The development of employee knowledge and skills is a critical HRD function. Employees at all levels need to understand the firm’s strategy, how they contribute to the success of the firm, and the need to continuously improve their job performance (Guan & Frenkel, 2019). Updating skills and abilities is critical for workers, firms, and entire economies. Participation in continuing education and training (CET) has become widespread in industrialized countries aiding in the prevention of human capital depreciation (Ruhose, Thomsen & Weilage, 2019). This continuing education allows organizations to remain competitive in a rapidly changing work environment. The monetary investment in training has been highlighted as an essential requirement to ensure both opportunities and quality of training for employees (Sung & Choi, 2014). One of the barriers to the concept of strategic HR is quantifying HR outcomes (Mello, 2019). This barrier is illustrated by the difficulty in quantifying the benefit of increased employee development costs and investments in formal training programs.
Estimating the return on the investment in work-related training on productivity is a challenge for two reasons. First, the selection of workers into training is not a random process. The selection process makes it challenging to identify the causal effect of training participation on individual productivity separately from other unobservable factors that drive participation. If the factors driving the selection of participants is not accurately accounted for, the impacts of training investments on productivity can be overestimated (De Grip & Sauermann, 2012). Second, it is difficult to find appropriate proxy variables for productivity (De Grip & Sauermann, 2012). Wages are frequently used to estimate returns to training participation for the individual. However, direct measures of productivity at the individual level are hard to identify and correlate with quantifiable benefits to the organization (De Grip & Sauermann, 2012).
The combination of the perceived value of effective training coupled with a need for organizations to maintain competitive cost structures and fiscal responsibility requires that organizational leaders assess their training investments (Avolio, Avey & Quisenberry, 2010). Organizations must ensure that they are investing in the most optimal training processes (Avolio, Avey & Quisenberry, 2010).
HRD plays a strategic role in the organization. It is the responsibility of the HR team to make sure that the company employs the right people with the right skill set at the right time and in the correct location. This task requires that the HRD team monitor the labor market to understand what skills the potential employees have. By having a forward-looking view of the anticipated company needs, HRD can pinpoint labor shortages in advance and take appropriate action to mitigate the impacts. The HRD team can take steps to design training programs in–house to train new or existing employees on the needed skills to minimize the problem caused by the deficiency of skilled employees. As an alternative, the HRD team can locate and partner with educational institutions in the area that have programs that can be utilized by the company for the training of individuals. This partnership provides the opportunity to communicate what skills the company is looking for and when the company plans to begin recruitment. This information is especially beneficial for vocational and technical education institutions that often tailor their offerings to produce job-ready graduates for local companies.
Whether the company is looking to design anin-house training program, utilize online training opportunities, or partner with local educational institutions, the ability to measure and estimate the benefit to the organization, is critical. HRD must have this information or the ability to accurately determine the benefits to implement a program that efficiently utilizes resources and maximizes the benefit for all stakeholders, including individuals, teams, the organization, and society in general.
By understanding the benefit of the investment expenditure, HRD can develop and implement a professional development program that maximizes the benefit for all stakeholders, individual employees, work unit teams, and the organization.
References
Avolio, B., Avey, J., & Quisenberry, D. (2010). Estimating return on leadership development investment. The Leadership Quarterly., 21(4), 633–644. https://doi.org/10.1016/j.leaqua.2010.06.006
De Grip, A., & Sauermann, J. (2012). The effects of training on own and co‐worker productivity: Evidence from a field experiment. The Economic Journal: the Journal of the British Economic Association., 122(560), 376–399. https://doi.org/10.1111/j.1468-0297.2012.02500.x
Grossman, R. (2015, May 1). How to create a learning culture. HR Magazine. Retrieved from https://www.shrm.org/hr-today/news/hr-magazine/pages/0515-learning-culture.aspx.
Guan, X., & Frenkel, S. (2019). How perceptions of training impact employee performance. Personnel Review., 48(1), 163–183. https://doi.org/10.1108/PR-05-2017-0141
Mello, J. A. (2019). Strategic human resource management. Boston, MA. Cengage
Ruhose, J., Thomsen, S., & Weilage, I. (2019). The benefits of adult learning: Work-related training, social capital, and earnings. Economics of Education Review., 72, 166–186. https://doi.org/10.1016/j.econedurev.2019.05.010
Sung, S., & Choi, J. (2014). Do organizations spend wisely on employees? Effects of training and development investments on learning and innovation in organizations. Journal of Organizational Behavior., 35(3), 393–412. https://doi.org/10.1002/job.1897