Training – Overhead or Investment?

In today’s competitive environment, organizations are now, more than ever, becoming vigilant regarding expenditures, especially in regard to typical “overhead” items.

In the past, it was common practice to have training and development programs be one of the first to fall under the budget ax, with the understanding that such initiatives could easily be integrated back into active status at a later date.

Because of these belt-tightening practices, in-house trainer positions were considered a high-risk profession, operating in a feast or famine environment with a job security rating just below that of the company CEO!

Complicating this practice was a lack of comprehension of the strategic side of training and development and its impact on the workforce, the organization and its competitive advantage. Since training and development is aligned with Human Resource Development activities, HR has been tasked with proving their relevance as a department, and re-defining themselves as a critical strategic partner to both the core functional roles of the business, as well as to the overall organizational success.

The evolving roles of HR from domestic and tactical to global and strategic has been instrumental in elevating the respectability of the department and the profession, and has provided a critical strategic lens when viewing training and development as a key contribution to employee attraction, job satisfaction, employee engagement, and retention.

The organizational value generated by these key HR activities are becoming more easily recognizable and defensible when applying a variety of metrics across Human Resource Development activities that show a positive return on investment.

Recruitment strategies have also evolved due to specific generational differences found in today’s job applicant requirements.

Seeking the best and brightest employees requires the application of completely different methodologies that are in alignment with current labor market demands.

Again, promotional opportunities, as well as training and development programs have taken precedence over compensation and benefits in attracting top job candidates, especially those who are recent university graduates.

Perhaps the greatest impact of training and development activities in regard to return on investment is coupled with employee turnover and its associated costs.

Most turnover statistics support the reality that 30%-40% of turnover is due to lack of training as well as deficiencies in career development opportunities.

The compounding real employer costs of turnover frequently reach 1.5 to 2 times of the lost employee’s annual salary, depending upon the position. How is this possible?

Taking into account the total cost of hiring an employee, consider the following:

1. Cost of hiring a new person (advertising or employment agency fees, interviewing, hiring)

2. Cost of orientation or onboarding (training and management time invested)

3. Temporary replacement while recruiting (using temporary labor or overtime)

4. Lost productivity (a new employee may take a year to reach full potential of lost employee)

5. Lost employee engagement (high turnover can cause morale issues with remaining employees)

Inclusive training and development opportunities need to be established and promoted that will cover employees from hire through to the end of their careers.

The integration of employee career planning with organizational career management programs can significantly impact employee retention factors, creating a skilled, secure, and motivated workforce that will produce sustained company business performance and execution. Another ROI factor associated with training and development deals with workforce planning.

Maintaining current skills and accessing cross-training and rotational programs help to develop a more diverse workforce that is capable of taking on additional work and projects that can actually reduce the overall headcount and create a collaborative and enriched environment where employees will feel more engaged, more valued, and more challenged, eliminating job boredom and complacency.

Likewise, providing the necessary skillsets that will empower employees for future job requirements will result in increased job performance and enable organizations to maintain their competitive edge and sustainability.

Lastly, training and development’s return on investment becomes exponential when an organization leverages every learning opportunity as a means of transferring that learning to others, increasing the impact through well-planned knowledge management programs that require dissemination, and the sharing of new training and development materials across a broader base of employees so that all are impacted and can enjoy the same level of learning benefit and opportunity.

Overall, training and development programs are wise strategic investments for organizational success.

Allan Gardner, PHR, HRMP, MHRM has over 35 years of experience in the Human Resources field. Currently, he is an expert Human Resource Trainer throughout the EMEA region and also teaches HR and Strategic Management programs for MBA students at the UAE campuses of Chifley Business School Australia.

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