevant for a long period. The cost of the project will be the direct monetary investment made by the firm into the project. The calculation of the cost and benefit is done in section 5 of this paper. The analysis shows that it is a financially viable project that the management should not ignore.
Pros and Cons of Various Financing Options
The management of ABC Company has to consider the most appropriate financing option for the project. One option is for employees to fully fund their training. The benefit of this strategy is that the company will not invest anything in the project other than the time that employees will spend learning online. However, the problem with this strategy is that it will create an impression among employees that the firm does not care about them. They may be discouraged from undertaking the training. The second option is for the firm to fully sponsor the project. The benefit of this training is that workers will be motivated to participate in it and will not experience the financial burden (Meredith & Shafer, 2021). However, the main challenge of the strategy is that it may not emphasize the significance of the training to the employees because they do not spend their money on it. The third option, which was chosen for the project, is a hybrid of the two financing alternatives. The company funded 80% of the project while employees funded 20%. Sharing of the burden is fair to both employees and the firm. It also helps in demonstrating the significance of the project to workers. The management can also be directly involved in controlling the losses by monitoring how the money is spent in the entire period of implementing the project.
A Five-Year Cash Flow of the Project and the Timeline
It is necessary to clearly articulate the cash flow for the project and a timeline of activities involved. As shown in Table 1 below, the first year will involve introductory concepts and other major issues affecting employees. The second-year will focus on emerging technologies in the industry. The third-year will involve reviewing the issue of diversity in the workplace. The fourth-year will focus on emerging industry trends and how they affect the firm. The final year will involve a review of the activities done and other issues affecting the firm. The table also shows a five-year cash flow in the project.
Table 1: A Five-Year Cash Flow for the Training Project
Calculation of Financial Ratios
The finance department of ABC Company will need to be convinced that the project will be valuable for them to consider financing the project. As Iqbal (2020), the viability of a project is often determined by, among other factors, its financial returns. As such, this section will focus on calculating financial ratios that will help in determining the viability of the project.
Net Present Value
Net present value is one of the financial ratios that help in determining the financial viability of a project. According to Heldman (2021, p, 67), NPV is the “present value of your cash inflows and the present value of your cash outflows over a given period.” In accounting, this ratio helps in determining if the income generated from a given project yields a greater return than the investment made. As such, it is a tool that measures the profitability of a project. However, it is important to note that investing in the training of employees may not yield direct profits such as investing in a new product or an expansion project. The benefit of this project cannot be easily calculated in direct financial terms as it includes improved efficiency, cost reduction, and employee satisfaction. The basic formula for calculating NPV is as follows:
NPV = Cash flow / (1 + i)t – initial investment
This formula can only be used when there is a cash inflow arising from the project. However, the training of employees does not yield a direct income as other investment projects do. As such, the simpler formula below was used.
NPV = Today’s value of the expected cash flows − Today’s value of invested cash
The following assumptions had to be made:
- Today’s value of the expected cash flows is the amount of money the firm will save by having highly trained workers. The value of estimated to be $ 456,876
- Today’s value of invested cash is the total expenses the firm will incur after a five-year training of workers. As shown in Table 1 above, the value is $ 212,052
- 456,876-212,052 = 244,824
The value means that the firm will gain more than twice the amount that will be spent on the project in terms of saving that the firm will make. There is also the improved efficiency of the workers and employee satisfaction that is not computed in the above calculation. The nature of investment made in this project makes calculations of internal rate of return (IRR) and payback period unnecessary. However, the positive value of the NPV is a strong indication that this project is worth the cost.
Recommendations and Timeline for Implementation
One of the best strategies for achieving and maintaining competitiveness in the market is to maintain a team of highly skilled employees. ABC Company’s decision to take its employees through an online training program will enable it to enhance its capabilities without having to spend time away from work. The implementation of the project will last 5 years, from 2021 to 2025, as shown in Table 1 above. To ensure that the project yields the expected return, the HR department should take the following into consideration:
- There should be a supervisory system within the firm that will help in ensuring that employees participate in the training as required.
- The human resource department should work with other departments to understand their needs to help tailor the training process accordingly.
- The company should select one of the best local universities as the participating institution when implementing the project.
- The HR department should put in place measures that will reduce employee turnover rates to ensure that the firm does not lose its skilled workers after training.
References
Alpert, E. (2018). Rocket prep PMP project management concepts: 600 practice questions and answers. LULU COM.
Brewer, J. L., & Dittman, K. C. (2018). Methods of IT project management. Indiana Purdue University Press.
Heldman, K. (2021). PMP project management professional exam study guide: 2021 exam update. Sybex.
Iqbal, A. (2020). Project management multiple choice questions and answers (MCQs): Quizzes & practice tests with answer key. Bushra Arshad.
Meredith, J. R., & Shafer, S. M. (2021). Project management in practice. Wiley & Sons.