Training professionals are increasingly under pressure to demonstrate the return-on-investment (ROI) of training programs.
Training ROI has been put in the spotlight in both the boardroom and in professional circles — and this is a good thing. For too long, organizations have viewed training and development purely as a cost centre when really it’s a strategic investment that can provide tangible business results.
But do practitioners fully understand the implications of ROI modeling for training and development, and are they equipped to view, define and articulate training initiatives in terms of measurable business impact? The short answer is not always. In the current business climate of constant change, cost-cutting and increased pressure to demonstrate immediate returns on spending, organizations are often quick to defer training investments when the short-term financial returns do not seem apparent.
Training and Development Outlook 2003
published by the Conference Board of Canada, Canadian organizations continue to spend less than their major international competitors on training and development. Actual formal training expenditures in Canadian organizations for 2001 was $768 per employee, lower than the forecasted $859 per employee. In contrast, U.S. employers spent $1,137 per employee in 2001. Economic slowdown since 2001 is responsible for these decreasing or static investments in formal training. And the Conference Board of Canada does not project increases in the immediate future.
If organizations are reluctant to invest in training, perhaps they should consider a different look at ROI: return on ignorance. What are the costs of deferring training until the economic picture is better or choosing not to train at all? There is a lengthy list of costs to organizations who defer training investments. And while some are hard to measure in dollars and cents, they all have a negative impact on the bottom line.
Employees may be hired with the requisite skills and knowledge to perform a given job. But as a company innovates with new products, services and technologies, the requirements of the job will change. Think of how much time and productivity is wasted when employees are left to figure out how to use a new system or implement a new procedure. If innovations are not accompanied by appropriate training, it is difficult for employees to integrate them into to daily responsibilities and for the organization to capitalize on strategic investments.
People are not stupid. When lack of training results in inability to meet job requirements, employees realize they are not meeting performance expectations. People do not enjoy their jobs when they feel unsure or incompetent. This ultimately leads to poor morale and a lack of commitment to the job and the organization. Colleagues notice this, and so do clients.
Poor performance results in poor product and service quality. If untrained staff is left to deal with clients, how can they meet their expectations? Think of the exposure this has: lost opportunities, poor service records, increased rework and risk of litigation are just a few potential outcomes that will impact an organization’s bottom line.
Poorly trained employees do not take responsibility for their work, and typically rely on others to pick up and fix their mistakes. If an organization does not invest in training, who is to be held accountable when things go wrong and business results are not met? Is it the employee that does not perform? Is it the manager that has to step in to fix the problem? Or is it the executive that chose to reduce the training budget?
Competitive advantage often comes from identifying creative ways to streamline business, develop new offerings and staying one step ahead of competitors. If employees are not trained to do the basic tasks needed to do their jobs, creativity and innovation will be stifled and there will be no time to improve upon performance if effort is spent just meeting daily job requirements.
In the long run, the price of not training is the real cost to consider in ROI calculations. Most Canadian companies that consistently perform well over the long-term almost always have a clearly articulated training strategy in place for their employees. They realize the price for making a necessary investment in properly planned training and development is insignificant compared to what may occur to overall business performance when training is ignored.
Like investments in the stock market, training investments must be based on a long-term strategy. Returns will come from implementing training and development programs that are defined, designed and developed to deliver tangible business results.
Anita Bowness is vice-president of operations at ACERRA, a provider of professional learning services. For more information, visit www.acerra.ca.