Quantitative Decision Framework for Selecting a New Employee Training Program

Context

Your company must choose one of three ways to launch a new employee training program:

• (1) External vendor — Standard package: fastest to implement, not customizable, training data stored in vendor’s database.
• (2) External vendor — Premium package: customizable, higher data security controls, longer to implement.
• (3) Internal build: fully tailored, longest to implement.

Assume the goal is to maximize long‑run business value while managing risk. Implementation times differ, so benefits start later for slower options.

Task

(a) Define core KPIs (e.g., completion rate, performance uplift) and describe how to causally estimate the incremental impact of training versus baseline (experiment or quasi‑experiment), including success metrics and power considerations.

(b) Construct a risk‑adjusted NPV model over horizon H with variables: implementation time T, upfront cost C0, annual run cost Ct, annual benefit Vt, breach probability p, breach loss L, discount rate r. Write the exact decision rule/inequality that chooses among the three options, explicitly modeling value lost while implementation is in progress.

(c) Specify a sensitivity analysis (parameters, ranges, and stopping rules) and a pilot plan to update priors for Vt and p.

(d) Given only ordinal information that customization increases from Standard < Premium < Internal and that Standard is the fastest to implement, defend which option you would select now and specify an observable threshold that would cause you to switch.