Return on investment (ROI), refers to a performance measure which is used to evaluate t to compare how efficient other investments are and the profitability.

The main aim of ROI is to measure the amount of return on a particular investment, that is related to the investment cost; in order to calculate ROI, the return or benefit of an investment is divided by the cost of investment, which results as a ratio or percentage.

In Human Resources, a return on investment is used for metrics; for example, in an instance where the human resources department introduces a new health and safety program, its effectiveness is measured based on the associated reduction in cost of work-related injuries.

 The value of a new employee onboarding program can be measured in relation to a ROI by evaluating the costs saved by related reductions in staff turnover. Things  such as HR training programs, diversity programs, training, HR Information systems, mentoring and developing initiatives are examples of HR programs that are measured by ROI calculation.

How Return on investment is calculated in Human Resources 

In order to calculate ROI by the human capital formula, divide the organization's net revenue – gross revenue after deducting operating expenses, salaries and benefits – by the cost of salaries and benefits, reports. To calculate the ROI of a particular program, the organization must firstly calculate the value of the specific program itself, then divide it by the costs of implementing the program.

For instance, if a training program  to speed production of a factory line results in an increased amount of product, calculate the value of the additional product and divide that by the costs of providing the training and materials.