Article: ROI of skills upgrade- A different kind of dilemma

#Building HR Capability

ROI of skills upgrade- A different kind of dilemma

Upgrading skills among corporations is a no-brainer. There will always be issues of ROI in skills upgrading, but a closer collaboration between corporations and training-providers might just be the solution.
ROI of skills upgrade- A different kind of dilemma

You should train people for what you will need them for, and plan ahead for that with a really good HR at hand.

There are many traditional corporations catering to stable markets, and among these, many organizational cultures prize low turnover. Upgrading skills among those corporations is a no-brainer. Of course there will always be issues of RoI in skills upgrading, but among such stable corporations, the lengths of the payback can be substantial because the risks of losing the investment with the employee’s departure are low.

It is pretty difficult to see the picture around the corner, but that seems to be the challenge for agile corporations catering to new market challenges around every corner. Needless to say, and worth repeating, you first need to know in which direction and at what speed your market will turn. Then you need to compare that to the number of people with the necessary skills you have now; and from the balance, you will have a training needs menu — how many to train, how fast, and ‘for what’ upcoming needs. There will be some gaps that you may want to fill-out by hiring from the market. That would be most appropriate for acquiring skills that may take longer to develop internally than you can afford to wait for. This is not as easy to figure out because you need to factor in how long the new hire will take to fit-in and be as effective as expected from the level of skills you hired the person for.

In societies with a low-trust in people, the fit of the newcomer to the corporate organizational culture is a challenge in itself, and the time it might take for the person to fit in the culture (three to nine months) should be factored in the decision to hire from the market. For example, take Ajit, four years with the corporation, loyal and reliable, but his transfer to a new position would require three months of training. Compare Ajit to Arjun, who already has the necessary skills but would take at least three months to be accepted by the team he would work with. It sounds like flip-of-the-coin decision, but once you throw in Ajit’s proven reliability and greater probable fit into the new function, Arjun’s set of skills look somewhat less palatable.

The fit of the newcomer to the corporate organizational culture is a challenge in itself; and the time it might take for the person to fit in the culture should be factored in the decision to hire from the market

To lower the fit-risk of new skilled hires, I like a Brazilian solution for the software development industry, a growing industry hiring all the time, and that also faces both the skills-gap and the fit-cost, who collaborated with training institutions to counter these challenges. Training institutions, on the other hand, have a hard time facing the risk of desertion while training people who cannot afford the cost of long training. Deferring the cost of training is an unlikely option for the short-of-cash training institutions. One side needs the skills-ready individual but also needs to lower the high cost of a bad fit; the other side cannot afford the risk of training people who cannot afford training yet. A Brazilian training company solved the dilemma in the following way. It took promising undergraduates for an eight semester-long training program as long as the entrants agreed to take internships with the software development corporations from the second semester onwards. The corporations took it upon themselves to pay for the eight semester training but in turn benefitted from the intern’s work in the meantime. The close connection between the industry and the training facility ensures that the candidates ultimately come up with the necessary skills. During the process, the interns become acquainted with the organizational culture they work in and the organization gets acquainted with their intern’s work ethos and reliability that in turn lowers the cost of a poor fit substantially.

The entertainment industry may have a lower requirement for skills, but new entrants come from environments with a poorer culture-fit prognosis. Again in Brazil, an NGO took it upon itself to provide simple entertainment industry-related skills to poorly educated youngsters who were offered internships at a publicity film company. There, they needed to be trained, to dress-up, and behave in a world far from their upbringing and which they were only acquainted with through television. But the collaboration worked wonders.

These are the training challenges that developed countries do not really have but which we need to find solutions for. Both solutions suggested here point to a closer collaboration between corporations and training-providers.

The fit of the newcomer to the corporate organizational culture is a challenge in itself; and the time it might take for the person to fit in the culture should be factored in the decision to hire from the market.

Topics: Building HR Capability, Learning & Development, Skilling

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