A simple formula to make your assignment ROI rock

Every business around the world wants to make sure their company has a healthy bottom line, and that any services they provide or procure have a minimum Return on Investment, or ROI.  ROI measurements can be calculated for many aspects of an international move. By making a few educated value decisions or using hard numbers from your CFO, you can calculate a percentage return.

The standard ROI formula is:

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For instance: If language training is provided for an assignee, what is the monetary value gained by the company? Twelve weeks of language lessons would cost the company $6400. But let’s say that after six months in a new location, Simon closed a deal by using some of his new language skills during a meeting.  The deal created $500,000 of new business, yielding $100,000 in net profits for the company in one year.  In this case, the ROI for providing language lessons is 1463%!  While the company might have appeared to have saved money if Simon eventually learned enough of the new language to close a deal in nine months, he would not be as well positioned to close even more sales.

Looking at both versions of this scenario illustrates the true return on investment for language training.Chart for today's blogpost.png

In this case, an investment of $6400 yields an increased annual profit of $100,000.  (This analysis does not take into account the cost of sending the assignee and other related costs.)

How can this help you?  If language and local knowledge is critical for success in the destination, this analysis can help you make a good decision with a solid payback.  It may also mean finding an assignee with the requisite skills, or looking for a local resource.

Language training can specifically help get employees on the ground and productive faster.  This same model can be used, with modifications, for Cross Cultural Training and Destination Services.

Only 4% of multinationals calculate ROI for international assignments as a whole. Not being able to measure the full ROI of an assignment doesn’t mean you can’t measure other services that support your assignees and families. This practice helps to justify the costs. Creating values for certain services offered to international assignees can start the ball rolling for calculating the full ROI for assignments, in which all known values associated with the move are included.

Not being able to measure the ROI of an assignment doesn’t mean you can’t measure other services you are providing to support your assignees and families, which helps to justify the costs.

Written by:  Cathy Heyne, Managing Director, Living Abroad LLC