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PB JAM from Manager's Perspective - What is my RoI

Updated: Aug 1, 2021

#TLDR: Reduce #turnover by using #PBJAM


At #PBJAM, we are big fans of tangible and verifiable progress! To this end, we do get questions from our client organizations as to what is the RoI (Return on Investment) for something like #PBJAM? Training RoI is always difficult to calculate, so our approach is to look at the whys, costs and benefits of development in today's workplace that is dominated by Millennials (those born between 1980 and 1996).


Development is critical in today's workplace

As per recent Gallup report,

  • 59% of Millennials report that opportunities to learn and grow are extremely important at a work place

  • 57% of Millennials look for companies that invest in them as employees and people

  • Millennials are 85% less likely to switch employers if they can see tangible and visible investments in them as individuals to improve their professional capabilities

Cost of losing an employee is high

As per 2012 report from Center for American Progress, it can cost between 40% to 80% of the annual compensation to replace an employee who leaves the organization. In this study, the authors quote another study conducted in 2006 in New Jersey (1) that highlights that the average replacement cost for a mid level executive earning between 50k-120k per year was a staggering 98k-117k (almost up to 200%!!).


The right training can make all the difference!

One of the main concerns for you as a manager is whether you are investing your training dollars in the right training or not. At #PBJAM, we recommend considering the #why carefully for opting in #PBJAM. For example, if you are really lacking hard technical skills, then #PBJAM is not the right fit/answer for you.

RoI Calculation

Let's take an example, where the average annual fully loaded compensation for the group of employees you are analyzing is 100k USD per year. Let's say that the size of this group is 400 employees (2). Let's further assume that your historical turnover rate is 5% for this pool of employees. If you do nothing, this implies that over the next 12 months you stand to lose 20 employees. Assuming the replacement costs at 60% of average annual compensation, you can estimate that such turnover will cost you 20 x 100k x 0.6 = 1200k USD in total.


No matter what you do, there will be some turnover that is unavoidable. You can analyze your own data and find the percentage of unavoidable turnover. For our example, let's assume 60% of turnover was unavoidable. This leads to total cost of avoidable turnover at 480k USD per year. That is 1200 USD per employee for the group of 400 that you are analyzing! Needless to say, retaining the employees also has intangible benefits like knowledge retention, network growth and company branding that we are not considering here.


Now, from the cost perspective, it does not mean that you should spend 1200 USD for each employee (as there may be many who are not a flight risk or not interested in training). Let's assume that there are 20% employees (Pareto principle) that are either a flight risk and/or are strongly interested in developmental training. This should be your focus group and on this group, even if you spend 6000 USD per person per year (yes, that is six thousand!!), you will break even for RoI under one year!


Point to ponder: Maybe you do not need to take the full burden of training cost. Empowering the employee to invest in themselves by sharing some of the cost can provide higher #engagement. This increases their motivation to make the most of the #PBJAM offerings and allows your training dollars to go even further!


What do you think of our RoI approach? What has been your experience? We would love to hear from you either in our comments section or via email to info@pbjamplatform.com


(1) Eileen Appelbaum and Ruth Milkman, "Achieving a Workable Balance: New Jersey Employers' Experiences Managing Employee Leaves and Turnover" (New Brunswick, New Jersey: Center for Women and Work, 2006)

(2) These numbers are based on data from SUSB with multiple assumptions around firm size and area of business. Ask us for the data and we will be happy to share it with you.

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