Developing A Cost Benefit Analysis for Internships, Part I

It’s clear that internships are an integral part of a college recruiting program, which is in turn a crucial part of an organization’s recruitment platform. Because interns and college hires are less expensive to recruit than experienced hires, using these sources as a part of the recruiting platform will lead to savings in the recruitment and selection of employees in the long term. However, knowing that intuitively and demonstrating that to management effectively are two different things. Although we in Human Resources have only recently been asked to demonstrate hard numbers for return on investment (ROI) in our programs, it is an important part of being a successful partner with the business. The first step in demonstrating the ROI of an internship program should be a cost benefit analysis. To justify the initial and ongoing investments in such a program, a firm should look at what the financial benefits to the firm from such a program will be. In this two-part series, we’ll talk about how to develop a cost benefit analysis for your internship program and deliver the results to senior management. The steps to developing a cost benefit analysis are not as daunting as they may seem. First you will develop the Cost Categories and Benefit Categories. We will discuss these in detail in a moment. However, the key to developing accurate categories for your organization is getting input. For each cost or benefit, you will be determining whether the cost is fixed or variable and how you will measure it. After you have developed your lists of costs and benefits, solicit input from others within your organization and benchmark other organizations with existing internship programs. Once you’ve developed your categories, you will attempt to determine how ROI will be measured for your internship program. Finally, we’ll walk through how you make the case to Management for your internship program. Cost Categories In developing the following cost measures for an internship program, we’ll focus on the costs of setting up the program, recruiting interns, and administering the program. This should allow us to develop a good set of measures for the total costs of such a program. Most of the cost of development will be comprised of the salary of the individual charged with creation of the program. Additional costs to consider might be consulting fees, if outside resources were chosen for development features, or administrative costs of program development. Recruiting fees related to advertising, time and personnel dedicated to recruiting, and administrative costs are another cost to measure. A firm with an existing college recruiting program will have internal benchmark data to help develop these estimates. Finally, one should examine the costs of administering such a program. Training and managing the interns will be the two largest sources of costs. One can assume that a skills gap will exist for interns. The same will be true for managers. People who are managing for the first time or are managing interns for the first time may need additional training. Other related costs include compensation for interns, and fees related to events for interns such as team building or a speaker series. Some of these costs will need to be determined after a suggested program is developed. Benefit Categories Unlike the cost categories, most benefits of such a program are focused on the long term. Decreased costs in college hiring and general recruiting are the main and most obvious benefits of such a program. However, one cannot ignore the increased productivity such a program will provide. Full-time hires converted from interns will need less training and orientation time. Because an internship can serve as part of the selection process, the firm will only convert the high performing interns. Therefore, one can assume these workers will demonstrate greater productivity. Additionally, it has been shown that employees who were hired after interning with a firm have longer tenure than those who did not intern with the firm. This will increase the general recruiting savings mentioned earlier. In the second half of this series we will discuss how you take the information you have gathered here and create an estimate of ROI. We will also cover how to develop an outline for making a case to senior Management to institute an internship program.

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Maggie Ruvoldt (mer@FutureCollegeGrads.com) runs FutureCollegeGrads.com, a website devoted to helping students and employers find each other and to maximizing the internship and entry-level job experience for both. Ms. Ruvoldt also consults for organizations developing college recruiting and internship programs. Ms. Ruvoldt is also working towards completing the Masters Program in Human Resource Management at the Rutgers University School of Management and Labor Relations. More information about her work, consulting services, and job listings can be found at FutureCollegeGrads.com.

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