Is New Employee Training Worth the Investment?

Balance the benefits with the costs

New Employee Training
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Many companies provide some kind of introductory training (or orientation) for most of their new employees. It may take the form of an older employee tasked with showing the new employee "the ropes." Or, it may be left to the HR department or the new hire's supervisor to get them started.

Many organizations, especially in government and academia, have created new employee training that is designed exclusively, or primarily, to provide mandated safety familiarization.

However, some companies in highly competitive industries recognize the value in new employee orientation (NEO) and take it even further. They require several weeks, or even months, of training so that new employees become familiar with the company, its products, its culture, its policies, and sometimes even its competition. But there's a measurable cost to that training and it begs the question, is it worth the cost? And the answer is, sometimes.

What the Experts Say

Technology in the workplace changes so rapidly that companies either have to keep up or lose revenue to the competition. A survey by the Ontario (Canada) Skills Development Office found 63 percent of the respondents planned to "introduce new technology into the workplace that would require staff training." A third of the respondents included "improving employee job performance" and "keeping the best employees" as desired outcomes.

The American Society for Training and Development (ASTD) says that companies spend less than $1,500 per employee on training and that most money spent on training goes toward technical and professional training. Barely anything is spent on new employee orientation or quality, competition, or business practices training.

The Cost-Value Equation

Even though $1,500 per year for training each employee doesn't sound like a lot, it's still a cost. For some companies, especially those noted for their high turnover, it can be a major expense. If your profit per employee is less than $1,500, then clearly training can't be justified. Also, some employers believe it is the worker's responsibility to acquire the skills necessary to do a job before getting hired.

Benefits of New Employee Training

Interestingly, all the reasons to not train a new employee (except cost itself) are the very same reasons you would want to do the training. For example, if you experience high turnover, training new employees will make them more productive, they'll feel better about themselves and the job, and ultimately, they'll stick around longer.

However, if your profit per employee is less than $1,500 per year, then you have a problem and need to start training all your employees, not just your new hires. Begin by showing your stakeholders the potential return on investment (ROI) of the training. This, of course, is only the case if government regulation, insurance coverage, and common sense dictate some training must be given to every new employee.

Additional Reasons for New Employee Training

American International Assurance is an ISO 9002 certified insurance company. AIA makes a commitment to train their staff because AIA "recognizes that the training and development knowledge, attitude, and skills of the staff (and agency field force) are fundamental to its continued efficient and profitable performance.” Orchard Supply Hardware considers its New Employee Training program important enough to include in their list of benefits for full- and part-time employees.

Training as a Separate Function 

Dr. Edward Gordon is such a firm believer in training, he recommends that companies make training a standalone function, separate from HR. He points out a 20 percent increase in training expenditure since 1983 has not kept pace with the 24 percent increase in workers over the same period of time. He suggests training managers use return on investment to demonstrate that the training function is a profit center, not just a cost center. Dr. Gordon also points out that companies such as Sprint, Xerox, General Electric, and General Motors have opted to establish Corporate Universities, reflecting the importance they place on employee training.