Return on Investment for Training and Development of Employees
CHAPTER 1: INTRODUCTION
Background of the Topic
With advancements in technology, particularly information technology, knowledge is being generated and spread at a remarkable rate. During the years 1900-1950, human knowledge increased twofold; after that human knowledge has been doubling every 5-8 years. The inference from this observation is that knowledge is becoming outdated so rapidly, implying that individuals must double their knowledge base twofold after 2-3 years to keep up with advancements in technology (Allen & Kimberly, 2006). Then again, the mounting uncertainty, complexity and turbulence of the business environment pose the need to have diverse and greater amounts of knowledge. Businesses in the present day require higher levels of knowledge that are insufficiently available in the official school education system; this implies that the gap existing between business needs and knowledge offered in schools is mounting (Anderson & Smith, 2006). The business environment is past the period of mass production as consumers are becoming increasingly selective. As a result, increased customer demands pose the need for new knowledge and solutions. Because of the mounting competition in the present day business environment, there is the need for organizations to regularly revise their service and product mix, methods of management and improve on productivity (Armstrong, 2003). The present day business conditions associated with dynamic competition, knowledge-based economies, and globalization markets have increased the significance of human resources in an enterprise. These business conditions have compelled organizations to consider human resources as a strategic resource for every enterprise. In fact, differences existing among organizations are because of the differences existing in terms of human capital, that is, their human resources and their methods of management and development (Hubbar & Beamish, 2011).
In a global, turbulent and complex business environment, organizations can rely only in knowledge to develop sustainable competitive advantage. The primary significance of conventional factors of production such as labour and capital is decreasing; as a result, there is the need for organizations to locate corporative knowledge and develop it through training and development to attain organizational goals and objectives (Dessler, 2000). Because organizational knowledge is largely found in the human mind, since humans are carriers of activities and knowledge, human resources is increasingly becoming a critical success factor for various organizations. Organizational growth and development depends on human knowledge; for this reason, employee training and development are some of the ideal solutions to tackle complex business issues, and HRM is becoming a central component of contemporary management. Through employee training and development, HRM offers steady knowledge innovation, produces an environment for the mutual exchange of knowledge and experience; this makes considerable contributions to competitive advantage and employee satisfaction when undertaking business procedures (Edwards, 2005).
All firms have the responsibility of effectively managing four core resources which include people, information, equipment and money. Investing in better equipments helps in speeding up the process of production and reducing operational costs, which makes significant contributions to the profitability of the organization. In the business world, information is power; this is because being in procession of information regarding products, customers and prices is vital for the growth of any business (Hubbar & Beamish, 2011). Investing in the training and development of employees helps in increasing their efficiency and productivity, which contributes directly to the bottom line. The fundamental objective implementing training and development programs is improving the capabilities of employees at both organizational and individual level. When an organization adopts strategies to enhance the knowledge and skills of its workforce, the returns on investment goes beyond just having employees who are effective and productive (LLoyd, 2002). Training and development programs can focus on either team or individual performance, depending on the training needs of the organization. The fundamental prerequisite before implementing and managing employee training and development programs is that they should base on the management and training needs of the business enterprise identified through a needs analysis process; this is helpful in ensuring that employee training and development is aligned to the strategic mission of the organization (McKenzie & Van Winkelen, 2004).
In order for training and development programs to be effective, there is the need to take into consideration the fact that members of staff are adult learners (Mitki & Herstein, 2007). As a result, training and development programs must draw upon the five tenets of adult learning theory, which includes the following. First, adults must know the reason for their learning; adults are usually self-directed; adults incorporate work-related experiences in the learning process; adults make use of problem-centered learning approach; and adults learn through intrinsic and extrinsic motivation. These elements of adult learning theory are essential in ensuring that organizations design effective employee training programs (Noe, Hollenbeck, Gerhart, & Wright, 2003). The fundamental argument is that an effective employee training program results in a considerable return on investment.
At the organizational levels, employees are usually at varying phases of their careers; this denotes the need for different forms of training for dissimilar forms of development experiences. According to Lloyd (2002), maximizing the effectiveness of employee training requires organizations to regularly evaluate their employees’ needs current training requirements in order to prepare them for their subsequent position. Achieving this requires organizations to acknowledge that different members of staff have different training needs, and that these training needs evolve over time as employees develop their careers (Noe et al., 2003). A recent survey pointed out that approximately 40% of employees who get poor job training depart their job positions after one year. In the light of these circumstances, it is essential for firms to take into consideration the cost of turnover (Hubbar & Beamish, 2011). With fewer employees, the organization’s productivity decreases. In addition, the existing employees are compelled to over work themselves resulting in diminishing staff morale. An inference from this observation is that the cost of failing to training employees is more than the staff turnover, which justifies the need to train employees (Noe, 2008).
Investing in human capital through employee training helps in improving employee capabilities at both individual and organizational level; however, investing in employees is not similar to investments in machinery and equipments. For instance, when a firm invests in the purchase of new computers, the costs tend to depreciate with time; however, when a firm invests in training employees, costs are not subject to depreciation (Woods, 2001). The expected outcomes when firms invest in equipments is that the equipment will facilitate faster production, and reduced waste and maintenance costs; hence, paying for itself. However, when a firm invests in enhancing the skills and knowledge of its workforce, there are numerous benefits for the firm although the significant challenge involves measuring the returns on investment for training employees. As a result, most organizations are undermining the significance of investing in employees, and focusing more in investing in machinery and equipments because of the tangibility of the returns on investment (Wiseke, Ulrich, Christ, & Dick, 2007). In addition, organizations fear training employees because of the fear that they become more attractive to other potential employers. After employees have been trained and developed, they have the freedom of leaving the firm and work for another corporation, which is likely to increase turnover. This counterproductive logic argues that there is no need to train employees for the benefit of a competitor. Such biases impose a significant impediment for firms to embark on people investment (Thomson, 2005). As a result, the goal of this paper is take a critical review on the return on investment of employee training and development in order to conclude that employee training is worthwhile. This paper seeks to affirm that employee training and development is vital for the continued success of every company. Despite the fact, that the Internet and technological advancements have facilitated competition and collaboration at the global level, it is apparent that people are the source of competitive advantage for any organization. In addition, training and developing employees ensures that employees widen the competencies and skills needed for bottom line outcomes for the company (McKenzie & Van Winkelen, 2004).
Thesis
It is worthwhile for a company to invest in the human resources department, which has the responsibility of training employees. The paper maintains that employee training is cheaper than the associated turnover, and that employee training can affect the company and result in positive results. As a result, organizations must embark on effective employee training programs that are aligned to the business goals and objectives for positive outcomes for the firm.
CHAPTER 2: CONCEPTUAL FRAMEWORK
Key Concepts in Employee Training and Development
In the context of human resource management, employee training and development focuses on organizational activities having the primary objective of bettering both individual and organizational performance (Rose & THomsen, 2004). Employee training and development entails three primary activities including education, training and development, which separate and interrelated activities. Training is focused on and evaluated against the job position that an employee holds currently whereas education focuses on job positions that an employee is likely to hold in future and is usually evaluated against future job positions (Robbins & Coulter, 2007). Development activities focus on organizational or individual activities that may be undertaken in future, and is almost impractical to assess. Stakeholders involved in employee training and development include sponsors, clients, participants, facilitators and providers. Sponsors include the top level management of the organization, who have the primary responsibility of ensuring that employee training and development is aligned with the strategic goals and objectives of the organization. Clients of employee training and development include the business planners such as line managers who have the responsible of monitoring resources, coaching and performance. Employees who actually take part in the training are the participants whereas facilitators comprise of the HR staff. Providers comprise of specialists in employee training and development (Hubbar & Beamish, 2011). It is essential to note the various stakeholders in training and development have their own reasons and agendas, which increases the likelihood of conflict between various stakeholders. Irrespective of the conflicts, the underlying argument is that employee training results in positive outcomes for the organization and reduces the turnover on employees.
