Lack of understanding leads to less investment in staff and lower productivity
Canadian companies lag behind global competitors in investing in on-the-job training and education. Compared with employers in the United States and Europe, Canadian employers invest 40-per-cent to 50-per-cent less on training and education, says Paul Cappon, chief executive officer of the Canadian Council on Learning, a not-for-profit organization with offices in Ottawa and Vancouver.
That translates to only 30 per cent of Canadian workers receiving any training or education on the job, putting Canada in the bottom ranks among nations belonging to the Organisation of Economic Co-operation and Development (OECD) in Paris.
“We’re in the knowledge economy and yet 70 per cent of (working) Canadians don’t get any training at all,” says Cappon.
A report from the Canadian Council on Learning’s Work and Learning Knowledge Centre highlights the value of education and training and analyses the barriers preventing Canadian companies from making investments that can reap substantial returns.
Between 2000 and 2005, Canada’s productivity growth was only one-quarter of that in the U.S., according to the report, Connecting the Dots: Linking Training Investments to Business Outcomes and the Economy. Productivity is linked directly to training and the capacity of Canadian employers to expand the skills of their employees, says Allan Bailey, the report’s author.
“Canada’s preparedness to compete in the increasingly competitive, knowledge-based global marketplace is in jeopardy,” states the report.
There’s proof in other countries that training can result in substantial profits and cost savings. A series of Australian case studies, published in 2000, measured productivity, sales, staff turnover, fuel usage and training costs for manufacturing, transportation and charitable organizations that invested in on-the-job learning. The results ranged from a 30-per-cent return on investment (ROI) at Queensland Rail, where the training reduced fuel costs, to a 7,125-per-cent ROI at the Mission Australia charity, where training led to a reduction in staff turnover.
So why don’t more Canadian companies invest in training?
Bailey attributes the problem to a lack of awareness. Most Canadian companies are small to medium-sized and don’t have training departments, don’t know where to find the training they need and aren’t aware of how much value it can deliver.
Companies should choose training programs directly aligned with business goals, says Bailey. For example, training that improves quality, reduces costs or time and decreases the number of rejects a manufacturing company produces will improve the company’s bottom-line. Generalized training, such as teaching employees to identify their learning styles, probably won’t result in improvements for the company.
Although Canadian companies that invest in training and measure the ROI may not see figures as high as the two Australian companies mentioned, they should aim for a 15-per cent to 20-per-cent return. These can be higher if they train supervisors, who in turn train their employees — what Bailey calls the “trickle-down” effect.
In addition to dollar-value returns on investment, Connecting the Dots also finds intangible benefits from training, including increased customer and employee satisfaction and reduced stress, absenteeism and staff turnover.
The report (available online at www.ccl-cca.ca) outlines the methodology used to calculate training ROI. While the basic technique is simple — it’s a normal cost-benefit calculation — the report makes it clear the real challenges are properly measuring outcomes at different levels of the results chain, isolating the unrelated factors and resisting the temptation to over-quantify the intangibles.
A simple calculation looks at net profits as a result of the training, divided by the cost of training (see sidebar). Companies need to isolate the effects of training on profits, convert hard data and subjective data into monetary values and calculate all the training program costs.
Canada does not yet have much experience in measuring the ROI of workplace training and education. Bailey estimates that, so far, only about 60 to 70 companies do so. But the tide is turning.
Also the CEO of Mississauga-based e-learning provider Learning Designs Online, Bailey is working with clients on pilot projects that are already delivering heartening results.
Firestone Canada identified a lack of skills as the source of an internal problem. The firm put 15 supervisors through a problem-solving workshop. After they applied their new skills to solve the problem, the company assessed the impact on the supervisors and the company’s bottom-line.
The result: Cost savings of $10,000 per month. The assessment also found employees had acquired new problem-solving skills, strengthened their analytical thinking, participated in more dynamic teamwork and had better quality control. Eighty-seven per cent of the supervisors felt the training was a good investment.
The results of Bailey’s study for the Canadian Council on Learning and his work with pilot projects, such as the one at Firestone, make it easier to convince CEOs that investing in workplace learning really does pay off.
Beth Everson is the director of communications at the Canadian Council on Learning, a not-for-profit organization with offices in Ottawa and Vancouver. She can be reached at [email protected].
ROI calculation
A simple mathematical equation
To determine the return on investment (ROI), calculate the increase in profits (the effect the training had on business) minus the cost of the program; divide that figure by the cost of the program, then ¬multiply by 100 to obtain the ROI as a percentage.
For example, if a new training program cost $10,000 and yielded $30,000 in sales, the ROI would be [($30,000 - $10,000)/$10,000] X 100 = 200 per cent. That means every $1 spent on training yielded $2 in profits.
