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Not Investing in Employee Training Is Risky Business

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Starbucks recently announced what must be a coffeehouse first: low-cost college degrees for its employees, including part-timers. The caffeinated beverage giant is rolling out a program for employees who work at least half time to earn an online degree from Arizona State University. The tuition is deeply discounted, and employees can choose from a number of educational tracks. What's more, Starbucks does not require workers to remain at the company upon completion of their degree.

Starbucks is taking a risk here, but it is one that's calculated. Offering training of this type engenders goodwill, further solidifying the company's position as an employer of choice and attracting college-minded young people. Starbucks is betting that, for however long they have these employees, they will serve the organization well. And that some of them will actually stay with the company and move into management positions.

When it comes to employee training, some small businesses are torn. They want their workers to be well equipped and productive, but they fear that these newly trained folks will desert them for higher-paying jobs at larger companies. That's a narrow view, and a potentially dangerous one. Companies that fail to develop their employees could be doing damage not only to morale, but to the bottom line as well. HR Magazine reports that companies investing $1,500 or more per employee per year on training average 24 percent higher profit margins than companies with lower yearly training investments. The American Society for Training and Development (ASTD) collected training information from over 2500 firms and found that companies that offer comprehensive training:

  • Have 218 percent higher income per employee than those with less comprehensive training,
  • Enjoy a 24 percent higher profit margin than those who spend less on training, and
  • Generate a 6 percent higher shareholder return if the training expenditure per employee increases by $680.

For those who remain unconvinced, IBM provides yet another potent example. The international firm recently did a study to examine the percentage of capabilities that companies lose over time. When internal and external turnover, new technology and changes in businesses were factored in, the results were staggering. The study found that a company loses 10 to 30 percent of its original capabilities every year. Within three years, each company loses 41 percent of its staff. By year six, only 24 percent remain. Any business that doesn't believe in training, evolving, and moving their people forward is paying a much steeper price than its realizes.

If organizations knew these statistics, perhaps they would all step up to the training plate. Yet lingering doubts remain. Why is that so? Frankly, I think the training industry and practitioners of training and corporate development have struggled to prove ROI. Our industry teaches real skills, but sometimes those skills are "soft," and sometimes it takes time for those newly acquired skills to affect the bottom line. Improvements derived from training and development are not easy to track point for point. If, for example, a sales team is given a comprehensive new training program and the following year sales skyrocket; was it because of the training, or was it perhaps that a competitor has gone bankrupt?

Few companies can afford control studies to definitively determine the ROI of training, but there is a great deal of peer-reviewed research, such as that mentioned above, that has documented its benefits. Starbucks certainly believes in the benefits of training, both for its employees and its bottom line. People who are passionate about training need to speak in terms of ROI more often, or at least as often as they speak in terms of softer outcomes such as happier employees, better leaders and enhanced teamwork. ROI is the term that the C-suite responds to and understands best.