Understanding the concept of training and development needs an insight to all changes taking place because of learning. Since employee training and development generates new knowledge, it is placed in the wider strategic context of the management of human resources with the goal of benefitting both employees and the organization (LLoyd, 2002). In order for organizations to create and maintain competitive advantage, they must have the capability of creating new knowledge instead of relying on existing knowledge. As a result, continuous employee training and development plays a significant role in developing organization and individual performance. In addition, the strategic processes involving employee training and development must focus on creativity, invention and shape organizational knowledge in a manner that positions the organization as unique and different from others (Dessler, 2000).
At present, the procession of knowledge by organization is a primary determinant for competitive advantage. As Noe (2008) proposes, the logical sequence of employee training and development involves knowledge creation, innovation and competitive advantage. However, knowledge is only important if it is of strategic importance to the organization because it helps in enhancing the value of the organization and is significant to the strategy of the organization. Noe (2008) affirms that organizations should not just embark on training and development without any apparent rationalization; as a result, employee training and development should draw upon feasible needs to facilitate innovation and result in competitive advantage. In addition, training and development impose a positive outcome on the individual and organizational performance only if they are synchronized according to the needs of the company, organization goals, and employees’ goals (LLoyd, 2002). The following subsection discusses the return on investment on employee training and development to affirm that training and development leads to positive outcomes for the organization.
Organizations can embark on training and developing its employees for a number of reasons depending on the identified training needs. First, employee training and development can be implemented when performance appraisals indentify the need for a performance improvement. Performance appraisals have the primary objective of identifying performance gaps within the organization and among employees (Armstrong, 2003). As a result, organizations can tackle performance-based issues by training and developing its employees. The second reason why organizations can initiate employee training is to set a standard for the status of improvement in an effort to increase organizational performance. In the light of this view, training and developing employees serves as a benchmarking tool for the status of improvement, and employees can be trained and developed to achieve the established benchmark. In addition, organizations can embark on training and developing its employees as a component of the professional development initiative, especially when there is the need to establish career and professional development platforms for employees in the organization (Lockwood, 2004). Organizations can also integrate training and development as a component of succession planning in order to prepare employees for position changes in the company. Furthermore, training and development can be helpful in assessing the operation and effectiveness of new performance systems implemented in the organization. According to the outcomes of a needs analysis, training and development can be used for educating employees on specific topics such as communications, ICT skills, customer service, diversity, ethics, human relations, quality initiatives, and occupational safety (Hubbar & Beamish, 2011).
CHAPTER 3: RESEARCH METHODS
Fisher (2007) defines research design as a general plan outlining the steps required in answering the research questions and meeting the objectives of the study.. According to Ruane (2005), research design involves structuring the investigation in order to specify variables and determine how they relate to one another, which in this case was employee training and development and returns on investment accrued training and development. Therefore, the research design represents an outline that acts as a helpful guide for the researcher when collecting data required for the study.
It is evident that this study will require the collection of qualitative and quantitative data to assess returns on investment on employee training and development. The data acquisition method will comprise of both primary and secondary data sources to ensure comprehensive data analysis. According to Ruane (2005), a qualitative research involves an inductive process of organizing data into groups or categories followed by an establishment of the relationships and patterns existing between the data classifications. This definition implies that data and their relevant meanings are drawn from the context of the research. Qualitative research design relies significantly on the basic assumptions and viewpoints, which increases the probability of breaking down a multifaceted phenomenon into a number of independent and dependent variables (Nardi 2003). Furthermore, the qualitative component of this study utilized an inductive mode of inquiry because of the absence of firm hypotheses and over emphasis on research questions (Laurel 2003). The research utilized a grounded research strategy with the primary objective of utilizing natural and iterative data collection and relationship processes, whereby the existing conceptual frameworks discussed in the literature review are the probable outcomes of the research (Neuman & Kreuger 2006). It is apparent that study context is explorative, implying that quantitative design is imperative when addressing the research questions.
Study Sample
The sample used in this study will comprise of 100 organizations, which will be classified basing on how they have integrated training and development on their organizational structure. The organizations were selected randomly followed a nationwide survey on the returns on investment on employee training and development. Besides a nationwide survey, the study also collected data from the employees regarding their views on how training and development or lack thereof has affected various productivity variables such as employee morale and satisfaction. Therefore, through the nationwide survey and interviewing employees, the study aims at providing a holistic view of the benefits of employee training and development at both the firm-level and individual-level.
Data Collection and Research Instruments
Gathering data is a crucial prerequisite for any study since it plays a crucial role in influencing the success of the study by providing channels for inferring conclusions (Neuman 2003). Nardi (2003) points out that there are two main forms of data, which include primary and secondary data. Primary data refers to the data gathered by the investigator through direct contact with the respondents, whereas secondary data is gathered from other researchers who investigated the similar aspects of the study (Laurel 2003). The fundamental research tools deployed in this study involved the nationwide survey and interviews with employees of the selected firms.
Survey
After selecting 100 sample organizations, an analysis was conducted to determine their emphasis on training and development; this was drawn upon the company’s annual reports and the HR strategy that the company used. The outcome of the classification was divided into two broad categories: those with structures that support employee training and development and those that failed to support employee training and development. After classification, the performance variables of the firm were analyzed and compared on assumption that differences stemmed from lack of employee training and development.
Interviews
Interviews were conducted with the main objective of evaluating the returns on investment on employee training and development from the employee perspective. This entailed asking questions on how employee training and development has influenced their decisions to stay or leave the company, their perceived levels of productivity, satisfaction and morale.
CHAPTER 5: DISCUSSION
Benefits Accrued from Employee Training and Development
It is imperative to note that effective employee training and development draws upon a succession of benefits that commence with improvements in the performance of employees, which are then transferred to the localized workplace that ultimately impose a positive outcome on the organizational performance (Mitki & Herstein, 2007). In addition, the scale, scope and size of the impact are not necessarily important provided the results are positive and progressing. Some of the benefits of employee training and development discussed in this paper include high levels of job satisfaction and employee morale; increased levels of motivation among employees; improved efficiencies in business processes leading to financial gain; and decreased employee turnover. In addition, employee training and development increases the organization’s capacity to adopt and implement new methods and technologies, enhances organizational image, and serves as a tool for risk management. Other benefits of employee training and development include improved recruitment and retention of employees, and facilitating knowledge transfer. Irrespective of the monetary costs associated with employee training and development, it has significant returns on investment (Dessler, 2000).
High Levels of Job Satisfaction and Employee Morale
According to Noe (2008), job satisfaction involves a positive or pleasing emotional state of an individual emanating from an evaluation of his or her job. Job satisfaction is also viewed from the perspective of the attitude that a person has towards his or her job. Several affect the levels of job satisfaction including the needs and desires of an employee, the quality and style managerial practices in the organization, job design, levels of compensation, social relationships, working conditions, perceived opportunities within the organization, and perceived opportunities outside the organization. LLoyd (2002) affirms that job satisfaction imposes a considerable impact on employees’ organizational turnover, grievances, absenteeism, and employee turnover. An inference from this observation is that satisfied employees tend to enhance organizational productivity because reduced turnover and less absenteeism.