For more information on calculations, including how to convert all training benefits to a monetary value, visit www.roiinstitute.net or www.learning-designs.com.
That translates to only 30 per cent of Canadian workers receiving any training or education on the job, putting Canada in the bottom ranks among nations belonging to the Organisation of Economic Co-operation and Development (OECD) in Paris.
“We’re in the knowledge economy and yet 70 per cent of (working) Canadians don’t get any training at all,” says Cappon.
A report from the Canadian Council on Learning’s Work and Learning Knowledge Centre highlights the value of education and training and analyses the barriers preventing Canadian companies from making investments that can reap substantial returns.
Between 2000 and 2005, Canada’s productivity growth was only one-quarter of that in the U.S., according to the report, Connecting the Dots: Linking Training Investments to Business Outcomes and the Economy. Productivity is linked directly to training and the capacity of Canadian employers to expand the skills of their employees, says Allan Bailey, the report’s author.
“Canada’s preparedness to compete in the increasingly competitive, knowledge-based global marketplace is in jeopardy,” states the report.
There’s proof in other countries that training can result in substantial profits and cost savings. A series of Australian case studies, published in 2000, measured productivity, sales, staff turnover, fuel usage and training costs for manufacturing, transportation and charitable organizations that invested in on-the-job learning. The results ranged from a 30-per-cent return on investment (ROI) at Queensland Rail, where the training reduced fuel costs, to a 7,125-per-cent ROI at the Mission Australia charity, where training led to a reduction in staff turnover.
So why don’t more Canadian companies invest in training?
Bailey attributes the problem to a lack of awareness. Most Canadian companies are small to medium-sized and don’t have training departments, don’t know where to find the training they need and aren’t aware of how much value it can deliver.
Companies should choose training programs directly aligned with business goals, says Bailey. For example, training that improves quality, reduces costs or time and decreases the number of rejects a manufacturing company produces will improve the company’s bottom-line. Generalized training, such as teaching employees to identify their learning styles, probably won’t result in improvements for the company.
Although Canadian companies that invest in training and measure the ROI may not see figures as high as the two Australian companies mentioned, they should aim for a 15-per cent to 20-per-cent return. These can be higher if they train supervisors, who in turn train their employees — what Bailey calls the “trickle-down” effect.
In addition to dollar-value returns on investment, Connecting the Dots also finds intangible benefits from training, including increased customer and employee satisfaction and reduced stress, absenteeism and staff turnover.
The report (available online at www.ccl-cca.ca) outlines the methodology used to calculate training ROI. While the basic technique is simple — it’s a normal cost-benefit calculation — the report makes it clear the real challenges are properly measuring outcomes at different levels of the results chain, isolating the unrelated factors and resisting the temptation to over-quantify the intangibles.
A simple calculation looks at net profits as a result of the training, divided by the cost of training (see sidebar). Companies need to isolate the effects of training on profits, convert hard data and subjective data into monetary values and calculate all the training program costs.
Canada does not yet have much experience in measuring the ROI of workplace training and education. Bailey estimates that, so far, only about 60 to 70 companies do so. But the tide is turning.
Also the CEO of Mississauga-based e-learning provider Learning Designs Online, Bailey is working with clients on pilot projects that are already delivering heartening results.
Firestone Canada identified a lack of skills as the source of an internal problem. The firm put 15 supervisors through a problem-solving workshop. After they applied their new skills to solve the problem, the company assessed the impact on the supervisors and the company’s bottom-line.
The result: Cost savings of $10,000 per month. The assessment also found employees had acquired new problem-solving skills, strengthened their analytical thinking, participated in more dynamic teamwork and had better quality control. Eighty-seven per cent of the supervisors felt the training was a good investment.
The results of Bailey’s study for the Canadian Council on Learning and his work with pilot projects, such as the one at Firestone, make it easier to convince CEOs that investing in workplace learning really does pay off.
Beth Everson is the director of communications at the Canadian Council on Learning, a not-for-profit organization with offices in Ottawa and Vancouver. She can be reached at [email protected].
ROI calculation
A simple mathematical equation
To determine the return on investment (ROI), calculate the increase in profits (the effect the training had on business) minus the cost of the program; divide that figure by the cost of the program, then ¬multiply by 100 to obtain the ROI as a percentage.
For example, if a new training program cost $10,000 and yielded $30,000 in sales, the ROI would be [($30,000 - $10,000)/$10,000] X 100 = 200 per cent. That means every $1 spent on training yielded $2 in profits.
For more information on calculations, including how to convert all training benefits to a monetary value, visit www.roiinstitute.net or www.learning-designs.com.
