Employee training should be seen as an investment, not a cost

Ignoring it is called `mortgaging your future'

October 13, 2002|By T. Shawn Taylor | T. Shawn Taylor,SPECIAL TO THE SUN

Patricia Thorp, owner of a small Miami public relations and marketing firm, used to spend $6,000 a year per employee on training. This year she cut the figure to $4,800.

But Thorp & Co. is still a believer in employee development - she's just keeping the training in house. That means no more fee-for-service motivational speakers; she uses volunteers. And gone for sure are the here's-a-nice-treat management seminars in New York.

Thorp said her new emphasis on in-house training is good not only for the bottom line, but also for doing a better job of giving employees the skills they need.

Thorp has taken the route most experts would suggest. Instead of slashing employee training, she has re-evaluated and reallocated employee education and training dollars to work more efficiently.

Too often when the economy is weak, experts say, companies first cut employee training and development because they see it as an expenditure, not an investment. Like delaying maintenance, putting training on the back burner can come back to haunt companies, they say.

"What happens is, you start mortgaging your future," said Stephen Burnett, professor of strategic management at Northwestern University's Kellogg Graduate School of Management. "The labor shortage is not going to go away. You counter that by having more productive employees. But you won't if they aren't properly trained."

The American Society for Training and Development says training expenditures increased to $704 per employee in 2000 from $677 in 1999, and increases are predicted for this year and next year.

Eustace Koon, a research officer for the training group, said those predictions are based partly on heightened requests for tuition reimbursements - particularly for degrees such as a master's in business administration - and the move to more in-house, online technologies.

"College is on the upswing. Companies are not particularly budgeting more but employees are using [these programs] more," Koon said. "Expenditures on learning technologies increase because [employers] are looking for innovative ways to deliver training."

For all the talk about investing in human capital, when companies look for expenses to cut, they "tend to be expenditures for the future," said Burnett of Kellogg, which has seen an increase in M.B.A. candidates but a decline in executive education and customized corporate training programs in the past year.

Burnett runs Kellogg's Advanced Executive Program, a course for senior-level managers with profit-and-loss responsibilities. It is Kellogg's most popular management series, he said, and one of the most expensive at $26,000 for four weeks.

He blames lower participation partly on cuts in corporate travel budgets since 9/11, which have indirectly affected training.

Burnett expects the lull in training to be temporary.

Employers similarly cut education and training budgets during the 1991 recession, but many were returned to full funding by the end of 1993, said Mike Hostetler, who heads executive education programs at Cornell University's Johnson Graduate School of Management.

"This is the kind of investment people can defer. But it can catch up with you," Hostetler said.

Training is good for employee relations, but few companies measure the long-term effectiveness of training on employees or its impact on their profits.

"A lot of companies don't know how to measure it," said Lisa Aldisert, a management consultant and author of Valuing People: How Human Capital Can Be Your Strongest Asset. "It's a combination of art and science."

To begin with, most companies that provide training do not work with individual employees to map a development path. They leave that up to the employee, she said. Then, after training, there is little follow-up.

"Training is a retention tool that makes people feel good and valued. But are you matching the right training to the right people?" Aldisert said.

Global consultant Watson Wyatt Worldwide released a study in May that asserts that training for training's sake could be a drain on shareholder value.

The Human Capital Index found that training around leadership development and management skills for people not in those roles can be a mismatch.

"There are few limits [placed on reimbursement] in some organizations. If someone in finance gets a law degree, for example, you may not need that law degree and [the company] will never benefit from it," said Ilene Gochman, organization measurement practice leader for Watson Wyatt in Chicago.

Some academics, executive coaches and human resources professionals argue that companies that provide education and training for their employees are almost always more profitable than those that don't.

They challenged the Watson Wyatt study, saying training's impact cannot be measured so directly.

T. Shawn Taylor is a reporter for the Chicago Tribune, a Tribune Publishing Co. newspaper.

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