Is Training Your Employees Worth the Investment?

If you are interested in learning more about employee training programs and initiatives, attend our HRCI webinar on August 19th at 11:00 AM Pacific. Click here to register.

Two managers are talking about training their employees. The first one asks, “Yeah, training costs money and what if we train them, and they leave?” The second responds, “What if we don’t train them, and they stay?”

Old corporate training joke

NOTE:  This is part one of a three-part series regarding best practices in training topics and options for corporate success.  Part I focuses on making the business case for training. Part 2 will cover the types of training and selecting the right training for the right audiencePart 3 discusses the business reasons why eLearning has emerged as the training method of choice.

Corporate budgets are tight, and in many organizations employee salaries, benefits, taxes and other employee expenses are the most significant expense line items in the budget. Adding further expenses for employee training and development sparks the question about whether this is a good return on the organization’s investment. The key is to define what that training investment buys for the company. Consider that the prime competitive differentiator in any organization is how that business delivers its products and services to its customers. How is that product or service delivered? It’s done by the organization’s employees. Well-trained and motivated employees create value for the business, and those who are not can quickly destroy value.

Instead of asking if employee training is worth it, ask yourself if you can afford NOT to invest in your employee’s ongoing development. Consider the following questions as you review the return on investment (ROI) of employee training:

  • Can we afford the cost of poor customer service and the potential loss of good customers?
  • Can we afford employees who are not engaged in the company or their jobs?
  • Can we afford to lose our best employees who may have better opportunities elsewhere in organizations willing to invest in their development?

The business case for employee training

Especially with some of the soft skills training, it may seem difficult to justify the cost for the program because the internal results aren’t readily apparent. Numerous studies are conducted annually to build the business case for employee training, and these studies are typically sponsored by training organizations justifying the sales of their products. The statistics for why businesses should invest in training segmented by different courses and types of training (eLearning, in-person, rotational assignments, external courses) are available. Using the argument that “other good companies train employees and in order to be competitive we need to do the same” is not always a compelling argument to your board of directors. Using the emotional argument that “training is the right thing to do to keep good employees and have everyone feel good about working for us” is an even less effective justification in the board room. Linking training to the business priorities is the strongest way to make an effective business case for employee development and training.

Consider these important reasons to keep skills and knowledge sharp:

  • Employees who know their jobs and are up-to-date with the latest knowledge and skills are generally more productive, and this productivity can be measured;
  • Companies known to invest in their employees attract better candidates — superstars want to tie their careers to high-performing companies that will invest resources in their personal success;
  • Employees who can see that the organization cares about their development (as well as their productivity) are generally more satisfied in their jobs and less likely to leave, and those retention statistics (and costs for hiring replacements) can be measured;
  • Those same highly-satisfied employees are more likely to produce the company’s products and services with care, creating less quality issues and greater customer loyalty while building a winning brand in a company others want to be a part of;
  • Internally, some types of training programs can enhance communications when the entire company is using the same key terms and work processes; and
  • Shared internal messaging and shared values furthers the “branding” and shared commitment to the goals of the company.

Some of these reasons to develop employees may be easier to quantify than others, but all can be valid justification for training. In our experience, each organization’s training and development needs are different and relying on certain external benchmarks to make your case is less important than first looking internally at your company’s strategic priorities. Best practice companies then conduct an organizational scan of the resources required to execute those strategies, honing in on the human capital resources available to deliver those strategies. After a thorough gap analysis of the human resources required and the skills and knowledge needed, it makes for a strong case for required employee training to deliver business results.

Andy Grove’s formula for measuring the importance of making training one of your highest leverage activities makes sense and is illustrated with this example:

  1. You have 10 managers who are relatively new to management and you believe that they need training to handle difficult employee conversations more smoothly to drive performance in their work teams.
  2. You calculate that each one of these employees works 2,300 hours per year for your company, or 23,000 hours in total.
  3. The management training consists of a series of 4 courses and 8 hours of time to complete the courses. This results in 80 hours of time invested to understand a management skill that can improve the managers’ effectiveness and enhance the productivity of the work group.
  4. If that training results in a 1 percent improvement in performance for that management group, that would result in a gain of 230 hours of work as a result of 80 hours of investment plus the cost of the course. Not a bad ROI, especially if the groups improve by 5 or 10 percent!

More on the importance of employee retention: Companies leave people more often than people leave companies. There are certain industries and job skills that are in high demand, and in addition to the financial impact of retaining your best and brightest employees, consider the following based on our experience over the years in conducting exit interviews with people leaving companies. There is a common trend as to why people leave companies that emerges year over year and is not dependent upon the industry. Management often centers upon the financial reasons that employees most frequently give their supervisors for leaving. The deeper follow up question asks why that employee took the call from the headhunter or applied for that job in the first place — even before money, benefits, or perquisites are discussed — and gets to the root cause for the departure.

The common threads leading to employee retention issues generally fall into two areas that are easily addressed by investing in training and development:

  1. The employee felt the investment in his time and efforts was one-sided, and he didn’t feel that he was learning enough to advance his career within the company or within the profession; or
  2. The employee disliked his manager due to the manager’s poor management practices, generally in the areas of poor or inappropriate communication, lack of constructive feedback and support, lack of mentoring or making new opportunities available for leaning, or micro-managing projects.

Further, according to a recent Harris poll, 41 percent of employees who report “poor” training opportunities at their job plan to leave, compared to just 12 percent who report excellent training programs.

Summary

From a best practice perspective, investing in focused employee development and training programs can reap big dividends for employers, including cost savings, enhanced productivity, greater employee satisfaction, better customer service, higher retention rates and improved company image. The keys to training success include a robust assessment of training needs and targeting the right participants; determining the best training methodologies for the types of training required; and selecting the best platform(s) to optimize training results. An eLearning solution coupled with a strong learning management system (LMS) can accelerate the success of your employee training and development program.

If you are interested in learning more about employee training programs and initiatives, attend our HRCI webinar on August 19th at 11:00 AM Pacific. Click here to register.

About Laura Kerekes, SPHR, SHRM-SCP

Laura Kerekes is ThinkHR’s Chief Knowledge Officer and leads the company’s human resources knowledge operations teams. She provides expertise to customers with complicated human resources and management issues, offers knowledge and guidance regarding management and HR best practices, and regularly shares her expertise through articles and webinars.