Let’s Do the Math. Turning Training “Cost” Back Into Worker “Investment”

by Dean Prigelmeier, President of Proactive Technologies Inc. ^®

It’s fairly institutionalized now. A lot of time, effort and resources go into recruiting workers, but very little is done once they’re hired to maximize the return on what should be considered an investment. Although employers forgo tens of thousands of dollars in lower worker capacity and, compliance risks and therefore lower ROI for each employee, each year, the solution has always been simple, economical and available but ignored. Here is formula to estimate what it means to the bottom line to “develop organizational capacity” through worker development and how to turn what has become unnecessarily a “cost” back into a manageable “investment.” 

Background – There was a time when worker training was considered essential, supported by management and accounting. As employers, unwittingly at first, shifted this focus away from nurturing an investment to placing the burden on someone else, it began to look to some like an unreasonable expectation.  Pressured by shareholders, employers saw an opportunity to please them and blame others; the false choice to move and keep work offshore in lower wage labor markets (with greater training needs), or spend a lot of time and money developing automated replacements – never mind the risks or feasibility. Simply training the worker for maximum capacity was nudged further and further off the table. The trichotomy – conflict between cheaper labor markets, automated solutions and simply training the worker – continues.

For many employer’s HR professionals, improving onboarding is popular. It is a good start, but it is informational learning, and 70-80 percent is forgotten before the learner gets a chance to apply it. Re-enforcing it with more classroom learning experiences only amplifies the ineffectiveness. Even more detrimental, leaning so heavily on “learning” experiences with uncertain relevance and outcomes has jaded management and accounting to think all worker development options are “costs” to be minimized.

In fact, what is needed is to simply reemphasize “training” instead; an expert at a process transferring their expertise to a trainee until they become expert, as well. The concept behind “apprenticeship,” whether registered or not. Training is performed where the task is performed, so there is little chance to forget the knowledge imparted during the process-training. The trainer just needs structure to ensure nothing is forgotten in the delivery and it is delivered consistently to others. It also allows for production to continue, albeit slowed slightly and for a short time by the beneficial act of building another “expert.” This can be done with existing staff and without burdening existing work scheduling as employers might have convinced themselves it has to be. Most employers are already doing informal OJT whether they know it or not, so structuring it only makes it more efficient and effective.

Although GAAP (General Accepted Accounting Principles) has started to look more into quantifying worker value, accounting hasn’t kept up with tracking things like Return on Worker Investment (ROWI). Most accountants and finance people are stuck in the rut of their creation, considering workers and efforts to train them, as “costs.” Managers are afraid to confront accounting for permission to do what seems logical – leaving a worker without training to become a self-fulfilled prophecy cost – so the status quo continues. Companies panic, pouring in expenditures to recruit and hire more people but nothing done to train, maintain and retain them so they see little improvement in operational capacity although headcount is up. Workers get it, so incumbent workers, to the best of their ability, try to mentor their coworker to be able to help them. Some trainees desperately try to train themselves. Yet with each new worker getting more of a watered-down version of the training, the more ineffective the organization becomes overall and no records exist testifying to which workers have mastered which tasks.

if the employer is relying on unstructured, informal, and undocumented one-on-one training to do the job, that’s better than nothing but leaves a lot of ROWI on the table. Informal OJT has severe limitations, it cannot be explained, measured, documented, accelerated or improved upon; it is just 2 people, one sharing expertise in an informal way to uncontrolled, undocumented results. Magically, products do get shipped and services do get delivered, but how well is not known until an incident occurs to show us “not very well.” Why not build on this roughly effective approach and make it work better; make it into a bone fide system?

Determining What You Missed – With no worker training at all, it is easy to predict the outcome and risks which include everything you can imagine. A rough calculation can give an idea as to the effectiveness of informal on-the-job training compared to structured on-the-job training(SOJT).

Of course, other variables effect the quality of even SOJT and resultant ROWI, which exist for even informal OJT with a greater negative impact:

• Level of expertise of the trainer (e.g. shift-to-shift differences in the quality of training the trainer received, whether quality training time can be “squeezed into” production scheduling, etc.);
• Management commitment to training felt by trainer and trainee;
• Level of core and industry-technical skill base trainee brings to the SOJT experience;
• Prevalence of other distractions influencing the effectiveness of SOJT, such as suitable compensation, external issues, fear of layoff;
• High turnover rates;
• Lack of job definition, disjointed task training (internal job hopping before primary job understood and mastered).

All of these factors would show up in even slower, repetitive or unsuccessful efforts to train the trainee. An example of the training cost/lost ROWI formula applied shows how a typical scenario is quantified:

The impact on the organization compounds if unchecked:

•  Multiply by the number of new-hires, internal transfers, cross-trainees = Big Bucks Cost with Low ROWI

•   After 90 days, attention to informal training wanes – adding to opportunity costs, increased compliance risks = Bigger Bucks Cost with Lower ROWI

•  Turnover rates of 20-40% exacerbate the problem and costs = Biggest Bucks Cost with Lowest ROWI!

Solution – These issues would be minimized and mitigated by formalizing the informal OJT into a structured OJT (SOJT) system, providing data on each worker’s progress toward full mastery of the tasks required (Key Performance Indicator or KPI), documentation of tasks mastered (for any job they held and are cross-trained on), auditability, revisability – compliance support for engineering, quality and OSHA requirements. All of this data and more is available once the training is structured and implemented, giving accounting and management data to assign accruing value to each worker. Building structure around what is happening informally makes implementation easy and acceptance – management, employees – more likely. A training infrastructure, importantly, supports other company-wide initiatives and systems, such as engineering standards, quality requirements (e.g. ISO/AS/IATF and Nadcap quality programs), Lean and continuous improvement and OSHA compliance.

As reports are available to summarize each worker’s accruing value as tasks are mastered, there is no doubting that an increase in a worker’s capacity represents an increase in a worker’s value; the definition of an “investment.” This can now be measured, monitored, and included in accountings reports. Where these SOJT systems have been placed, we have noticed accounting is more deliberative when cost cutting efforts are mandated, being now able to quantify the investment in each worker and what that loss would mean to the organization. Supervisors now can manage the asset as expected with the tools to do it right. The organization’s overall capacity grows, flipping the antiquated notion of “labor cost” to measurable and manageable “worker investment.”

See how simple and intuitive this solution is? It may have more bells and whistles than informal OJT, but it has never been hard for employees to understand and quickly run with it, nor management to support once they see it in place and in action. It becomes as second nature as clocking in or cleaning one’s area before end of shift.

Employers have nothing to lose and much to gain by taking a little time to learn more how this approach can seamlessly organize their worker development effort. Once they can see how training is structured and outcomes documented, most states have Incumbent worker training grants for employers to offset the small investment to get the program set-up and implemented as Proactive Technologies, Inc.^® has demonstrated in several states, time and again, since 1996.

If you recognize these challenges and have shed your fear of even looking for other solutions, check out Proactive Technologies’ structured on-the-job training system approach to see how it might work at your firm, your family of facilities or your region. Contact a Proactive Technologies representative today to schedule a GoToMeeting videoconference briefing to your computer. This can be followed up with an onsite presentation for you and your colleagues. Learning more doesn’t cost a thing!