Employee training and development is one of the most effective HR practices that an organization can use to increase job satisfaction among its employees. Employee training and development plays significant role in eliminating feelings associated with employee dissatisfaction, especially when the working conditions offers little time to pursue personal and professional goals. In addition, employees normally have a hard time focusing their energy on the success of the organization if they do not hold the belief that the organization cares about them (Lockwood, 2004). The bottom line is that employees acknowledge the value of working for an organization that is enthusiastic to invest in its employees, even if the investment solely profits the company. Employee satisfaction and commitment relies on employees’ feelings that the company can undertake its commitments to its employees, and the sentiment that the organization values its employees and regards them as crucial towards the success of the organization. As a result, organizations do not only require employees for their success, but also employees have to feel that their efforts are playing a crucial role in the attainment of business goals.
Studies have reported that organizations using employee training and development programs are reporting higher job satisfaction among employees and reduced turnover rates; this is because employee and training and development increases company loyalty since employees have a feeling that the company is making investments in their futures. In addition, employee satisfaction is high among organizations deploying in-house and provide support for continuing education. It is difficult to quantify company loyalty, although it is imperative to intrinsic rewards associated with employees’ feelings (McKenzie & Van Winkelen, 2004). When employees feel that they are playing a vital role in helping the organization’s bottom line, they normally have a good feeling and are motivated to continue making significant contributions towards the success of the company. This is because employees are positive that their efforts have purpose and are vital to the organization. Top performing employees rarely desert a job because of the pay; rather, it is because their job positions are not aligned with their personal and professional goals and other things required for their happiness (LLoyd, 2002). Despite the fact, that benefits and salaries play a crucial role in the recruitment and retention of employees, individuals also seek for opportunities to expand their knowledge, face the challenge associated with new responsibilities, and the prospect of professional and personal development. Employee training and development comes in handy to satisfy these intrinsic needs, which helps in nurturing trust, boosting employee morale, company loyalty, and resulting to overall hob satisfaction among employees (Anderson & Smith, 2006).
Organizations are relying on new-hire training programs and continuing training and development for employees at all levels with the aim of increasing organizational loyalty a motivating employees to work efficiently and harder. Training and development programs impose considerable impacts on the morale of employees within an organization. First, training and development creates a team environment within the organization. Organizations with good reputations have learnt the art of motivating employees and creating teamwork in the organization (Hubbar & Beamish, 2011). Training and development programs play a crucial role in establishing a team atmosphere through nurturing the culture of group work among employees whereby employees learn to solve problems, make decisions and work together. Comprehensive training and development programs also build confidence among employees since employees have confidence about the skills of other employees, which is vital in fostering a team environment within the organization. Second, training and development increases employee morale because they tend to motivate employees. Most training and development programs are adopted with the goal of providing employees with the tools they required to perform effectively and efficiently. As a result, employees are motivated to deliver their best (LLoyd, 2002). Employee training and development also enhances workforce morale because they feel valued. Training and development programs are costly in terms of money and loss of productivity time; however, when organizations invest considerable amount of resources and times on its employees, the organization is simply conveying a message that its employees are worth the investment and valued, which results in high levels of employee satisfaction and morale (Edwards, 2005).
Smart organizations acknowledge the fact that, there is a direct correlation between employee satisfaction and morale and the productivity of employees; as a result, employee training and development serves as an effective strategy for enhancing employee productivity, which has considerable returns required for the success and continuity of the organization. It is essential to acknowledge that employee satisfaction and moral is a critical success factor for the organization, and so is employee training and development (McKenzie & Van Winkelen, 2004). The underlying argument is that the success of a company depends on the attitudes of its employees and how they enjoy their jobs. On the other hand, the business costs of low morale and employee dissatisfaction are evident; for instance, low employee morale results in reduced productivity, increased employee turnover unresolved conflicts at the workplace, and increased unproductive time, which results in negative outcomes on the overall organizational performance (Lockwood, 2004). As a result, employee training and development serves as a solution for a number of issues leading to low employee morale and dissatisfaction. Overall, despite the costs in terms of money and loss of productive time associated with employee training, the end results are positive and make significant contributions to the performance of the organization.
Increased Levels of Motivation among Employees
A direct outcome of employee training and development is increased motivation levels of workforce. A significant determinant of employee motivation is the availability of growth opportunities for employees to develop their careers using training and development. Fundamentally, the goal of employee motivation is to get employees perform their duties because they want to perform their jobs. Noe (2008) observes that one of the factors affecting motivation levels for employees is the need for new training in order to enhance their expertise and develop their careers. It is evident that every individual appreciates to feel valued and empowered, and every person needs to grow; as a result, training and development can be helpful in satisfying this need among employees, which ultimately results to increased organizational performance emanating from cumulative individual performances. Increased employee motivation produces personal development, which results in long lasting competencies (McKenzie & Van Winkelen, 2004).
Organizations are usually filled with employees who are eager to acquire new skills and development. In addition, organizations aim at harnessing the full potential and value of their workforce and build loyalty and retention; as a result, employee training and development is a winning prospect for all stakeholders. In the light of this view, training and development fosters employee motivation in various ways including understanding, improvement and creating opportunities personal and career development. With respect to understanding, it is evident that every employee makes a significant contribution towards the overall function of the organization; however, employees having a limited scope jobs tend to have a feeling that they may not be vital in the overall function of the organization (Hubbar & Beamish, 2011). As a result, training and development plays an integral role in helping employees have an understanding of how their work is aligned with the structure, goals, achievements and mission of the organization. The outcome is that the levels of motivation among employees tend to increase and they normally become excited about their jobs because they have an understanding how their concerted efforts contribute to organizational success (Hubbar & Beamish, 2011).
Employee training and development also fosters improvement, in the sense that employees are aware of the circumstances they can improve their processes and productivity. According to Noe (2008), employees usually lack the tools and education needed to achieve their potential fully. As a result, training and development, especially for departments and other business divisions, play an integral role in ensuring things get back on track in order to improve the quality of work and result in positive outcomes. The outcome of employee training and development is that employees are happier when undertaking their duties and feel the excitement associated with the prospects of growth and success at both the individual and organizational level. Training and development also increases employee motivation through providing opportunities for career development (Woods, 2001). Many employees join an organization with the goal of not only having a job but also developing their careers. Consequently, opportunities for growing their careers are a vital tool for employee motivation. However, if these growth opportunities are not available in the organization, employees tend to depict low levels of motivation, and may opt to seek other organizations that are willing to support their quest for career development. Training and development plays a significant role in helping employees to achieve their goals through providing them with the education and skills required to perform betters, and acquire knowledge relating to new aspects of the business that they can apply in future. From a HRM perspective, training and development is a form of investment that organization makes in its employees. When organizations adopt training and development programs as part of their business strategies, the organization is pointing out that it values its employees and their respective efforts; this provides an effective platform for motivating employees towards organizational and individual achievements. The outcome of a motivated staff is loyalty, attachment and enthusiasm, which leads to enhanced productivity and positive outcomes for the organization (Edwards, 2005).
