Published March 2002

Benefits of employee training far outweigh costs

By Jack Goldberg
Columnist

Recently, a best-selling book, “The Boss’s Survival Guide: Everything You Need to Know About Getting Through (and Getting the Most Out of) Every Day,” included the statement, “If employees are really our greatest assets, it only makes sense to invest in them. Training improves employee contributions. It creates better teams.”

If training improves employee contributions, then why is employee training one of the earliest budget items to be eliminated and one of the last to be reinstated when company finances tighten?

The most likely answer is that the cost of training is easy to calculate, but the benefits of training are not. If your company is considering eliminating the training budget, consider the following arguments for maintaining and even increasing employee training.

Retention
“[Training] is also a tremendous retention tool. Employees want training; so much so that many cite lack of training as the reason for leaving their jobs.”
— “The Boss’s Survival Guide: Everything You Need to Know About Getting Through (and Getting the Most Out of) Every Day”

While the economic downturn has made recruitment easier, the cost of replacing a productive employee is still onerous. With turnover, a company incurs both direct and indirect costs.

Direct costs include actual dollars spent on recruiting, selecting and hiring replacements. Direct costs also include the costs of orientation sessions, job training, record keeping, and accounting and payroll activities.

Indirect costs are those expenditures attributable to the effect on production caused by turnover, i.e., costs for disrupted work, loss of employee experience, loss of work quality, cost of management time training replacement employees and lost work hours while the job is vacant.

A recent article in Workforce, a magazine focused on human resources, discussed the value of employee training:

“Companies that spend more than the average amount on training have a high placement of internal hires, and that reduces, in real dollars, recruiting costs and downtime.”

Further, the article correlates more training with lower annual turnover.

Quoting Richard Roth, Managing Director of Hackett Benchmarking and Research, the article notes, “Companies that spend $218 per employee in training and development have more than 16 percent annual voluntary turnover. Companies that spend $273 per employee have less than 7 percent annual voluntary turnover.”

Protection
When training focuses on behavior, employees learn what is and is not acceptable in the workplace. This type of preventive training improves behavior so that difficult employee relation issues do not arise. While it is difficult to calculate direct savings resulting from the lack of litigation and attorneys’ fees, it does not require much imagination to believe that preventive training is less expensive than defending or settling a lawsuit.

In addition to improving employee behavior, training can help an employer establish its defense in cases of harassment. When harassment by a supervisor occurs but the harassment does not involve a tangible employment action, an employer may be able to avoid liability by establishing an affirmative defense that was recognized in two 1998 U.S. Supreme Court cases.

The employer can show that (a) it used “reasonable care” to prevent and correct harassment, and (b) the employee unreasonably failed to complain. Part of establishing reasonable care is providing harassment training for employees and supervisors.

Training also can prevent problems by ensuring supervisors and managers are aware of employment-related laws and understand how to apply those laws. For illustration purposes, consider the following:

• Wage and hour: Noncompliance occurs in the calculation of overtime pay, provision of meal and rest periods, use of compensatory time and misclassification of employees as exempt or non-exempt.
• Safety and health: Federal OSHA and some state programs require training in areas such as job safety and hazardous-materials communications.
• Recruitment and selection: Issues arise when company managers ask improper interview questions, make decisions based on improper criteria and/or fail to make proper accommodation in the hiring process.
• Disability and accommodation: Various federal, state and local laws prohibit discrimination against qualified disabled individuals. These laws require reasonable accommodation in the hiring process and in the employment relationship under most circumstances. Inadvertent errors in this area can be costly.

Companies that invest in employee training recognize the value of providing their staffs with the information and tools they need to succeed. So, if training improves employee contributions, increases retention, helps prevent litigation and protects company assets, why isn’t training a priority?

Jack Goldberg is President of Personnel Management Systems Inc., with offices in Everett, Kirkland and Tacoma. The PMSI Web site is www.hrpmsi.com.

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