Investments in Training Are Assumed to Have Positive Returns

2014 Words5 Pages

Investments in Training Are Assumed to Have Positive Returns

For years, companies have been operating under the assumption that they are reaping positive benefits from their training efforts. They train workers because they believe it strengthens the organization and serves as a retention tool (Lachnit 2001). They accept training as a given expense, showing human capital investments as expenditures on their corporate balance sheets, not as assets that are expected to generate income. However, because intuition and casual estimates have formed the basis of many of their training investment decisions, many companies have little evidence to verify that they are realizing positive returns on these investments.

This practice of operating from an underlying belief in the value of training is not unique to the United States. A study of 15 countries in the Organization for Economic Cooperation and Development found that the majority of enterprises believe employee training is responsible for “productivity improvements, greater workforce flexibility, savings on material and capital costs, improved quality of the final product or service, and a more motivated workforce” (National Centre for Vocational Education Research 2001, p. 1). However, many companies have not measured the benefits and related them to the cost of training in a way that reveals the rate of return on a firm’s investment (ibid.). Apparently there is no other workplace issue on which so much money is spent with as little accountability as training (Worthen 2001).

In today’s competitive and economically volatile market, business managers can no longer approve spending without substantial justification to support their spending decisions. They are asking their hu...

... middle of paper ...

...: NCVER, 2000. http://www.ncver.edu.au/research/papers/downloads/roi.pdf

Pate, J.; Martin, G.; Beaumont, P.; and McGoldrick, J. “Company-based Lifelong Learning: What’s the Pay-off for Employers?” Journal of European Industrial Training 24, no. 2-4 (2000): 149-157.

Purcell, A. “20/20 ROI.” Training & Development 54, no. 7 (July 2000): 29-33.

Rowden, R. W. “Exploring Methods to Evaluate the Return from Training.” American Business Review 19, no. 1 (January 2001): 6-12.

Sticht, T. G. Adult Basic Education: Strategies to Increase Returns on Investment (ROI). July 1999. (ED 432 672)

“What Makes Training Pay?” Management Development Review 10, no. 6 (1997): 225.

Willyerd, K. A. “Balancing Your Evaluation Act.” Training 34, no. 3 (March 1997): 52-54, 56, 58.

Worthen, B. “Measuring the ROI of Training.” CIO 14, no. 9 (February 15, 2001): 128-136.

Open Document