Statistics point out that about 75% of employee recruitment entails the replacement of employees who quit their job positions (Hubbar & Beamish, 2011). In addition, organizations incur average losses of $ 1 million yearly for professional and managerial employees quitting their job positions. This dismal statistics are attributed to the disengaged and unmotivated employees who do not perceive any growth opportunities in organizations, which is mainly attributed to the lack of training and development initiatives implemented in the organizations (Hubbar & Beamish, 2011). It is apparent that failing to adopt training and development programs to satisfy employees needs for growth results in low motivation levels, which is costly to the organization in terms of high turnover rates and reduced productivity leading to low organizational performance. Employee motivation is driven by the need to develop a good image as a worker, which results in increased growth and productivity at both individual and organizational levels. Once employees achieve this goal, the next phase of their lives working in the organization entails self actualization. If the organization does not assist in the quest for esteem by failing to provide skills development training, it is apparent that employees will seek opportunities outside the organization to satisfy this intrinsic motivation. In addition, failure by the company to affirm that it values the contributions of its employees by investing in them produces a motivation killing message, wherein employees perceive their work for the organization as a dead-end job (Edwards, 2005).
Organizations accrue a number of benefits associated with giving a motivated staff, particularly after employee training and development, including increased productivity, reduced absenteeism, reduced staff turnover rates, enhanced industrial relations, good company reputation, and improvements in product or service quality. Improved productivity results in reduced costs of production, which gives the business a strategic advantage compared to its competitors. In addition, reduced absenteeism and staff turnover rates tend to lower the recruitment and training costs implying that training and development of employees offsets the costs associated with high employee turnover rates. It is apparent from the advantages of a motivated workforce that training and development results in positive outcomes for the organization and is cheaper than employee turnover (McKenzie & Van Winkelen, 2004).
Improved Efficiencies in Business Processes Leading to Financial Gains
Empirical studies point out that there is a strong and positive correlation between employee training and development and competence, which influences the efficiency of business processes. Conventional knowledge indicates that there training and development results in improved competency. The underlying argument is that training and developing employees increases their competency, which results in organizational competency by facilitating efficient business process. Despite the fact that, research report mixed findings regarding the impact of training and development, this paper argues that cases where training and development does not have an effect on employee competency can be attributed to training and development programs that were designed and implemented poorly (Hubbar & Beamish, 2011).
Hubbar & Beamish (2011) argue that relevant and well-designed training and development programs have a direct impact on the competencies of employees. If training and development are designed and implemented in accordance to organizational and individual needs, the participating employees will be able to perform their organizational tasks competently; thus, making significant contributions to organizational efficiency. In fact, training and development serves as an ideal solution to the identified competency gaps within the organization. A competency refers to a criterion for organizational success, implying that employee competency describes the individual capability to perform rather than the actual performance (Wiseke, Ulrich, Christ, & Dick, 2007). According to this model of thinking, it is evident that training and development is instrumental in developing the core competencies of employees and the overall organization. Competencies are significant because of the correlation with job performance. Training and development programs based on competency gaps are beneficial both to employees and organizations. For organizations, competency based training and development helps in retaining employees, identifying the suitable training for various job levels, providing performance measures needed to achieve organizational goals, and ensuring effective employee selection. For employees, the competency framework helps employees to know the requirements of their jobs and to know the skills required for carrying out business processes effectively (Lockwood, 2004).
An inference from the above observation is that training and development helps employees to develop their competencies; hence, making significant contributions to business efficiency. Some of the benefits of training and development include employees acquiring the competencies needed to execute their duties effectively; confidence is build among employees after being successful in mastering certain competencies; and improved productivity. The bottom line is that training and development plays a significant role in bridging the gap between the tasks to be performed and what is taught during training and development programs. As a result, training employees to undertake actual job functions plays a significant role in ensuring that employees have the expertise, abilities and knowledge needed for executing business processes effectively, safely and properly (Edwards, 2005).
Organizations accrue numerous benefits associated with having a competent workforce, which is solely developed through employee training and development. The first business advantage of a competent workforce is increased efficiency in business processes because employees have the knowledge, skills and abilities to perform organizational tasks effectively. Peters (2006) argues that a competent workforce is essential for organizations to compete in the present global economy. In addition, competent employees result in reduced labor costs; this is because organizations having competent employees can operate effectively and efficiently with a few employees. Training and development produces a competent workforce that moves with the workload; hence, leading to business efficiency. Businesses can use reduced operation and labour costs to establish a sustainable competitive advantage (Mitki & Herstein, 2007). The second business advantage associated with having a competent workforce is the delivery of quality services and products, which makes significant contributions to customer satisfaction resulting in increased profitability. As a result, organizations can use a competent workforce to increase its market share, competitive advantage and profitability, which are usually aligned with the strategic goals of business organizations. Furthermore, training and developed based on identified competency gaps helps in eliminating cost overruns associated with poor performance. The third business advantage associated with a competent workforce is that it facilitates employee recruitment; this draws on the view that individuals seeking employment wish to be part of a competent workforce. As a result, training and developing employees implies that the organization will be an employer of choice for many job seekers, which plays a significant role in reducing the costs associated with hiring new staff when the organization expands its business operations (LLoyd, 2002).
The underlying argument from the above organization is that employee training and development helps organizations to develop the competencies of their workforce, which serves as a point of competitive advantage. Competent employees increase the efficiency of business process, which results in various business advantages such as decreased business costs, especially cost overruns associated with poor performance; and increased customer satisfaction, which increases market share, profitability and competitive advantage. Therefore, investing in human resources through employee training and development is a worthwhile cause for organizations. The business advantages and financial gains associated with training and developing employees outweigh the costs incurred during the same. In the long run, training and development results in positive financial outcomes for the organization accrued from business efficiency (LLoyd, 2002).
Reduced Employee Turnover Rates
Employee turnover is one of the significant concerns for many companies in the present day business environment. Employee turnover is expensive for the organization; the Society for Human Resources Management reveals that the costs of replacing of an employee is about 300% of his or her employee including lost productivity and opportunities, recruitment costs and severance. In addition, the Society for Human Resources Management reveals that approximately 50% of recruited employees tend to leave within two years. In addition, 25% of newly hired employees are likely to desert the organization within the first six months (Hubbar & Beamish, 2011). Employee turnover statistics also reveal that almost 70% of organizations report that employee turnover imposes negative implications on the organization’s finances because of the hiring recruiting and training costs associated with replacing a lost employee. Furthermore, about 70% of companies have reported significant difficulties in replacing lost employees whereas 50% of companies face significant problems with retaining employees (Hubbar & Beamish, 2011). This dismal statistics reveal the need to deploy effective strategies to lower the rate of employee turnover and the associated costs. High levels of employee turnover impose a negative effect on the organization, especially when employees leaving the organization are top performers. According to the Society for Human Resource Management, the primary reasons why employees desert an organization voluntary include the need to grow their career in other firms providing opportunities for training and development and career growth, improved compensation and benefits, and poor management. The Wall Street Journal estimates that the total costs associated with employee turnover range from 50-60% to 100-150% of the annual compensation of an employee (Hubbar & Beamish, 2011). For instance, take a scenario whereby the savings of an organization when it retains one or two extra employees yearly through improved management and offering training and development as part of the employment benefits package. In such a case, consider a mid level manager earning $ 35,000; if the organization opts to substitute this manager, the process will cost the business approximately $ 17,500 (Hubbar & Beamish, 2011). Therefore, if the organization loses two managers annually, the total cost of employee turnover is $ 35,000, and it increases with the number of employees that the company loses. The relationship between the cost of employee turnover and the number of employees leaving the organization is shown in the following figure.
