Employers Invest in Training!
It's Good for Business!

by Gloria Dunn

Until recently, employee training was viewed as expendable. Most companies did not equate the value of providing employee education with profit. When budgets were cut, training programs were the first to go. After all, training was deemed the “soft stuff.”

Yet, research proves that an investment in training not only supports a company's bottom line, but can help predict a firm's future total shareholder return (TSR).

The American Society of Training and Development studied 575 U.S.-based, publicly traded firms during 1996, 1997, and 1998. They found that an increase of $680 in a firm's training expenditures per employee generates, on average, a six percentage point improvement in TSR in the following year. In fact, firms in the top half of the study had a TSR that was 86 percent higher than firms in the bottom half, and 45 percent higher than the market average. Finally, the firms in the top quarter of the study group, as measured by average per-employee expenditures on training, enjoyed higher profit margins (by 24 percent), higher income per employee (by 218 percent) and, on average, higher price-to-book ratios (by 26 percent) than firms in the bottom quarter.

It is obvious from these statistics that an investment in training leads to an increased bottom line. How? Through increased employee retention and shorter recruitment cycles, as a result of employees who are willing to go the extra mile to achieve better products and services. Trained employees build skills, improve performance, increase productivity, experience satisfaction, and help achieve company goals. Isn't that what every employer wants?

Training Influences Retention
As an example, let's look at what lack of training does to retention. The high cost of turnover has challenged many profit margins with an expenditure of between 30 and 150 percent of a departing person's salary. People usually leave because of the following reasons:

They don't get along with their boss (people leave managers not companies);
They don't know how to do their job;
There is no opportunity to learn and grow;
They conflict with co-workers or teammates; and
The company's culture is not employee-friendly. Hence, employees becomes stressed, dissatisfied, unproductive or just quit.

With training programs focused on management development, specific job techniques, critical thinking and the many other skills that produce bottom line performance and satisfied employees, employers would cut the drain of unnecessary costs.

Training can turn many of the confused, unskilled, and uncooperative into great employees. There are many excellent training programs that help people succeed where they now struggle. These programs are taught by internal training staff as well as outsourced to external training professionals and provided in public workshops.

Another critical reason to increase training today is that within the next two years we will experience an employee shortage. The amount of people available to work will decrease due to baby boomer retirements, a lower birthrate since 1958, and unhappy employees escaping unpleasant work situations and finding more satisfaction as entrepreneurs. Although there is an excess of good, skilled people looking for jobs today, this supply will not last. As the economy improves, companies will again grab for the best employees making worker scarcity inevitable.

Disengaged Workers Cost Billions
A further cost to employers is through the disengaged worker. A study by the Gallup Organization concludes that 19% of 1,000 workers surveyed meet its definition of being “actively disengaged.” Gallup says actively disengaged workers, based on their numbers, salaries, and productivity, cost anywhere from $292 billion to $355 billion a year. Data suggests that a big factor in disengagement is one's manager. Many managers are promoted into their positions without training, and don't know how to manage people. Management development through a series of training programs provides these essential skills.

The workforce has been through tumultuous changes. Downsizing, reorganization, mergers and acquisitions, and a volatile marketplace have played havoc on personnel stability. These changes have impacted a person's sense of well-being, breeding negativity, stress and fear. These are not the precursors to profit. Once again, education can rescue the dismal side of the workplace by providing skills in how to handle change.

Successful Companies will Profit by Paying Attention
A comprehensive review by the Department of Labor of more than 100 studies that examined the link between progressive people practices and improved bottom line results concluded that: “There is a positive relationship between training, motivating, and empowering employees and improvements in productivity, employee satisfaction and financial performance.”

Companies that want effective employees who provide quality goods and services, excellent customer service, and a profit every year will invest in training. They will assess internal needs, issues, and goals, and provide the education that teaches how to solve critical business problems as well as develop a positive and productive work environment.

Learning needs to be a core value that is voiced and modeled by company leadership. Systems need to be in place to support employee growth. All levels of management must find continuing education opportunities as well as encourage employees into programs that will grow their skills. Reinforcement of those learnings must be done on a continuous basis.

It is incomprehensible that companies who require education as a prerequisite of new job candidates do not have ongoing learning programs for employees. Organizations that want to not only survive, but thrive in the coming years will need to offer training programs at all employee and management levels. They will need to provide a mix of technical, interpersonal, and other relevant programs required to assist people with performance, competency, and workplace behaviors.

HR professionals will be facilitating a workforce that is more generationally and culturally diverse, composed of non-traditional families and with more women in traditionally male-dominated jobs. People will come to work with varied personal backgrounds and work ethics. Through training, an organization can develop a work culture that supports organizational growth and success. By meeting the educational needs of employees, companies will gain bottom-line performance and profits.

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Gloria Dunn is a management and organizational development consultant, and president of Wiser Ways to Work. She is the author of "From Making a Living to Having a Life", and also writes and speaks on management topics. She can be reached at 415-883-8239 or at gloria@wiserwaystowork.com or visit her website: www.wiserwaystowork.com.

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Employers Invest in Training! It's Good for Business!

For the Latest Free Workplace Statistics and Management Tips

Employers Invest in Training!
It's Good for Business!

For the Latest Free
Workplace Statistics
and Management Tips