An academic research measures the tangible impact of soft skills on employee productivity, and their true return on investment to the business.
“The true return on investment on training garment workers with soft skills came out to be 273 percent of the net cost. Workers trained with life skills were 20 percent more productive than their counterparts .”
For any individual, regardless of the seniority level, for example, Associate or CEO, it is very important to have a certain set of soft skills to be successful. Academic research by Cunningham and Villasenor in The World Bank Research Observer, says that “Surveys of employers from around the world corroborate that soft skills are in great demand; and that firms often struggle to find workers with high levels of these skills.” Soft skills are best inculcated from the childhood, as research has proven. A body of research also proves that it gets difficult to attain non-cognitive skills at later ages. For those with “low baseline stocks”, it is particularly difficult. This implies that people whose proficiency of these soft skills is on the lower side, it is hard to train them with such skills at an older age.
An academic research tests whether workers with low baseline stocks can be taught soft skills, its business impact on the productivity metric and, if there is enough return on investment for companies investing in soft skill training. This article explores the findings of the study titled, ‘The skills to pay the bills: Returns to On-The-Job Soft Skills Training’ by Achyuta Adhvaryu, Namrata Kala and Anant Nyshadham.
The study
The researchers conducted the experiment on the garment industry workers in India. Five factories of a large supplier to Gap Inc. were chosen as sites for experimentation. The female garment workers in these five factories were undergoing P.A.C.E., i.e. Personal Advancement and Career Enhancement program. This program was aimed at improving life skills such as time management, effective communication, problem-solving and financial literacy for its trainees. The study was conducted on a randomly selected sample of 1087 workers. Data for each of the following was calculated and analyzed:
i. Productivity,
ii. Attendance, and
iii. Retention.
Productivity, for instance, is measured against the standardized metric across the global garment industry. Standard Allowable Minute or SAM (implies the minutes taken to complete one garment) is the metric of productivity.
The findings
Impact on monthly retention:
On an average, the impact of the treatment on retention was small and insignificant throughout the entire observation period of months. There was a big positive impact at the start of the program and it dissipated by the end, making the average impact very small. The treatment impact on cumulative person days (calculated from production data) is positive. “The treatment increases the cumulative person days per treated worker by 6.8 days during treatment and 16.2 days after treatment when the production data is used,” according to the research paper.
“Surveys of employers from around the world corroborate that soft skills are in great demand; and that firms often struggle to find workers with high levels of these skills,"
Cunningham and Villasenor in The World Bank Research ObserverImpact on productivity:
- Treated workers are more efficient: People who undergo the experiment and learn life skills from the P.A.C.E. program are much more efficient compared to how they were before undergoing the elongated training. The efficiency of those treated is 20 percent more than the control group. The efficiency stays high after the treatment too (almost 15 percent)
Difference in the efficiency of treatment and control group (Screengrab from research paper)
- Treated workers are assigned more complex tasks: Workers undergoing the PACE program are assigned more complex tasks both during and after the treatment. According to the research paper, the tasks they are assigned to take 7 percent more time (about 2.3 seconds) the control group.
- Treated workers get a negligible hike in their salary: The research also found out that the difference in salaries paid to people who took the P.A.C.E. program against others is a mere 0.5 percentage points. The gap in salary only appears later in the program and increases thereafter, albeit very gradually.
What the findings mean
If one looks at the two outcomes – increase in employee productivity and increased the ability to perform complex tasks – of soft skills in isolation, it is a great business case in itself. What is important to note here is, the employees being trained life skills under P.A.C.E. are doing more complex tasks than their counterparts and, are still being more efficient than them at the same time. “The non-cognitive skills like time management, goal-setting, and teamwork enhance worker productivity,” form the focus of the academic paper. The impact on a sustained increase in productivity is observed at the later stages in the program when there is a significant increase in worker productivity.
Why should a business invest in soft skills of blue collar workers
This research proves that soft skills or life skills, indeed, can be taught at later stages of people’s lives. This is true, despite the fact that they have “low baseline stocks.” Being equipped with life skills increases the productivity of employees significantly (20 percent as the research proves), and they can perform complex tasks with much more efficiency.
The true RoI: When you factor in all the cost on the investment made viz. trainer salary cost, employee hours lost cost (1 hour per employee everyday) and plot it against the additional man days and additional productivity, the total benefits outweigh the total costs. See graph from the research below:
Cumulative program benefits over time
The research paper estimated the net rate of return to be 73 percent after 1 year and, 258 percent 20 months (~$340,000 return against ~$95,000 cost) after the program’s announcement.
In summary
- Soft skills equip people to do complex tasks: Even if people are oblivious to some of the life skills necessary to excel at work, they can be taught and equipped with them. These life skills enable people to do tasks which they would not be able to do earlier.
- Soft skills equip people to be faster and more productive: People with a set of requisite life skills can perform tasks much faster and be more productive than without them. Skills such as communication, team work and ownership make them better at their everyday work.
- Investment in soft skills leads to true ROI: Investment in soft skills isn’t an incurred cost to organizations. It leads to exponential return.
Despite these benefits, employees weren’t rewarded with a raise in salary. If businesses are to keep flourishing, not only do they need to train their employees with a combination of functional and soft skills, but also reward them for their performance. Or else, they stand at a risk of losing their best workers.