(Solved): How could utility analysis (described below) be used to complement that ROI analysis in the Andrews ...

How could utility analysis (described below) be used to complement that ROI analysis in the Andrews and Laing (2018) case?

Andrews, P., & Laing, G. (2018). Evaluating the outcomes of a training program through an ROI evaluation: A case study. E - Journal of Social & Behavioural Research in Business, 9(3), 1-9.

 

Utility Analysis The results of an evaluation study often express the effect of an HRD program in terms of a change in some aspect of the trainee's performance or behavior. For example, if untrained employees average 22.5 units produced (per day or per hour) and trained employees average 26 units produced, the gain due to training is 3.5 units per employee. Utility analysis seeks to translate these results into monetary or dollar terms. For example, Thornton and Potemra estimated that the utility of an assess- ment center procedure to promote police officers to the rank of sergeant was over $400,000.141 One popular approach to utility analysis is the Brogden-Cronbach-Gleser model.¹42 This model computes the gain to an organization in dollar terms as AU, or "change in utility," using the following variables: N T d? = Number of trainees = Length of time the benefits are expected to last = An effect size, which expresses the true difference of job performance between the trained and untrained groups (expressed in standard deviation units) SD = Dollar value of job performance of untrained employees (expressed in stan- dard deviation units) y C = Costs of conducting the training Wayne Cascio combined these elements into a formula to compute the dollar value of improved performance due to training. 143 The left side of the equation esti- mates the benefits of training, while the right side presents the cost. The formula is AU = (N)(T)(d)(SD) - C Some terms in the equation can be directly measured, such as N, C, and d,, but others, such as T and SD, typically must be estimated. More complicated formulas have been developed to account for other factors, such as attrition and decay in the strength of training effects over time. ¹44 Sturman proposed a number of modifica- tions to the equations used to calculate utility estimates. 145 Cascio suggests a method for incorporating the results of utility analysis into cost-benefit analysis for training and HRD programs. 146 The goal of such cost-benefit analyses is to assist HRD professionals in demon- strating the expected gains of their programs and in comparing these gains to either the gains from other programs or other potential investments (like the purchase of new equipment). While utility analysis can help translate the benefits of training programs into monetary terms, many HRD professionals have concerns about the practicality of such efforts. Further, some researchers question the value of utility analysis because of the nature of the estimates used to determine some of the factors in the formula. ¹47 It is also unclear to what extent HRD professionals use utility anal- ysis to communicate the effectiveness of HRD programs. Given that utility analysis is intended to help managers see HRD programs as an investment and to make more informed decisions about HRD programs, it is reasonable to ask whether their deci- sions are influenced by utility estimates. Research on this question has produced mixed results. 148 Utility analysis (in addition to ROI and cost estimates) presents an opportunity for HRD professionals to provide information to decision-makers in monetary terms. However, simply providing managers with the dollar estimates generated by utility analysis will not by itself be sufficient to gain acceptance or use. 149 As with ROI esti- mates, gaining management acceptance is key. 150 The following recommendations should increase the chances that management will accept and use utility information: ? Involve senior management when determining the utility model and procedures to be used. • Train HR professionals and managers in the details of utility analysis. Offer an explanation of the components of the utility model; focus on utility infor- mation as a communication tool to aid in decision making. • Involve management in arriving at estimates. ? Use credible and conservative estimates. ? Admit that the results of utility analysis are often based on fallible but reasonable estimates. Use utility analysis to compare alternatives, rather than to justify individual programs. 151 Finally, it is important to remember that not all decision-makers, and not all HRD programs, require justification in monetary terms. HRD professionals should find out from senior managers what they consider important when determining the value of HRD programs, and then provide management with information in those terms. 152 For some organizations, this may include the dollar value, while in others demonstrating positive improvements in nonmonetary terms may be preferred. A lively debate concerning the inclusion of "values" (other than financial return) in