Demonstrated ROI

Compliance Training Brings Superior ROI to Organizations
April 11, 2002
ELT and Littler Mendelson

ROI Analysis

Training on legal compliance subjects in general and on employment law in particular can produce a superior ROI to organizations in terms of both hard and soft dollars. Perhaps the best way to demonstrate this benefit is to look at one of ELT's client's experiences. The client is a large organization with employees in multiple locations.

Costs To Respond To A Claim

Based upon a review of numerous client cases, the law firm of Littler Mendelson (ELT's exclusive content provider) developed the following hard and soft costs and their average dollar and time amounts incurred by an organization to defend itself against a single claim that arose in the employment law area.

Defense Hard Costs

Attorney Fees if the case goes to trial: $250,000.
Attorney Fees if the case settles prior to trial: $95,000.
Manager time expended in the claim process: 40 hrs.
Employee time expended in the claim process: 40 hrs.
Employee time spent investigating the claim: 60 hrs.
Employee time spent preparing for trial: 60 hrs.
Range of settlement costs or jury awards: $150,000 to $250,000+.

Defense Soft Costs

Impact on the work group in terms of distraction and reduced morale.
Impact on the cost of insurance if company is covered and experiences losses.
Impact on stock price and reputation if there is publicity around the claim.
Potential of copycat lawsuits or other claims due to internal and external publicity.
Impact on attracting the best employees given potential negative publicity of a claim.

Benefits From Employment Law Training

Prior to retaining ELT, the client experienced an average of 110 employment-related claims annually between 1995 and 1998. In 1998, ELT implemented an ongoing training program for this client to address its employment law training needs.

Since the program's introduction, the client has experienced a 42% reduction in the number of claims per year – from an average of 110 claims per year to 64.

Excluding settlement and award costs, the client calculated a hard cost savings of $2.2 million dollars per year. The client's ROI analysis was the result of an independent study not commissioned by ELT. The complete savings and return on employment law training investment from this kind of claim reduction is demonstrated below:

Littler Mendelson's experience indicates that approximately 25 percent of claims go to trial.
64 claims x 25% = 12 claims avoided going to trial.

Cost Component Amount

Attorney's fees of $250,000 x 12 claims: $3,000,000.
Settlement costs or jury awards of $150,000 to $250,000 x 12 claims: $1,800,000 to $3,000,000.
Attorney's fees of $95,000 x 34 claims settled prior to trial: $3,230,000.
Settlement costs of $150,000 to $250,000 x 34 claims: $5,100,000 to $8,500,000.
Total Annual Hard Costs Saved By Claim Reduction: $13,130,000 to $17,730,000.
The annual cost of training program: $100,000.
RETURN ON INVESTMENT ($11,350,000 to $17,730,000/$100,000) 11,350% to 17,730%.

Note that the soft costs savings that have not been taken into consideration would enhance the return on investment even more.

As this analysis shows, ELT's clients can experience significant returns on their training program investment. The avoidance of just one claim going to trial or settled prior to trial more than pays for the annual cost of the program. Any organization would be hard pressed to find an asset acquisition that can approach these returns on investment.

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