Besides the high cost of replacing lost employees, it is almost impossible to substitute the proprietary knowledge that these employees take with them when the desert the organization result in several ripple effects that are damaging to the organization. When employees desert the company, they usually affect the morale of the remaining employees, spread rumors, and may encourage other employees to leave the company (Noe R. , 2008). The Society for Human Resources Management estimates that an average firm loses about $ 1 million yearly for every 10 professional personnel leaving the company. Despite the fact, that there are numerous factors influencing an employee’s decision to desert the company voluntarily, one core factor that is linked directly to remaining and working for the organization are opportunities for training and development. During 2002 alone, businesses in the United States invested approximately $ 54.2 billion to undertake corporate training and development (McKenzie & Van Winkelen, 2004). This investment has resulted in positive impact with respect to the ability of organizations to retain their employees. Nevertheless, most studies investigating the relationship existing between employee retention, and training and developed focus on traditional hires and employees. There is little research that has assessed the significance of training and development in employee retention. Despite the fact that costs associated with implementing training and development programs are substantial, the cost is minimal in relation to the revenues generated and cost savings when employees remain in the organization.
Organizations usually perceive training and development programs as expense, and some executives view training as a waste of productive time and money. However, research has disapproved this view. The Society for Human Resource Management estimates that in organizations with poor training and development, approximately 41% of employees leave the organization yearly. However, in companies with good training and development opportunities, only 12% of employees of leave the company. This implies that there is a possibility for organizations to improve their employee retention rates by approximately 29% using good training and development programs (Allen & Kimberly, 2006).
Employee training and development has a considerable effect on the finances of the organization because of the various training and development costs that organizations incur. However, after the completion of training and development programs, employee productivity increases, which benefits both the organization because of improvements in employee productivity and output, and to the employee because increase in output results in increased pay and opportunities for career growth. Besides the direct and indirect costs associated with training and development programs, employee turnover plays a crucial purpose in the amounts of training and development costs incurred by the organization (Allen & Kimberly, 2006).
In order to have an insight into the correlation between costs and returns of training and development, it is imperative to commence by considering the two mutually exclusive types of employee training and development, which includes general training and specific training. General training offers employees with expertise that is not only applicable to the present organization but also other organizations in the entire labor market. On the contrary, specific training seeks to improve employee’s productivity and output for the present organization only; as a result, this form of training is helpful only to the present employer. An inference from this observation is that costs associated with employee turnover can be mitigated using specific training. As a result, the effort, energy and time displayed by employees in any form of training can lead to committed employees; hence, increased investment on employees increases their ties and connectedness to the organization. On a similar account, firms that invest and offer general training to employees tend to build an “insider feeling” among participants of training and development programs. These “insider feeling” translated to improved productivity and work ethic, and lessened probability that the employee will leave the firm (Woods, 2001).
After a new employee has been hired in a firm, training and development is the first HR practice that firms offer to the newly hired employee. Training and development plays a significant part in the socialization process of several employees. In fact, employees engage in employment relationships with numerous desires and expectations, which when satisfied, employees can identify with the organization, which increases the commitments of employees. However, when training and development programs fall short of these expectations, there is the likelihood of a negative attitude change (LLoyd, 2002). Unsatisfied expectations results to reduced commitment and increases employee turnover rate; this denotes the significance of designing and implementing effective training and development programs according to the training needs identified and ensuring that they are aligned with the strategic goals of the organization. Training and development aims at improving employee investment and ensures that employees identify with the firm, which increases employees’ commitment to the organization and reduce the intent of leaving the organization voluntarily. The direct outcome is the establishment of a firm that has the ability to retain its employees.
From the above observations point out the fact that training and development is a vital tool that organizations can utilize to lessen employee turnover considerably. Training and development is a motivator for increasing the level of commitment that employees have towards the organization. Furthermore, investing in employees depicts a positive impression to the workforce and shows that the company cares about advancements and careers of its employees. In addition, training and development creates the “insider feeling”, which improves the ties between employees and the organization (LLoyd, 2002).
Retaining employees is not the only reason for organizations to invest in its workforce through training and development. According to the American Society for Training and Development, organizations offering training and development for 80% of its employees are in a better position to attract and retain workers that competing organizations of the same size and scale that do not make any investments in training and development. In addition, the US Council on Competitiveness, an increase in employee training and development by 10 percent produces more positive impacts on employee productivity than an increase in working hours by 10 percent. These figures indicate that employee training and development is an investment, rather than an expense, and should be viewed from this perspective. Therefore, it is essential for organizations to consider training and development as a solid investment; therefore, organizations must consider training like any other form of investment (Noe, 2008).
Training and development offers an opportunity for employees to grow their careers while remaining in the same organization. Firms must take into consideration the fact that, training and development is a form of input that leads to greater returns from the workforce. Studies report that employee feel secure regarding their jobs when working in organizations providing training and development opportunities, which leads to increased positivity, productivity and commitment towards the company by continuing to work for the organization. An inference from this observation is that training and development is an effective tool that helps companies to nurture productive and committed employees. Effective training and development programs result in increased commitment and reduced turnover, which is achieved through facilitating investment on workforce, identification, reciprocity, and restricting alternative employment options (LLoyd, 2002).
Increases the Organization’s Capacity to adopt and Implement New Technologies and Methods
In the present business context, organizational change is a prerequisite for organizational success. Adopting and implementing organizational change is not easy task and poses the need to have well-laid procedures, structures and strategic planning. A primary driving factor that compels organizations to revise their business models and processes is the need to maintain the pace with the ever changing nature of the market ad fosters an organizational culture that is aligned with the current trends in management, production, and the execution of business processes. It is apparent that organizations cannot rely on conventional business operations that are mostly predictable; this is because the new organizational trend is continuous and lacks the aspect of predictability (Woods, 2001). An inference from this observation is that there the need to regularly revise business processes, operations and strategies because the past business context is not similar to the present day business environments. Organizational change affects all the facets of the company including operations and administrative tasks. Operational changes involve changes in the manner in which the organization executes its business process whereas technological changes entail changing the technological platform deployed in the organization with the primary goal of increasing business efficiency and reducing operational costs. Core drivers that compel companies to change their processes and methods include the need to intensify employee productivity, reducing business and operational costs, and ensuring that business utilizes the most recent technological trends (Wiseke, Ulrich, Christ, & Dick, 2007).
Irrespective of the significance of adopting and implementing organizational change, several barriers tend to challenge the effective adoption and implementation of new technologies and methods with the significant challenge emanating from employees of the organization. Employee resistance towards the adoption and implementation of new methods emanate from lack of familiarity with the new systems, fear, and lack of expertise to handle new systems. Employee readiness for change is a significant barrier that can jeopardize the success of organizational change strategies, which might rob the company of profit, growth and competitive advantage prospects associated with the adoption and implementation of new technologies and methods. In the wake of these challenges to change adoption and implementation, employee training and development serves as an ideal solution; whereby, if integrated in the change management strategy, employee and development can streamline the change management process and guarantee its success. Employee training and development is applicable to all facets in change management including operational, managerial, technological changes, and changes in the organizational culture and behavior (LLoyd, 2002).
