The training challenge
Does training encourage job shopping?
Or is it an investment in quality and retention?
And can we even afford it?
Training. It may be a word that makes you shudder. That’s because it’s a short, eight-letter word with big implications. In many ways training is the nerve center of every business. It’s closely tied to productivity, staff development and retention, business growth, regulatory compliance and risk management. And for smaller businesses — compared to large organizations — there are cost burdens that can be major roadblocks to profitability and business growth.
According to Josh Bersin, principal and founder of Oakland, Calif.-based Bersin by Deloitte, a human resources research and development consulting firm, businesses over two to three years invest at least 10 to 20 percent of an employee’s salary in training. Meanwhile, a 2007 Training magazine report noted that companies spend an average of $1,200 and 32 hours annually on training for every employee.
The U.S. Office of Personnel Management notes, there are five training cost components to keep in mind:
• Development costs — staff salaries and benefits,
and any equipment costs
• Direct costs such as training materials
• Indirect costs such as overhead and
• Compensation for participants
• Lost productivity, or the costs of having other staff cover off when employees are in on- or off-site training
“A lot of it comes down to economies of scale, and not just money, but time-wise,” notes Josef Pruellage, assistant vice-president and senior risk consultant in the risk services division of Hub International, the largest insurance brokerage in Canada.
Pruellage notes, for example that one of his clients, a trucking firm, needed to send two drivers for additional training. “They had the option of a four-hour course or a two-day course. They could afford the two-day course, but couldn’t afford the time for it. They needed those drivers on the road,” he says.
“A lot of companies, especially smaller ones, don’t have extra people to cover off,” he adds.
Training is a double-edged sword. There are two schools of thought among experts. One group holds that investing in training leads to higher staff turnover. The other argues that it helps retain employees. On the one hand, you need to train your staff to help both them, and your business, grow — the goal should ideally be to have loyal, long-term employees. Pruellage notes, however, that the challenge for smaller companies comes when well-trained staff leave for better opportunities. That’s when you’re faced with going back to the drawing board and having to reinvest in the entire hiring and training process all over again.
There’s a big burden on smaller companies faced with staff turnover. Go2HR, a training resource for the tourism and hospitality sector in British Columbia, notes that it “can cost as much as $2,500, depending on the position, to replace a frontline employee.”
Says Pruellage, “You can get WHMIS training online for $30…now is that a lot of money? I think even a small client should be able to afford that. So to me, the turnover aspect would be the biggest issue.”
On the other hand, if you don’t invest in training, employees may feel it’s not worth staying — one survey noted that poor job training is the reason why 40 percent of people leave their positions within the first year. This also puts you back in the position of having to hire and train new staff.
“If you want quality, you need training,” Pruellage says.
But more important than this, he affirms, is the key to reducing, or entirely avoiding, the cost burden of repeated hiring and training — hiring the right people to begin with. “You can foster all the right environment you want, but if you don’t have the right person in that position, none of that’s going to work,” he says, adding, “You have to have the right person for your company that’s going to have the right motivation.”
Hiring and training staff is expensive. So that’s why it’s crucial to make sure you hire and train the right people. And that’s why a lot of companies now include personality tests in the interview process, Pruellage says.
Training is a “huge” issue as it relates to risk control, affirms Pruellage. “It (risk control) is a big, open issue. It all comes down to how much money you want to spend,” he says.
Certain training — specifically health-and-safety training — is part of compliance with provincial legislation. And there’s a very real onerous cost and competitiveness burden on small businesses when it comes to the cost of regulatory compliance. One study in the U.K., for example, found that risk management cost per employee is $649 for smaller businesses compared to $70 per employee for larger companies.
However, don’t use being a small, independent business without a budget as an excuse to not invest in training. Cautions Pruellage, if you’re not doing any kind of employee training in your business, you’re really taking a huge risk when it comes to both business growth and risk management.
This may be the year to think about increasing your employee training budget — or develop one if you don’t have one. According to the most recent figures from the Association for Talent Development (ATD), businesses globally are investing more in employee training. In its 2014 State of the Industry report, the ATD noted that in 2013, average company spending per employee on training and development, was $1,208 — up one percent from 2012. The number of training hours also increased, to 31.5 from 30.3 hours per employee.
The ATD also noted that the cost per learning hour available in 2013 was $1,798 — down $15 after several substantial year-over-year increases. This likely means companies are getting better at using their training resources effectively, says the association.
While the ATD says globally organizations are getting better at staff training, the Canadian Policy Research Networks (CPRN) says Canadian businesses are under-performers when it comes to workplace learning. In a policy paper titled Employer Investment in Workplace Learning in Canada, author Mark Goldenberg notes, “The rate of participation in job-related training in Canada is only average compared to other countries, and is below that of some of our competitors.”
Among selected Organization for Economic Co-operation (OECD) and Development countries, participation in job-related continuing education and training in Canada, is only 29 percent. That’s well behind Denmark (46 percent), Sweden (45 percent) and the United States (44 percent). Out of 10 OECD countries, Canada is near the bottom in seventh spot.
In the CPRN policy statement, time and money resources, and a lack of knowledge about where to get as well as how to organize and provide training, top author Goldenberg’s list of factors influencing businesses’ decisions about whether to invest in employee training.
Pruellage sums up the time and money aspect this way: “The bigger the facility, the more resources they have or the more resources they can obtain from other places.”
When it comes to money, there’s help available for smaller companies with modest training investment budgets. The Canadian Federation of Independent Business encourages taking advantage of the Canada-provincial Job Grant. All provinces and territories except Quebec have signed on to the federal-provincial partnership. (Quebec has its own system that includes many aspects of the federal-provincial partnership grant.) The grant program covers the cost of tuition or other training fees, and materials. Under the program, you can apply for a grant of up to $15,000 per employee. The federal government pays two-thirds ($10,000) and the respective provinces kick in the other third ($5,000). You also have some responsibilities under the grant program — you have to:
• Pay some of the training costs
• Hire the person being trained
• Be applying for training delivered in your province
• Comply with all labour and workplace health-and-safety legislation in your province or territory
As for the lack of knowledge about where to find and organize training for your staff, Pruellage says there’s one resource you’re already paying for that you should be taking advantage of — your insurance provider.
“It’s really important to talk to your insurance company,” he says, adding, “Insurance companies are probably the biggest untapped resource that most companies have. They’re there to help you and to retain your business.”
Often, insurance providers can point you to training resources, or even provide them, explains Pruellage. “A lot of the larger insurance companies will have some training programs,” he says, especially ones related to risk management.
When you’re paying premiums, you should be finding out about and taking advantage of everything your insurance provider can help you with, instead of only calling when you have an insurance issue, says Pruellage. “There are very few companies out there that are willing to help you for free. But you’re paying insurance, and they have a vested interest for you to do well.