Article: Here’s what the lack of training can cost your company

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Here’s what the lack of training can cost your company

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Organizations which side line learning and development efforts face the risk of reduced employee productivity, low engagement levels and reduced profitability
Here’s what the lack of training can cost your company

Training is a part of most organizational agendas, yet companies still grapple with fundamental questions when it comes to truly embracing a learning culture. A primary point of contention is whether investing in training makes a significant difference? HR and businesses experts have seen that training offers many people-centric advantages- higher engagement levels, ability to attract the right talent, and better productivity. But do all these gains translate to business benefits? This may be hard to decipher, considering that learning outcomes are often intangible and embedded subtly in the people-outcomes. Business leaders who are often skeptical ask the question, “Does more training lead to more profitability?” The answer is “yes” and organizations that do not take up training as a key priority stand to suffer.

Sujatha Das, Director – Sapient Consulting notes that “the speed at which the technology and business landscape changes in a disruptive marketplace has made it inevitable for every individual to make “continual learning” as the mantra of life. With the growing competition among businesses in every industry, lack of training in the employees may replace the success stories with failures.”

The training-productivity linkage

Research indicates that employees of organizations providing the most training are nearly twice as engaged as employees who receive little or no training (43% versus 83%), which, in turn, shows that engaged employees are productive. As per a paper on “Labor Productivity and Vocational Training” by Hector Sala and Jose Silva, every hour of employee training increased labor productivity by .55%. Another research by Jozef Konings and Stijn Vanormelingen indicates that the “marginal product of a trained worker is on average 23% higher than that of an untrained worker”. This indicates a clear linkage between training and productivity. And productivity directly translates to higher profitability. Research from 'Bersin by Deloitte' found that high-impact learning organizations were three times more profitable than their non-learning competitors. This direct correlation is very real- the more the training, the better are the business outcomes. This is especially true in the highly dynamic VUCA world that we live in, where employees are a critical business asset. This strong training-profitability correlation highlights the compelling need for organizations to invest in training.

Organizations that provide training see a significantly higher return on assets i.e. three times more than companies that don’t engage in ongoing employee training programs -  IBM Smarter Workforce report (2013)



•    Reduces turnover:  Learning opportunities are being seen in new light, and no longer as a skill enhancement tool alone. Employees, especially modern millennials, consider learning opportunities as an indispensable tool that is in line with their life philosophies of continuous development and growth. Such employees look upon training as a much-valued benefit, an opportunity to advance one’s career without having to switch jobs. Hence, contrary to the popular perception that well-trained employees will scout for better opportunities and leave, training acts as the glue that makes employees stick. Such employees stick around as better engaged, loyal, and productive assets that can take the company to new heights.

•    Reduces recruitment costs: Many leaders think that investing in training is an expensive affair. The reality is that the cost of recruitment is often higher, and can go up to 150% of an employee’s salary. This is because hiring is a high investment when factor like costs of lost productivity, lost knowledge, interviewing and onboarding, and time and effort investment of recruiters and hiring managers are accounted for. A better alternative is to build capability internally, it is often cheaper and easier to do so.

•   Boosts employee morale: There are two ways of filling a vacancy- promote from within or hire from outside. Promoting a person from within requires the company to build the person’s capability for the next-level role. So a company that ignores employees’ development won’t have future-ready employees who can take on higher roles.

Make training future-centric; predict skills required for higher-order and future roles, and build a capable candidate pool that can be plugged into the right positions, as and when required. This train-plug-and-play approach to succession planning will foster better employee morale because employees will now see real opportunities for career growth. Also, a leader hired externally often requires more time to settle in, because he or she needs to understand and assimilate the company culture. On the contrary, an in-house leader is productive from day one. This is better for the employee as well as the organization.

Training is often seen as a cost-center, and business leaders may be unwilling to dedicate time and resources to train their people. The reality is that today new models of training delivery have emerged which are highly time and cost effective and result-oriented. Online learning, mobile learning, social learning, massive open online courses are offering smarter ways to learn. HR must showcase the real value of these training mechanisms through productivity and profitability dashboards. When they see the direct and tangible value-add to business, leaders are more likely to proactively take the plunge and invest in training their most competitive advantage- their people.


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Topics: Learning & Development, Training & Development, #Create The Future

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