Training, why you should take care of your greatest asset

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Training, why you should take care of your greatest asset

According to a survey from the Learning Skills and Council, in 2007 companies in the UK spent £38billion on training. During the recession this figure dropped but last year (2012) saw growth in companies training expenditure, a good sign for the economic climate, hopefully. So why do companies feel it is necessary to spend £38billion on training their employees, surely if they have hired someone for a job that person should already be qualified?

Well yes and no. Companies hire staff to do a job, a job spec will have qualifications and experience that the company is looking for in an ideal candidate. However, the way your company operates will no doubt be different to the last company the candidate worked for. Introductory training specific to the organisation is common amongst bigger companies, and most will continue training staff throughout their employment. So why should you invest in training your staff?

How can training benefit your business?

The benefits of staff training come in many forms; mainly it can increase profits and performance.

Based on the training investments of 575 companies during a three year period, researchers found that companies that spent the most on training yielded a 36.9% total shareholder return. That’s a return 45% higher than the market average. The same firms also enjoyed higher profit margins, and higher income per employee.

The American Society for Training and Development

Firms that invest $1,500 per employee in training compared with those that spend $125 experience an average of 24% higher gross profit margins and 218% higher revenue per employee.

Laurie J. Bassi et al

“Profiting from Learning: Do firms’ investment in education and training pay off?”

Some other benefits include:

Training makes your company more attractive to potential employees when recruiting
Among employees with poor training opportunities, 41% planned to leave within a year, whereas of those who considered their company’s training opportunities to be excellent, only 12% planned to leave.
Knowledge transfer, if a staff member has a certain skill and this isn’t shared, when that staff member leaves the company can suffer
Improved employee self-esteem and morale
“Motorola projects that for every $1 spent on training, there will be $30 in productivity gains in 3 years.”

Merill Lynch – the book of knowledge

How do you measure ROI

Not all benefits of training are quantifiable; some benefits such as employee morale are hard to measure accurately. If however you are starting a large training program you need to know what you are paying for. The classic ROI formula is: (Benefit – Cost) / Cost = ROI

Measuring ROI of training can be very detailed and complex or it can be simple, if you need an idea of how effective your training program is below is an example of a simple ROI calculation.

Training Program – A training program was designed to reduce turnover by increasing leaders’ effectiveness, which had been found (through exit interviews) to be a significant factor in determining employees’ willingness to stay with the organisation.

Cost of Training – The cost per leader was £2,000, which included materials, facilities, salaries, etc. Fifty leaders were trained. Total training costs were £100,000 (50 x £2,000).

Value of Training – The training reduced turnover from 20% to 15% in the unit where leaders were trained. No improvements were observed in an untrained control group. One percentage point of turnover was estimated to cost the company approximately £70,000 (lost productivity, hiring costs, etc). Therefore, the training might have helped the company save approximately £350,000 (5 x £70,000) – a return on investment of 250%.

Paul Bernthal – Manager DDI Centre for Applied Behavioural Research

There are significant trends between an organisations training expenditure and its performance, there isn’t really a debate about whether training your staff helps to increase business performance. Now it is a question of how to get the most out of your training. Many companies are beginning to realise the benefits of outsourcing their training.

So why are companies beginning to outsource their training?

Companies are realising that it may not make sense to have a dedicated training department. No matter how big your organisation is, it can benefit from training, but a whole department dedicated to training will drain resources. The training department will still have overheads even during periods of little to no training.

Training in-house can often be a distraction from the core function of your business, why not outsource your training to a company whose core function is training and development. You get expert training from day one with no start-up cost. Using a dedicated company means you can use their extensive network of trainers and courses, you can even start graduate training programs to attract the next generation of talent.

Bottom line, to save money. Companies outsource their training because it saves money.

If you are looking to outsource your staff training, speak with one of our training team to discuss your options. Let us improve your training program and save you money. Call 0800 0213 263

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About Project Skills Solutions

Project Skills Solutions have been providing NRSWA training to individuals and companies since 2004. Our team are trained to give you the very best advice in your course selection and focussed on customer service.
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