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Too often companies view training as an expense. Some execs even see it as a waste of time and money. But the research is pretty straightforward, so let’s consider a few key points.

First, according to the Emerging Workforce Study, in organizations where training is considered poor, 41% of employees plan to leave within a year. But in companies where training is considered good, that number is only 12%.

This means it’s possible for companies to improve retention by 29% percent simply if they offer good training.

That’s pretty substantial, but let’s look at this in terms of dollars. The Society for Human Resource Management (SHRM) has published research that shows the average cost of replacing an employee is equal to his or her annual salary, plus benefits.

Where I live, the average annual cost-per-employee (including benefits) is about $34,000.  

So if I have a small business with ten employees, that’s a total salary/benefits package of $340,000 annually.

If my training programs are considered good, it’s likely that one person is thinking about leaving this year, and it will cost me about $34,000 to replace him. But if my training is considered poor, four people are thinking about leaving. If they do, that’s a net loss of three employees (one was going to leave anyway).

According to SHRM’s estimates, replacing those three employees will cost me about $102,000. Yikes. But here’s the real problem: It’s not a line item on the budget, so I don’t really notice it.

Training, however, is a line item on the budget. But the idea that training is an expense is truly a misconception.

In an informal survey of HR managers and business owners, I found that training dollars allocated per employee ranged from $675 to $2,000 per year.  Even if I were at the top end of that (costing me $20,000 for ten employees) and my training offerings were considered poor, I could increase retention by offering outstanding training programs that cost me $40,000 per year—and I would be $62,000 richer for it just due to retention.

It’s counter-intuitive, but if these figures from SHRM and the Emerging Workforce Study are anywhere near true, even by doubling my training budget I can actually add dollars to my bottom line.

But retention isn’t the only reason to invest in your employees. Let’s look beyond and consider other gains achieved through training. Say an employee earning $10 per hour wants to improve his skills in Microsoft Excel, so he finds a class for $100. Employers who say “no” to paying for this would be shooting themselves in the foot.  

Here’s why: If the employee learns shortcuts that save him just fifteen minutes a day, his increased productivity pays for the class in just two-and-a-half months. And, as the employee continues at that new level of productivity, that $100 class gives the company a two hundred percent return on investment in the first year alone. That’s certainly not a waste; that’s a pretty savvy investment.

According to the American Society for Training and Development, firms that train more than 80% of their workers are able to attract and retain employees better than competitors of similar size and purpose that don’t invest in training.

According to the United States Council on Competitiveness, a 10% increase in employee training has a more positive impact on productivity than a 10% increase in work hours or stock options.

Hopefully all these research numbers can convince a few folks that investing in their workforce is truly a solid investment, not an expense.

But here’s a caution: If you’re looking to increase your training budget, don’t just throw more money at it. Approach training like you would any other investment.

First, look at your current productivity/level of service, etc, and then determine where you want to be in the future.

Second, identify what kind of behavior change or additional abilities are needed by your employees so they can help the company achieve the desired results you identified in step one.

Third, determine the knowledge, skills, and attitudes needed for employees to be able to perform at the levels identified in step two.

Fourth, identify someone to provide or create training that will equip employees with the knowledge, skills, and attitudes you identified in step three.

Fifth, evaluate, and retrain as needed.

This all takes time, but, as I said, it’s just like any other investment. You’ll want to make careful decisions and have clear goals in mind.

Bottom line, the research is in and training investments provide solid returns. Plus, as an added bonus, providing training gives you an edge over any of your competition that hasn’t crunched these numbers yet.

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