For best ROI, invest more in employees than machines

A survey by the U.S. Census Bureau proves what most business leaders intuitively know. Upgrading your employees delivers a higher return than upgrading your equipment. The survey’s findings amount to one more argument that organizations need a robust approach to employee training and learning.

Productivity boost

The survey was designed and funded by the National Center on the Educational Quality of the Workforce, a nonprofit research group at the University of Pennsylvania.

Using the survey, the Census Bureau interviewed managers and owners of 3,000 businesses. From their answers, the researchers calculated that a 10% increase in the educational level of an organization’s people triggered a boost of 8.6% in productivity. But a 10% increase in the value of equipment — tools, buildings, machinery and the like — entailed a productivity rise of just 3.4%, less than half the previous figure. The survey measured productivity in terms of sales as a function of total hours worked.

While the survey focused on educational programs such as those offered by schools, there was some crossover between more formal education and job training. The measurement of educational levels included some training programs.

Although the survey is now more than 20 years old, the results stand the test of time. And it’s indisputable that employee training and learning remain big topics for employers.

Effects on retention, hiring

Beyond productivity, there’s the fact that employee retention is enhanced when an employer offers its people chances to learn and grow.

In a national survey by Gallup of more than 400 employees of various age cohorts — Baby Boomers, Generation X, and Millennials — fully 70% of the respondents said job-related training and development opportunities influenced their decision to remain at their job, or not. For Millennials alone, the figure was a whopping 87%.

And these effects hold true as well for job applicants: 59% of Millennials, 44% of Gen Xers and 41% of Boomers said these opportunities were extremely important to them when applying for a job.

Challenges

Organizing training and development opportunities for your people can be challenging. It may be difficult to choose the right training. You may be uncertain about how to measure its value. Supervisors may be leery about the hours on the job employees miss while they’re being trained.

But as the statistics cited above demonstrate, it’s short-sighted to fail to invest in your people in this way.

This blog entry is based in part on the survey “The Other Shoe: Education’s Contribution to the Productivity of Establishments,” 1995, National Center on the Educational Quality of the Workforce.