Employee training and development facilitates the adoption of new technologies and methods in a number of ways. First, training and development improves the readiness of the organization to adopt and implement change; this is because training employees on the prospective change equips them with the expertise and knowledge required to execute the organizational processes under the new change platforms. For instance, with the ever changing and advancing technologies, organizations are faced with the challenge implementing the most recent technologies in order to develop and maintain competitive advantage by becoming technological leaders. As a result, when an organization is faced with the need to overhaul its ICT and other technological infrastructures, upfront training and development of employees helps to smoothen the transitional period during change management (Allen & Kimberly, 2006). Consequently, organizations that focus on training and development are in a better position to adopt and implement new technologies and business methods that are more effective than the existing technologies. For example, upfront training of employees regarding specific skills such as occupational safety and computer skills increases the chances of success of the change process. The primary goal of employee training and development is to provide employees with the required expertise to operate effectively after changes have been introduced in the organization, implying that organizations with training and development programs have fewer challenges when revising their business methods and processes (McKenzie & Van Winkelen, 2004).
Another advantage of employee training and development during the adoption and implementation of new methods and technologies is that it makes significant contributions towards continuous improvement, which entails identifying opportunities for improvement in the existing business processes. Training and development is a developmental and incremental process in itself. It is imperative to consider the fact that training and development draws upon identified gaps and opportunities for improving the efficiency of organizational process and methods. Noe (2008) argues that an organization that focuses on employee training and development is usually ahead of its competitors who do invest in employee training and development. This draws on the fact, that the present business environment is dynamic and changes with changes in technology and knowledge, which are the core points of competitive advantage. With regard to this, organizations focusing on training and developing with its employees tend to depict the characteristics of a learning organization, which is a critical success factor in this knowledge-based economy. Therefore, integrating employee training and development does not only enhance the organization’s readiness to adopt and implement new methods and technologies, but also nurtures a learning organization, which is a point of competitive advantage in the present knowledge-based economy. This is because training employees on future business trends helps them to be ready and prepared for potential changes that the organization might adopt to match current technologies and management trends (Lockwood, 2004).
The underlying argument is that training and development does not only improve the expertise and skills of employees to perform their current organizational tasks but also makes them ready for future changes in their tasks in accordance with changes in technology and methods. Consequently, training and development does not only affect the current competitiveness, performance and revenue of the organization, but also provides the organization with a platform to continue maintaining its competitive advantage in future. Unfortunately, organizations have a tendency of cutting their budgets on training and development programs because they do not consider training and development as a worthwhile investment. The view that training and development is an expense is a misconception; rather, it is a worthwhile investment that has significant returns and positive outcomes on the organization (Edwards, 2005).
Enhances Organizational Image
Organizational image refers to how external and internal stakeholders perceive the organization, which describes the image that the organization stands for. The reputation of the organization is an intangible factor, although it plays a significant role in determining the behavior of various stakeholders including the top level management, customers and prospective investors. According to Noe (2008), corporate image is long-term corporate asset required for competitive advantage. Organizational image is a form of a perpetual representation of the past practices and future prospects of an organization, which outlines the overall appeal of the organization to its stakeholders when compared to its competitors.
Companies utilize various resources to build their corporate image. To enhance organizational value, the HR function should emphasize on practices that develop employee competencies and motivation, which translates to positive corporate reputation. In the light of this view, HR practices, especially employee training and development plays a strategic role in the developing and sustaining a positive corporate image. The underlying argument is that the HR function, through employee training and development, can be utilized indirectly to build a positive corporate image (Edwards, 2005). The HR is an internal function and can improve organizational image by collaborating with the top management and implementing strategic HR actions. Lockwood (2004) maintains that HR can improve organizational reputation since human capital is a vital value driver for organizational image. HRM capabilities can be helpful in creating valuable and strategic competitive advantage that is difficult to imitate by focusing on initiatives aimed at building the competencies of employees that add worth to significant organizational outcomes such as organizational image. In addition, human resource managers can adopt strategies to enhance employees’ motivation to improve organizational image when they interact with external stakeholders. Lockwood (2004) argues that HR practices can impact the organizational image positively, particularly through investing in employees because employees are the ones who regularly interact with external stakeholders.
Organizational image is defined by a set of beliefs held by stakeholders and developed cumulatively over time basing on the predisposition that the interests of stakeholders will be met. Lockwood (2004) insists that organizational image is perpetual in nature and is determined by the amount of organizational appeal to its core stakeholders. Studies have reported a positive correlation between organizational image and financial performance and the future prospects of the organization. This is because organizational image draws upon the facets of organizational responsibility leading to competitive advantage; as a result, organizations can attract skilled employers and increase their customer loyalty and satisfaction. According to Rose and Thomsen (2004), various stakeholders utilize different criteria to evaluate corporate image because they have varying expectations. In the light of this view, stakeholders involve groups or individuals who can have an effect on or is affected by the attainment of the goals and objectives of an organization including shareholders, business partners, customers, governments, local communities and media. The HR function of an organization is positioned strategically to adopt and implement strategies to develop positive organizational image such as employee training and development, organizational communication, and compensation.
Because human capital is a point of competitive advantage in this knowledge-based economy, HR plays a considerable role in affecting the reputation of an organization, especially in organizations where employees interact directly with external stakeholders. For instance, in service organizations, a competent workforce plays a significant role in increasing the levels of consumer satisfaction whereas in manufacturing organizations, where there is reduced interaction between consumers and employees, employee training and development helps in determining consumer and public behavior towards the organization. Therefore, the HR functions within an organization influences organizational image indirectly through implementing strategies that improve the competency of employees, motivation and identification with the organization (Mitki & Herstein, 2007).
Employee training contributes towards the development of a positive corporate image through various ways. First, employee training and development results in high levels of employee satisfaction and competency, which leads to increased customer satisfaction, loyalty and profitability for the organization. A study by Lockwood (2004) reported that high employee satisfaction and turnover increased the levels of customer satisfaction, which is a core constituent of organizational image. Second, employee training and development affects the degree to which employees identify with the company, which is a vital precursor towards the establishment of a positive organizational image among various stakeholders. There is the likelihood that employees who identify with the organization are highly likely to practice behaviors that that tend to support the organization and play the role of organizational ambassadors when interaction with external stakeholders. According to Wieseke et al. (2007), customer orientation behaviors among employees rely on the degree to which employees identify with the firm. In addition, Edwards (2005) reported that employee identification with the organization leads to employees performing their duties in the best interests of the organization and develop a tendency to defend the organization in the public domain. Mitki & Herstein (2007) evaluated an innovative training program and reported that training is an effective approach for organizations to build organizational identities from the viewpoint of employees. Mitki & Herstein (2007) suggested that employee training enables companies to incorporate new organizational identities, enhance both customer and employee satisfaction, which results in a positive corporate image.
Employee training and development programs initiated strategically tend to enhance the competencies of employees. Noe, Hollenbeck, Gerhart, & Wright (2003) reported a considerable correlation existing between the perceived effectiveness of training and development programs and employee commitment, and motivation and employee satisfaction. A motivated and competent workforce that identifies with the organization tends to interact with external stakeholders in a manner that strengthens the image of the organization.
The role of the HR function as an employee champion is perhaps the most vital role of HR, which can be implemented through employee training and development. Organizations can utilize employee training and development as a method of employer branding to build a positive organizational image among its core stakeholders. For instance, Google is usually viewed as one of the best corporations to work for because it established the standards to workplace environments in order to promote employee creativity, loyalty and productivity (Lockwood, 2004). Corporations make use of varying strategies to achieve employment branding in order to establish an image that the company is “the best place to work” from the viewpoints of employees and the public. The argument is that organizations can utilize employee training and development to market themselves as the ideal place for employment. Unfortunately, few companies are using employee training and development as a facet of their employee branding strategy, which presents a prospect for organizations already implementing training and development programs. Consumer brand proposition helps in the definition of products and services offered by an organization; similarly, employee value proposition helps in defining a company’s employment offer in order to create a positive organizational image. It is evident from the above observation that employee training and development provides an effective framework through which the HR function can influence organizational image directly.
