Double down on diversity

For our group project, we chose a diversity initiative called Double Down on Diversity, which is currently going on in Johnson and Johnson. The initiative was created because Johnson and Johnson recognizes how impact having a diverse workforce can be on financial success. To support their claim, we looked to several articles describing how diverse workforces lead to more financial success.

One example came room a study published by Dolomite, a widely successful consulting/accounting firm. They write, "In essence, demographics act as a lead indicator as to whether organizations are drawing from the full knowledge bank and making merit-based, rational decisions" (Dolomite, 6). Below is a chart featuring how more demographic diversity and diversity of thought (which stems from demographic diversity) leads to higher potential business outcomes. The same article talks about how not Just ethnic diversity is important, but also gender diversity. Dolomite writes, "..

. Impasses with the highest share of women in heir senior management teams outperformed those with no women from 2007-2009 by 41% in terms of return on investment" (Dolomite, 9). This Just solidifies Johnson and Johnny's rationale for a diversity project team. The project team will consist of three pillars: driving accountability, university recruiting, and a global roadman.

The final pillar, the global roadman, is more long-term; however, the first two will require immediate costs and planning. We are proposing that the project team feature 17 members, one Vice President level, eight Director level, and eight analyst level employees.The projected costs of the new program are listed in detail as below (Table 1. 1). Direct Costs 1 UP salary = $200,000 8 Director Level sales = $150,000 * 8 Analyst salary = $75,000 * $600,000 Total salary costs= $2 million/year Consulting services from Dolomite (includes group flight, stay, and return) = $130,000 Benchmark consulting services = $400,000 Consulting service Total = $0.

53 million Various other supplies(build a new office, new office supplies), services = $1. 70 million Indirect Costs Diversity/campus recruiting = $2. 37 million Opportunity cost of time to work on project from other individuals = $0. 50 millionTherefore, the projected total cost in year 2013 is $5.

10 million and annual salary cost is $2 million. Supplies, including office furniture and equipment, will be depreciated on a straight-line basis too salvage value of $100,000 over five years. Unless fixed assets are included in Supplies, you don't need to depreciate them. Table 1. 1 Costs of Year 2013 2014 2015 2016 2017 2018 Direct Costs Salary costs 2. 00 Consulting service 0.

53 Various supplies 1. 70 Indirect Costs Diversity recruiting 2. 37 Opportunity cost 0. 50 Total Costs 5.

10 Your charts are helpful in summarizing the costs and conceptualizing the project cope.As discussed in class, you may need to reclassify a few of them. Financial Analysis Based on the projected costs and benefit analysis, we finally got the complete financial analysis of this new program, as shown in Table 1. 2. Table 1.

2 Financial Analysis of Double Down on Diversity ($ millions) Year Salary (2. 00) (0. 53) Other supplies (1. 70) (2. 37) (0.

50) Total costs (5. 10) Interest expense Depreciation (0. 32) BIT(Gross profit) 4. 35 5. 44 7.

50 8. 98 13. 58 Tax 1. 74 2. 18 3. 00 3.

59 5. 43 Income after tax 2. 61 3. 26 4.

50 5. 39 8. 15 Add back depreciation 0. 32 After-tax cash flow .

3 3. 58 4. 82 5. 71 8.

47 Free cash flow 0. 93 1. 58 2. 82 3. 71 6.

47 Present value@15% 0. 81 1. 20 1. 86 2. 12 3. 21 NP 3.

56 BCC 1. 80 AIR 36% Financial Ratio Analysis Net Present Value (NP) The net present value is the revenue or savings derived from an investment less its cost. We indicated that NP is defined at a particular discount rate. So we suggest accept projects with NP greater than or equal too.

For our program, the NP under discount rate of 15% is $3. 36 million, which means that this is a profitable program. Based on positive WV', we can accept this program.Benefit cost Ratio (BCC) The costs incurred were in the form of salary cost, consulting service cost, diversity recruiting, etc.

Decision rule is to accept projects with BCC greater or equal to 1. The BCC for our project is 1. 76. So it's worthwhile to take the project into consideration. Internal Rate of Return (AIR) The internal rate of return (AIR) measures an investment's ability to repay capital.

It is the discount rate at which the investment's NP equals zero. If the internal rate of return is less than the cost of borrowing used to fund your project;, the project will Leary be a money-loser.As an example of how the internal rate of return works, let's say for our project you're looking at a costing of $5. 1 million that is expected to return about $1 million per year for five years. The AIR for the project would be 35 percent.

The discount rate is 15%, while our AIR is 35%, exceeds the discount rate, so the investment should be accepted. -Good interpretation Overall, this program is profitable. And the company should accept it. Conclusion Overall, this program is profitable. Its overall position is at a good position.

Particularly the second year's position is well due to raise in the profit level from the first year position. It is better for the company to accept it as we may see greater development in the long run.. Benchmark Analysis Now that we have conducted a cost/benefit analysis to determine whether this program would be feasible, we must also benchmark with other leading diversity companies to determine what they are doing with their diversity efforts and see how it compares with our efforts. The first company we will take a look at is Northern Trust, a company who has been listed on both the Best Companies for Working