We all know it’s smart to invest in our workforce through training and development. But how often do you quantify training investment rather than deem it an expense? AREEA’s new training coordinator Shane O’Brien highlights why training should be considered for its returns.

KNOWLEDGE is of critical value to any organisation and it’s not unusual for a substantial portion of an annual budget to be allocated to training in the assumption that is both necessary and valuable. But rarely does an organisation make the effort to actually quantify that value.

Knowledge is valuable

Today, in the age of the information superhighway, companies are often valued on their intellectual rather than physical capital.

Edvinsson and Malone (1997) define intellectual capital as ‘the possession of the knowledge, applied experience, organisational technology, customer relationships and professional skills that provide [an organisation] with a competitive edge in the market’.¹

For companies like Google, Facebook and Microsoft the value of their intellectual capital, or ‘what they know’ far exceeds the value of their physical capital.

Training is one of the principle means of retaining and enhancing the intellectual capital within an organisation and as a direct result, this training can have a marked impact on its value.

Training is an investment

Accountants usually identify training as an expense. However, training is actually an investment: an organisation usually invests up-front to train its employees (in the form of enrolment fees, travel expenses and opportunity cost of the employee’s time) and, in return, expects future returns (in the form of increased knowledge, skills and productivity).

As with any other investment, if the returns are greater than the investment, then training is worthwhile.

The beauty of investing in training is that both parties can benefit. Employers can see marked improvements in productivity, while staff can grow their skills and knowledge, leading to promotion or increases in salary.

The Return on Training Investment (ROI)

It is often difficult to measure the direct effect of training. For example, training can lead to greater job satisfaction, which cannot always be easily quantified. Intuitively, we know this is important in order to retain good employees; however it will not show up on a ROI calculation.

However, there has been some well –documented success in measuring the impact of training on an organisations bottom line. One in-depth analysis of two well constructed internal case studies revealed a 100 – 200 per cent ROI.²

Although training might seem like a luxury in difficult financial times, it is a worthwhile activity that, when viewed as an investment rather than an expense, can produce high returns, making it one of the most sure and sound investments available.

Certificate IV in Training and Assessment

Within the resource industry, the intellectual capital of your staff is a vital asset which should be developed and enhanced as one important component of a successful growth strategy.

Staff who are qualified and skilled trainers and assessors can improve you company’s ability to retain intellectual capital and capital value also.

Successful completion of the Certificate IV in Training and Assessment (TAE40110) qualification will provide staff with the opportunity to succeed in a wide range of career pathways, including:

» Trainer and Assessor in industry (e.g. mining and construction)

» Teacher/Lecturer/ Trainer in public and private VET organisations

» On the job Trainer and Assessor (e.g. industry enterprise based)

» Off-shore Trainer

» Learning or Training Manager

» Human Resource Professional Development Officer

To find out how AREEA can tailor a course to suit your business requirements contact the AREEA Training and Development team on 1800 891 662 or via [email protected].

¹Article by Steve Muench, PhD, PE, University of Washington, 2004.

² Barrett, A and O’Connell, PJ (April 2001).