Tool for Risk Management
In the present business environment, risks are a common phenomenon; as a result, organizations must have effective risk management strategies to guarantee business continuity. In the business context, risk refers to the perceived degree of potential loss and varies according to situations. It is also essential to take into consideration that fact, that risk management entails people and processes. According to the Society for Human Resources Management, businesses usually devote considerable amounts of resources to develop effective risk management practices although they fail to allocate adequate resources on employee training and development as a strategy for increasing awareness and integrating employee training in the risk management processes. Employee training constitutes a critical element of an efficient and effective risk management strategy; this is because it involves core personnel and offers them with the confidence and expertise needed to make significant contributions and add value to risk management processes within the organization (Edwards, 2005).
Human resources play two significant roles in the process of managing risks. First, people within the organization are a potential source of risk; for example, employee shortages, lack of productivity, employees refusal to take additional responsibility, employees leaving after completing their training and development programs among many others. Second, people within the organization play a crucial role in handling risks; for example, employees can utilize their ingenuity to tackle unanticipated problems, teamwork within the organization, high levels of employee commitments towards organizational tasks among others. The pervasive nature human resources and business risks in organizational process imply that the HR function is positioned strategically to enhance the effectiveness of risk management processes. This implies that the HRD plays a critical role in the formulation of risk management approached utilized by the organization. Just like business risks, human resources are omnipresent in the business environment; as a result, human resources management provides the most effective risk management approach when integrated to the strategies adopted by the organization to manage risks. According to Anderson & Smith (2006), human component and influence is present in all organizational functions and presence including marketing, financial and production decisions. In order to have an understanding of the interrelationship between risk management and human resource management, it is imperative to understand that HRM comprises of staffing, employee training and development, retaining and motivating employees with the goal of ensuring that organizational goals and objectives are accomplished. It is apparent that HR practices impose significant implications for the risk management process. First, HR actions are needed to ensure that there is harmony between risk management tools and human resources; this draws on the assertion that risk management decisions are made by individuals. Therefore, ensuring that the employees are in place and that they have adequate training and motivation guarantees a success in the process of risk management.
From the above observation, it is evident that the Human Resource Department in any organization plays a critical role during the risk management process. Lockwood (2004) argues that one of the frameworks through which the HR function can ensure the effectiveness of risk management process is through employee training and development. Lockwood (2004) considers employee training as a unique and unconventional risk management tools. For instance, employees can be trained on the codes of conduct, existing safety regulations, other laws and standards, and corporate governance requirements; this helps in eliminating potential risks associated with non-compliance. In addition, an employee who is well trained is capable of spotting potential problems prior to their occurrence, which acts as the first and most effective approach when minimizing or eliminating business risks. Employee training helps in mitigating legal issues and lawsuits, which can be achieved through providing training and development programs regarding specific policies of the organization, ethics and occupational safety. The most effective tool for minimizing and eliminating risk is to ensure that employees receive up to date training about spotting potential risks. In addition, a well trained workforce can help to protect the organization from prospective risks such as lawsuits associated with non-compliance and adhering to the regulations and standards in order to increase workplace safety. At the administrative level, employee training and development helps in avoiding liability to the organization. This is achieved through training new employees, regular training updates, and creating an atmosphere that fosters open communication about potential risks. The fundamental argument is that employee training and development reduces the organization’s exposure to potential risks in future (Hubbar & Beamish, 2011).
Risk management through employee training and development imposes significant outcomes on the organization such as profitability, ensuring business continuity and cost savings. Business risks are usually costly and tend to threaten the survival of businesses if the organization fails to manage the business risks properly. This implies that investing in employee training and development is a worthwhile investment in the long run. In fact, businesses can incorporate risk management and compliance training in their programs in order to enhance the awareness of risks within the organization. As a result, the HR function of an organization plays strategic role in enhancing the effectiveness of risk management tools deployed by the organization, especially through employee training and development (Dessler, 2000).
Tool for Recruitment and Retention of Employees
Employee retention is a multifaceted aspect and there is no unified strategy that organizations can use to retain its employees. Many organizations have found out that one factor that plays a critical role in attracting and retaining employees is the provision of opportunities for learning and trying new things. Most Fortune 500 companies are developing learning systems, which have pointed out a strong relationship between employee training and development opportunities and employee attraction and retention (Hubbar & Beamish, 2011). Consequently, it is essential for organizations to acknowledge the fact that, a competent workforce is one of the most significant assets at their disposal; as a result, they are faced with the challenge of investing in them. The inference from this observation is that companies must strive to establish a working environment characterized by learning and growth. Organizations have the choice of either nurturing their employees and retain talented employees, or they can opt to leave these employees to look for opportunities for growth elsewhere, which ultimately results in high turnover and negative outcomes for the organization. Organizations that have adopted and implemented employee training and development programs have reported considerable success with respect to attracting and retaining employees. According to the Society for Human Resource Management, organizations that have opportunities for growth opportunities for its employees have reported a 40-50% less turnover than organizations lacking opportunities for growth (Hubbar & Beamish, 2011).
It is apparent that high employee turnover has a negative impact on the bottom line of an organization; this is because it is usually costly to train and recruit employees who are likely desert the company after completion of the training and development program. Consequently, improving the capability of the organization to retain and attract employees is crucial to the success of an organization. As result, investments in workforce through avenues like career paths and opportunities, and providing training and development plays an integral role in resulting in positive outcomes to the company by ensuring that the organization attracts and retains top talent. In a work environment that is positive, employees are likely to have a sense of being appreciated and encourage staff members to work harder resulting in benefits to both the company and employees. Providing employee training and development plays a significant role increasing the organization’s capacity to attract and retain employees, which reduces employee turnover and facilitates the achievement of the organization’s bottom line. An inference from this observation is that training and development is an effective tool for employee recruitment and retention (Hubbar & Beamish, 2011).
Enhancing employee attraction and retention using training and development is a strategic management tool that organizations overlook frequently. In most cases, organizations prefer increasing the salaries of employees or providing increased vacation time as a method of increasing employee satisfaction. However, these strategies are not effective because employees would adjust their living standards to utilize the salary increase. In addition, they cut their production time and increase their vacation time because of the increase the paid leave time. The bottom line is that these employees remain dissatisfied in the wake of increased salaries and vacation time. It is difficult and challenging for employees to perform organizational tasks when they lack appropriate training (Dessler, 2000). When employees struggle with their organizational duties, or spend their time performing tasks improperly, their levels of frustration increase resulting in conflict among employees themselves and among managers and employers. If organizations fail to make investments in employee training and development, employers usually have a feeling that the organization is not concerned with the quality of jobs that employees perform. The outcome is that employees and the organization are unsatisfied with the outcomes. When employees are of the view that the organization cannot make investments by offering adequate training and development, they are likely to seek other job opportunities elsewhere. Employee turnover is usually a costly proposition for an organization; this is because every time an employee deserts the organization and must be substituted, there is the likelihood that the learning curve for the remaining staff and newly hired employee will drop, resulting in a decline in productivity. Furthermore, the organization has to spend a considerable time to ensure that the replacement employee has adequate information, skills and abilities to perform the job (Armstrong, 2003).
