Looking Beyond Training Budgets

By Ed Frauenheim

Aug. 11, 2009

Key studies on the impact of training investments have focused on heavier versus lighter spending on employee training. The work of Laurie Bassi and Dan McMurrer over the last decade, for example, has concentrated largely on the link between training expenditures and stock performance. They have found that, all else being equal, companies that spend more on training on a per capita basis do better in the stock market in the year following the investment than do those companies that spend less.

Diane Valenti, a consultant who has worked in the training and development arena for more than two decades, says early Bassi research made a strong impression on her. But Valenti, who is president of San Francisco-based firm Applied Performance Solutions, notes there are limits to looking at training budgets alone. “It’s one thing to invest in training,” she says, “but another to throw money at it.”

Valenti calls for studies pinpointing the wisest uses of training dollars. “I would love to see that next layer of research.”

Josh Bersin, head of research firm Bersin & Associates, says organizations can get the biggest bang for their buck in the areas of sales-force training and leadership development. He says when companies invest heavily in sales training, they tend to gain a greater understanding of their customers and the market. Leaders and managers help everyone in the organization perform at a higher level, Bersin says, and leadership development prompts a thoughtful review of a firm.

“You can’t just spend money on it. You also have to design it,” he says. “It forces you to be reflective.”

Bassi and McMurrer agree that training budgets alone fail to tell the whole story. As part of a 2004 study, they found that the returns on technical training and basic skill training exceeded the returns on other major forms of training. What’s more, in their consulting work to help clients such as ConAgra Foods, Coca-Cola and Charles Schwab optimize business performance, Bassi and McMurrer look at a range of people management factors. These include work conditions, hiring practices, job design and leadership behavior.

Lucy Dinwiddie, vice president of organization development at ConAgra, says McMurrer and Bassi’s consulting firm, McBassi, helped push her 25,000-employee firm to invest in a new learning management software system and create a leadership development program that was recognized last year in Chief Learning Officer magazine’s annual awards.

Thanks partly to McBassi, the internal promotion rate at ConAgra—famous for brands such as Chef Boyardee, Hunt’s and Wesson—has climbed to 70 percent, up from 30 percent in 2006, Dinwiddie says.

“We’re very pleased,” Dinwiddie says of McBassi’s work. “It really helped us to prioritize and focus.”

Ed Frauenheim is a former Associate Editorial Director at Human Capital Media and currently works as Senior Director of Content at Great Place to Work. He is a co-author of A Great Place to Work For All.

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