The true cost of not providing employee training.
4 min read
While most companies have a pretty clear idea of what it costs to train an employee they often ignore the real question: what is the cost of not training an employee?
Michael Leboeuf in his book "The Great Principle of Management" warns of the dangers of ignoring training:
"If you believe that training is expensive, it is because you do not know what ignorance costs. Companies that have the loyalty of their employees invest heavily in permanent training programs and promotion systems. "
The benefits, praise and training that successful companies give their employees are not out of pure goodness of heart. There is an actual correlation between happy employees and a successful business.
A survey conducted by PwC asked Millennials, "Which of the following characteristics make an organization compelling to work for?” In first place was Opportunities for career progression at 52%, Competitive wages 44% come in second place and in third place was Excellent training/development programmes 35%, beating onto fourth place, a good benefits package 32%.
The current and up and coming workforce believes in the value of training and the opportunity to advance in a position. Because they are aware of the competitive world they live in, a job that provides training opportunities satisfies their need to stay ahead of the curve.
Conversely, untrained and unhappy employees who feel that they are being underutilized are more apt to become frustrated with their job and be less loyal to their company meaning they will make more mistakes and fail to meet even minimum standards. With proper training, employees feel like they are valued and are happier in their jobs plus a job that comes with training will attract a higher class of candidate.
An IBM study revealed that employees who feel they cannot develop in the company and fulfill their career goals are 12 times more likely to leave the company.
Training and Retaining Current Employees is Cheaper than Hiring New Ones
Lack of training leads to employees who feel unappreciated in their job and a general sense their job not really mattering. The training and recruitment costs of new hires are far more than what it would take to train an existing employee as well, when you factor in the time and money it takes to hire along with time spent as a new employee acclimates to the company. Rehiring costs represent around 12% of a company’s expenses with up to 40% for businesses that have a high turnover rate.
These stats prove that turnover is costly. A study conducted by Right Management also confirmed this, as nearly 70% of organizations say that staff turnover has a negative financial impact due to the cost of recruiting, hiring, and training a replacement employee and the overtime work of current employees that’s required until the organization can fill the vacant position.
Trained Employees Work Smarter
A company is only as good as its employees, and those employees are really only as good as the resources put into them. When workers perform poorly, it reflects badly on the business and affects the bottom line, but when you have a high turnover rate with dozens or hundreds of employees making the same mistakes, then it’s time to look at the training provided, not the employees themselves.
Proper training will make workers better and more capable of their jobs, which will reduce the time it takes to search for information as they are working. This also helps to quell redundancy of effort where multiple employees are attempting to perform the same task, not realizing whose job it really is because they have never been trained otherwise. The time and money it takes to correct mistakes are also lessened greatly when employees have the tools to do the task right the first time.
More Facts to Know
According to HR Magazine, companies that invest $1,500 on training per employee can see an average of 24% more profit than companies who invest less.
Additionally, a study of 2500 businesses done by ATD, found that companies that offer thorough training had more than twice the amount of income per employee over firms that offered less training. They also create a 6% higher return for shareholders when training per employee is increased by $680.
Effective Training Equals Increased Productivity
Training is no longer about sending all managers away for a weekend conference or sending anyone to an 8 hour-long lecture in a hotel. Effective training needs to be tailored to employee and business needs and to be an ongoing venture. Productivity is also increased because effective training makes employees feel valued and empowered, which fosters loyalty and engagement with the company that provides that training
Competition from around the globe and ever-changing technology means that skills need to be regularly updated to keep your workforce ready and able to support your company. Your Human Resources Department should make it a priority to integrate processes to encourage and promote employee education and skill development while also keeping the amount of time spent away from work to a minimum.
Before forgoing training always consider how much more expensive it is NOT to train. Consider productivity loss, the cost of employee turnover and lost customers due to mistakes made by improperly trained employees.
