Training return on investment (ROI)

A few days ago, in a LinkedIn post, Andrés Enrique González Giraldo quoted my publication with the table of SMRP proposed metrics for maintenance and reliability. He focused his attention on the 4.2.3 Return on Investment (ROI) indicator of training, which is not frequently used

ROI is a financial indicator that does not consider the value of money over time represented by an interest rate. Therefore, considering an annual period to evaluate the investment is advisable, where the interest rate and inflation are not significant.

In April 2013, I published the article "The hidden treasure behind root cause analysis" in the magazine SMRP magazine "Solutions". In that article, I outlined the benefits of implementing root cause analysis (RCA) when I worked in a global mining company. In September 2011, an ACR training was held by a specialist in the Apollo Method. After being trained, we began the application of the method and the recording of the cost of the events analyzed.

It should be noted that it is necessary to consider maintenance and operation costs of the event to have a total vision. Lost production costs are typically higher than maintenance costs to restore the affected equipment to function.

The cost of the events that were analyzed with ACR was, for the year 2012, USD 5,83,?464, distributed USD 2,207,914 in maintenance costs and USD 3,626,550 in production costs. The cost of training in RCA reached USD 25,000.

To estimate this last cost, we consider the following elements:

• Training Provider Cost
• Material Printing Cost
• Cost of the venue rented for the development of the event (includes meals and drinks)
• Cost of man-hours of staff attending the event
• Travel costs for non-resident attendees in the city

Metric 4.2.3 measures the ratio of the benefit of training costs compared to the investment made. This indicator can be used to justify investment in training and obtain approval from managers.

Considering the formula proposed in metric 4.2.3:

We apply the formula to the data referred:

In other words, RCA training made it possible to find the root causes of events that will not be repeated by attacking their origin and that means a benefit of 22,600%, well above what regular investments can give us. That is why we speak of the "hidden treasure behind root cause analysis" because its implementation can generate significant savings in a company.

In the specific case of RCA, the consulting firm Life Cycle Engineering (LCE), in its publication "Four Ways to Measure the Effectiveness of Your Root Cause Analysis Process", proposes four metrics for an RCA program. The first of them is the following:

What is the ROI of the RCA program considering the cost of developing the RCAs plus the cost of implementing the recommendations?

Here, training expenses would be included in the cost of the RCA program, along with other costs such as those of forming an RCA team and that of the meetings necessary for the analysis. In addition, the implementation of solutions for eliminating, controlling or mitigating root causes have a cost that is considered in this indicator.

Hence, the importance of presenting these proposals as a business case that shows the benefits to the company's management of implementing a methodology. It can be ACR, RCM, PMO or others. The relevant thing is to show the benefits of investing in training staff and when they implement what they have learned.

This is also a means of showing managers the importance of training staff and that this is a sustainable policy and not a "shooting star".

Víctor D. Manríquez, CIP, CMRP, CAMA

SOLSENCO