Employee retention has significant business advantages that result in positive outcomes for the organization. Employee retention and turnover are terminologies used to express the number of employees opting to remain in the company and the number of employees opting to remain. Both measurements are vital; in fact, employee turnover is a typical characteristic of the modern workplace. Nevertheless, there are more substantial benefits of employee retention than employee turnover including reduced cost-per-hire, increased job satisfaction and morale. Employee retention plays an integral role in lowering the cost per hire; this draws on the predisposition that the when an organization has few deserted job positions to be replaced, it incurs reduced hiring costs. Some of the expenses associated with cost per hire include advertising costs for recruiting applicants, participation fees incurred in job fairs and wages for external recruiting experts and employment specialist (Hubbar & Beamish, 2011). Furthermore, organizations incur expenses associated with training fees, decline in productivity because of ramp-up time, and costs for purchasing materials during the process. Some organizations utilize on-the-job training, which increases with each time a new employee is hired and respective following. Consequently, employing retention plays a significant role in reducing cost-per-hire expenses, which in turn, helps in improving the organization’s bottom line. The second business advantage of improve employee retention is that it results in increased employee satisfaction. Employee retention is relatively easier when compared to dealing with resignations and termination. This is because of the reduced stress associated with retaining employees if the employee retention strategies are proactive instead of reactive. Proactive employee retention entails improving the levels of employee morale and satisfaction in order to eliminate the feeling of leaving the company to look for employment elsewhere. On the other hand, reactive employee retention takes place through attempts to convince the employee to remain in the organization after announcing his or her intention to desert the organization. When organizations implement proactive employee retention, it is highly likely that employees will feel aligned to the values of the organization and increase their commitment towards the organization. An example of proactive employee retention strategy is employee training and development. With these regard, employees who consider that their efforts are valuable to the success of the organization tend to be highly productive and motivated (Dessler, 2000).
Employee retention also results in improved job knowledge and employee productivity. According to Noe (2008), seasoned employees are a valuable asset to the organization; this is because long-term employees having considerable service and product development are valuable to the organization; this is particularly the case when the learning curve of new employees tends to lower productivity. Consequently, retaining workers who, basing on their virtue and tenure, apprehend and understand the policies, processes and philosophy of the organization tend to become outstanding mentors for new employees. Furthermore, talent retention plays an integral role in boosting the organization’s capacity to offer high quality services and products. Skilled and top performing employees who can share viewpoints and make suggestions for continuous improvement can assist the organization in coming up with innovative ways of patenting ideas and products.
Employee retention also results in improve succession planning, which entails offering training and development, leadership opportunities for employees willing to take more responsible roles. Another perspective of defining succession planning entails the creation of employee career tracks. Keeping workers with capabilities and expertise required by the organization for its future operations plays an integral role in increasing the effectiveness of succession planning. With regard to succession planning, the significance of employee retention is that it can lead to considerable differences between the success of the organization in the short-term and long-term. As a result, another business advantage of employee retention is longevity in business, which guarantees that the objectives of both the organization and employees are achieved (Armstrong, 2003).
Challenges and Solutions to Employee Training and Development
Regardless of the fact that, employee training and development is a vital requirement for organizations to have a competitive edge, it has some significant drawbacks for the organization. Organizations utilize various methods to implement employee training and development programs such as classroom training and on-the-job training; however, all of these methods impose a number of challenges for organizations. The first significant challenge of employee training and development is the costs associated with the process. If the organization deploys internal training, it is costly because of the need to pay the employees for training rather than performing productive work. On the other hand, when the organization utilizes an external trainer, there are associated costs of hiring the trainer. Organizations can also train their employees by sending them to seminars and training conferences in other locations; this results in considerable costs for the organization (Armstrong, 2003). In order to tackle the problem of cost, it is essential for organizations to approach employee training and development as a form of investment whereby returns on investment are anticipated. As a result, there is the need to undertake a cost-benefit analysis of the training and development program in order to control the cost. In addition, training and development programs must be designed and implemented effectively according to the training needs of the organization and employees. In order to ensure that the training and development program is effective, there is the need to align the program with the strategic goals and objectives of the organization.
The second challenge when training and developing employees is the risk of trained employees leaving the organization after completing the program. This is a significant challenge because organizations have minimal control of employees’ decision, and they have the discretion to choose their place of work. When a trained employee leaves the organization, there are other cumulative costs associated with the departure such as increased turnover and recruitment costs to replace the employee. In addition, employee departure after completing the training is a clear indicator that the training and development was failure and did not make any considerations to the bottom line of the organization. In such a case, there are no returns on investment on training the employee because he or she is likely to seek for employment in other competing organizations. Tackling this challenge requires organizations to make use of specific training, wherein employees are trained according to the needs of the organization. General training is usually risky and should be approached with caution. Specific training implies that the knowledge attained is only applicable within the organization; as a result, trained employees are likely to remain within the confines of the organization (Edwards, 2005).
The third challenge facing employee training and development is the degree to which trained employees will apply the knowledge acquired in the job context to benefit the organization. The transfer of knowledge to the workplace is the primary goal of training and development, and employee training is of no value if employees cannot apply the knowledge acquired in an organizational context. However, empirical literature suggests that the degree to which employee transfer the skills and knowledge acquired during training depends on the support from superiors during the transfer of knowledge in the job context. A potential solution to this problem lies in the strategic framework of Human Resources Department practice that the support of top level management is a vital feature to facilitate the effective management and implementation of employee training and development. Consequently, the cooperation, involvement and support of the top level management are needed to ensure the effectiveness of employee training and development programs (Armstrong, 2003).
CHAPTER 5: CONCLUSION
This paper has affirmed that employee training and development is a worthwhile investment for organizations, which is evident through the benefits of employee training and development to organizations. In addition, the paper has affirmed that employee training is cheaper than the associated turnover, and that employee training can affect the company and result in positive results. As a result, organizations must embark on effective employee training programs that are aligned to the business goals and objectives for positive outcomes for the firm. The potential benefits of employee training and development to the organization include high levels of job satisfaction and employee morale; increased levels of motivation among employees; improved efficiencies in business processes leading to financial gain; decreased employee turnover; employee training and development increases the organization’s capacity to adopt and implement new methods and technologies. In addition, employee training enhances organizational image, and serves as a tool for risk management. Other benefits of employee training and development include improved recruitment and retention of employees. All the above benefits result in positive outcomes for the organization. It is evident that there is a direct correlation between employee satisfaction and morale and the productivity of employees; as a result, employee training and development serves as an effective strategy for enhancing employee productivity, which has considerable returns required for the success and continuity of the organization. A motivated workforce results in increased productivity, reduced absenteeism, reduced staff turnover rates, enhanced industrial relations, good company reputation, and improvements in product or service quality. Employee training and developing employees increases their competency, which results in organizational competency by facilitating efficient business process. In fact, training and development serves as an ideal solution to the identified competency gaps within the organization. Effective training and development programs result in increased commitment and reduced turnover, which is achieved through facilitating investment on workforce, identification, reciprocity, and restricting alternative employment options. . Consequently, training and development does not only affect the current competitiveness, performance and revenue of the organization, but also provides the organization with a platform to continue maintaining its competitive advantage in future. From the discussion in the paper, it is apparent that employee training is a worthwhile investment for organizations because it offers opportunities for organizations to develop sustainable competitive advantage.
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