As a business owner, evaluating any investment in terms of the expected ROI is critical. For example, if you invest in a digital marketing presence, then you expect to see an increase in revenue, right? But if you can’t quantify ROI, it’s hard to keep investing in a venture — no matter how clear the assumed benefits may be. This is a huge problem when it comes to evaluating employee training ROI.
It’s a reasonable assumption that employees with more opportunities to advance their skillsets are happier. Unfortunately, many business owners struggle to make the necessary investments in employee training. Why? Because they can’t derive a direct line between employee training and overall company profitability.
Sound familiar? Let’s demystify the issue of employee training ROI.
Employee Retention
We don’t have to look very far to understand precisely how investments in employee development support organizational success. And it all starts with employee retention.
We’ve found that when employees don’t get the development opportunities they need at their current job, they leave — and fast.
Unfortunately, businesses worldwide have been consistently unsuccessful in preventing these high levels of employee turnover. 40% of employees will leave their current position within the first year due to a lack of training (Guthrie-Jensen Consultants).
This figure is quite troublesome when we realize US businesses lose over 500 billion dollars annually to employee turnover. If you want to quantify these figures for your own business, consider that employee turnover costs can total up to 200% of an employee’s annual salary. These are real dollars leaving your business!
Productivity
A well-trained employee is more productive. IBM found that employees who received just 40 hours of training annually were 10% more productive, resulting in average savings of $70,000 per employee (IBM Corporation 2014). Training also fosters increased collaboration and cohesiveness, leading to a results-oriented team.
One excellent example is a manufacturer who implemented a 30-minute weekly training for each department within their organization. These pointed yet brief training exercises resulted in a 150% increase in overall throughput within 60 days of initiation.
Pairing Productivity and Employee Retention
While employee turnover can add a significant expense, employers must be aware that a lack of training also erodes an organization’s internal productivity. IBM cites that 42% of employees who aren’t provided proper training are actively looking for other job opportunities (IBM Corporation 2014).
Ask yourself:
If 42% of my workforce is actively searching for other jobs, what effect does that have on the effort and results they provide my organization?
You’ll quickly find that you’re losing employees, but that’s not all. The employees you retain are working far below their full potential and aren’t focused on the work.
Project Results and Objectives
On that note, we need to consider the various goals and objectives we have for our business. For small businesses, we often rely on our employees to carry out specialized projects and strategic initiatives above and beyond their daily responsibilities. Employee training is key to completing these types of projects.
IBM found that companies who properly trained their workforce saw a 22% increase in the time it took to roll out new products and processes with a direct correlation to increased revenue opportunities and more rapidly captured cost savings (IBM Corporation 2014).
If you feel like your team is well equipped to roll out new processes, think again. The same study found that merely increasing a team’s skill set by 30% through training increases the chances of completing a project from 10% to 100%.
Simply put, if you want to guarantee success, training needs to be part of the picture.
Adapting to Growth Challenges
Growing your organization requires a workforce ready for adaptation. Implementing training programs has proven to provide an outperforming organization with a significant advantage over competitors.
Outperforming organizations with a focus on employee training can better assess skill gaps within their organization. Consequently, they can build the skills necessary to address the changing conditions of the business or industry.
Employee Retention, Employee Satisfaction, and Profitability
Based on the information above, calculating the return on employee training investment becomes a bit easier to visualize. But what about what really matters to our businesses?
What about profitability?
According to Gallup’s meta-analysis, companies that engaged their workers through employee training saw an increase in profitability of 21 percent (Smarp 2020).
Consider the hardship and investment your organization has gone through to see such drastic increases in the past. A small investment in training just might do the trick.
The employee training model has already been proven, and it’s the most successful companies that have acted as our trailblazers. Per IBM’s study on employee training ROI, 84 percent of the most successful businesses have invested the necessary funds to properly train their people (IBM Corporation 2014).
If you’re a business looking to grow, you’ll need your people to do it. At Cunningham & Associates, we provide training and coaching services that produce results through adaptive and deliverable-based training solutions.
Contact us to see how we can help
References:
- Guthrie-Jensen Consultants (n/a). Undeniable results that prove the value of employee training. Retrieved December 1, 2020, from https://guthriejensen.com/blog/statistics-employee-training/
- IBM Corporation (2014). The Value of Training. Retrieved November 23, 2020, from https://www.ibm.com/services/learning/pdfs/IBMTraining-TheValueofTraining.pdf
- Smarp (2020), 8 Employee engagement statistics you need to know in 2020. Retrieved December 1, 2020, from https://blog.smarp.com/employee-engagement-8-statistics-you-need-to-know
