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Bitesize No. 13 – Choosing Added Value Measures

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In Bitesize 12 we cleared up any misunderstanding about validation and Box 1 training.

Now we turn our attention to Box 2.

Box 2 is not mandatory so you have to put a business case for it. Box 2 training therefore should always be subjected to an evaluation process.

This requires some £ signs benefits and a return on investment (ROI) calculation to show an acceptable return. So how do you choose the added value measures?

Some trainers do this the wrong way round.

They decide that the company needs customer service training then try to put a value on what benefit this might achieve.

Business partners work the other way around and start with a measurable business need.

These should already be expressed in the business plan (go right back to Bitesize 1).

So what are the priorities in the business plan?

The business partner looks for added value measures by searching for gaps or opportunities in output (quantities of the products or services the business produces), costs, revenue and/or any quality measures (e.g. scrap, errors, complaints).

Imagine that customer retention is already a business objective.

There are three simple questions to ask: -
* What was customer retention last year (year one)? (say 65%)
* What is our current retention rate (year two)? (60%)
* What do hope it will be next year (year three)? (70%)

It is relatively easy to produce a simple, initial £ sign for this.

If the total number of customers in year 1 was 1000 and the average spend was £100k then a 5% drop in year two is costing £5m.

The loss in profit will then be at least this figure times the normal profit margin (in reality it could be higher). So a 10% margin means a real loss of £500k.

The potential gain for year three can be calculated on the same basis.

Training may not have all or any of the answers to this problem but a business partner would certainly view it as worth a more detailed analysis.

* An explanation of how to separate training into Box 1 or 2 can be found in Bitesize 3.


Paul is happy to take questions and comments and can be contacted at:mailto:paulkearns@blueyonder.co.uk

Earlier articles in this series can be found at:
The Bitesize Business Partners Page

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