Measuring ROI Leads to Better Apprenticeship Programs

By Greg Goth January 18, 2017
Measuring ROI Leads to Better Apprenticeship Programs

Organizations that use apprenticeships to recruit and train employees in a cost-effective way are discovering an impressive return on investment (ROI), which can be even greater when detailed data is collected and used to evaluate the program.

Susan Helper, Carlton Professor of Economics at Case Western Reserve University in Cleveland, and economists from the U.S. Department of Commerce have written the report The Benefits and Costs of Apprenticeships: A Business Perspective, an overview of apprenticeship programs nationwide and 13 case studies that illustrate substantial ROI for the approach.  

Apprenticeships, long considered a basic steppingstone to employment in traditional building trades, are now being implemented in industries as varied as health care, precision machining and information technology by organizations facing tight labor markets and a sense of urgency in filling vacancies. There are now approximately 500,000 registered apprentices nationwide, according to the U.S. Department of Commerce.

Apprenticeships often provide classroom and on-the-job training along with salary to participants, and usually greatly shorten the time necessary to bring a qualified employee into the workforce.

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One of the organizations profiled in the report, Lebanon, N.H.-based Dartmouth-Hitchcock Medical Center, supplied detailed cost data on its medical assistant apprenticeship program to the report's authors to help create a model for more granular metrics. Not all companies collect such detailed information, however.

"A major surprise was the lack of data that companies had about what they were doing," said Ryan Noonan, an economist at the Department of Commerce and one of the report's co-authors. "In general, they understood what it cost to run an apprenticeship program, but they had very rudimentary metrics for understanding the benefits they were getting. Part of this is the difficulty of measuring benefits versus costs, but [there were] also things like data being housed in different parts of the company, which didn't talk to each other."

One of the major objectives of the report was to provide a road map to help employers get started in measuring apprenticeships' costs and benefits. Dartmouth-Hitchcock Chief Human Resources Officer John Malanowski said the organization's collaboration with the report's authors was a boon to the apprenticeship program, which launched in 2014.

"We thought we would have a good rate of return, but we didn't start measuring it," he said. "Our focus was delivering medical assistants to our physicians and clinics. We gave [the report authors] the data and they crunched the numbers. It was great. I couldn't even begin to do that internally."

The authors' analysis found a per-apprentice return of $48,000 in reduced overtime costs for nurses and physicians and $7,000 in increased revenue from additional booked patient hours, for a total of $55,000.

"If we look at the internal return on investment of using apprentice medical assistants versus provider overtime and assume that turnover of providers decreased by just one quit over a four-year period, the ROI of hiring apprentices relative to using overtime is at least 40 percent," the authors found.

Malanowski said the quantitative revelation about the program's effectiveness has led Dartmouth-Hitchcock to begin planning how to measure the ROI of its apprenticeships in other allied health professions.

"I think our finance team can continue to do this," he said. "Pharmacy tech and phlebotomy programs may show a different rate of return, but we have a replicable model here now."

Malanowski also gave credit to a neighboring firm, Hanover, N.H.-based manufacturer Hypertherm, for pioneering apprenticeship training in the region. The Hypertherm program, which began in 2005, saves the company an estimated $1.6 million per year relative to its prior training methods. "They have really perfected the model, and we learned from them about how to do this right. We just perfected it for health care," Malanowski said.

Mike Baymiller, Hypertherm's vice president for human resources, said the company's contributions go beyond providing inspiration for other businesses in the upper Connecticut River Valley area. Baymiller said other local machining firms have enrolled more than 80 of their employees in Hypertherm's training program.

"These are existing employees in other companies, and we are just offering our training program to them," he said. "The challenge is around the investment required to do what we do. The report says we've spent $2 million but it's probably close to $3 million. And a lot of small companies just can't do that on the scale we do. We have been able to maintain and grow the manufacturing economy through things like this program. I think it has been great for the communities all around us."

Greg Goth is a freelance health and technology writer based in Oakville, Conn.

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