Maximising Return on InvestmentDecember 13, 2016 3:59 pm
With the shipping industry going through a tough time, it is more important than ever that companies receive a positive return on investment (ROI) across all parts of their business. Training is no different, so how can companies measure the impact of training and the resources they put in place?
Within every company it is vital that budgets, returns and investments take account of the realities, expectations and projections within the business. Whether it is spending on spares or recruitment, equipment or training – the need to know what is being spent, why and the actual outcomes are vital.
For some companies it can be hard to really know and recognise the true return on investment. This can be especially true when it comes to training, but evaluating the good that training delivers, the benefits and the value can make a real difference.
It is important and inherently a good thing for any business to understand where the benefits of training, education and improvement lie. Of course, at the most simplistic levels training ensures compliance, and that is the foundation of all shipping activity.
Seafarers with the right certificates are the absolute basic minimum requirement, and they are vital to even allow a vessel to trade. So is that it? Is it purely about compliance? Well, no – the benefits really come as people get better. Whatever the tasks, a well-trained person will do them better. So moving above the lowest common denominators are key to better performance, a safer operation, enhanced results and maximised returns.
KNOWING WHERE TO LOOK
To understand, to measure and to validate the standard of training and the returns on investment, it is important to find the metrics to measure against. Companies do not always look at the same issues – some focus on performance others on profits, while some are more pragmatic and take a blended view of both.
Only if training is properly evaluated is it possible to build a picture of the positives, and of the returns associated. Return on investment (ROI) is the measure of the benefits obtained by the company over a specified period of time, in this instance it relates to the returns for a given investment in training.
Put more simply, ROI is the extent to which the benefits (outputs) of training exceed the costs (inputs). With over 40 years’ experience in the shipping industry, over 13.5 million training events recorded and 345,000 registered crew members, Videotel is proud to know and understand our industry and how to deliver the best training to its changing needs. So we are extremely well placed to help companies understand the outputs, results and benefits of maritime training.
ROI is vital to both justify a planned investment and to evaluate the extent to which the desired returns are achieved. There is an accepted calculation to determine the percentage return over a specified period. The percentage of a return on investment is deemed to be equal to: % ROI = (benefits / costs) x 100
In tough economic and market conditions, money is tight. There is a constant struggle, unfortunately there is often pressure in companies to cut away at training budgets. It is vital, therefore, that training departments have thorough, quantitative analysis to resist these cuts.
Performance indicators have to be produced and benefits calculated. Though it is not always a simple process, but wise maritime executives know where to look and what performance indicators are the ones that truly matter. So what does count when it comes to assessing the ROI of maritime training?
There’s an old saying, “if you think safety is expensive, try having an accident” – and that is true. Though it actually makes the whole ROI calculation rather difficult for training. It is hard to calculate the vast scale and potential cost of something bad that doesn’t happen.
Which logically means it is even harder to appreciate and account for the value of the action (training in this case) which stopped the bad event which didn’t happen from happening as a result of training.
Having made that rather complicated and convoluted logical argument, it is important to accept and understand that decisions are made on data, so it is important to try and set out the benefits of training.
Developing a list of Key Performance indicators (KPIs) is the next step. These are the areas of ship management and marine operations which can readily reveal benefits. These are likely to include:
- Accidents, incidents and near misses,
- Efficiencies and performance of the vessel,
- Deficiencies when audited,
- Detention rates when inspected by port State control,
- The look and feel of a vessel,
- Cargo losses and disputes,
- Consumption – from fuel to spares and consumables, whether in accepted and expected ranges.
There are also a range of soft data indicators too. These are issues such as job satisfaction and crew retention rates. Do the vessels report positively on aspects of life at sea and working relationships? Crew illnesses and instances of stress are indicators of performance. The signs of what is happening and tales of life onboard actually providing fascinating and compelling data which should not be overlooked.
BRINGING IT TOGETHER
These are areas in which training and awareness can deliver huge benefits. They also bring returns too, when offset against the modest costs of training. With so many obvious and clear potential performance indicators, it is possible to note areas of improvement and the costs incurred in raising the game. Training is a pivotal, vital and fundamental aspect of driving progress.
It has become something of a cliché for senior management to claim that ‘people are our greatest asset’. So these words need to be put into practice. Investing in training, development and supporting improvements can bring tremendous cost benefits.
The return on investments of mitigating and minimising accidents, losses, incidents and damage are many fold. At the core is the need to develop a company’s “human capital”. Well trained, drilled and experienced people truly are the best asset, and developing crews and managers ashore through training, education and development programmes will bring immense benefits.
Today these discussions are to the backdrop of darkening clouds and headwinds over the industry – and there are currently tough times in the markets with low freight rates, supply of vessels outstripping demand, and ever younger tonnage being scrapped. However, training is the key to efficiency and performance. Driving positives though training can allow a company to survive in bad times and it will also position shipping companies well to thrive when the good times return.
We look forward to hearing from you to discuss just how you can best manage maritime training to maximise and account for a return on investment in your company.