A few years ago, I read a witty quote that went as follows:
CFO: “What if we invest in our people and they leave?”
CEO: “What if we don’t and they stay?”
This brief exchange captures the essence of a frequent dilemma of many Indian companies. Given the high attrition rates in most companies, the fear of losing employees limits investments. And while low investment in Learning and Development (L&D) is more likely in a small or medium sized business with limited resources – it is at such sizes that Managed Training Services could have the highest ROI!
In case of the above exchange between CFO and CEO, both have the best interest of the company in mind. However, the answer lies somewhere in between – and varies across geographies.
How the scenario varies in developed countries versus India
As a global professional training company, at Redstone Learning we frequently interact with decision makers at both large and small companies globally.
Large economies like the US manage disruptive cycles in business and technology by sustained focus and large strategic investments in research, innovation and employee L&D. As per industry reports, US companies on an average budget 8-10% of their total employee spend on training, with a total annual outlay of over $100 billion.
In India, the corporate training market is disproportionately small, with estimated spends of only 1-2% of employee costs and a total outlay of less than $1 billion.
Related Read: Building Professional Relationships With New Employees !
Some of the reasons cited by industry heads are
High employee turnover – which is as high as 15-20% across industry, and leads to a perceived loss of the training investment incurred by the employer
Generalist mindset – Employees in India tend to move towards generalist ‘managerial’ roles fairly quickly, as compared to long stints to hone specialized skills that is common in US and similar economies.
More focus on entry – level skilling than specialist training
The missing piece – ROI measurement framework
As industry veterans point out – while companies understand the importance of skilled staff, they are unable to draw a linkage between skills and on-the-job performance. This is one of the key reasons why most organizations seldom have good L&D programs beyond the entry level.
If L&D needs to be considered as an investment, we advise clients to put measurement metrics in place to measure the ROI like any other strategic investment.
As part of this measurement framework, the employee needs to be assessed on what has been learned – and how that learning has been used to make a real difference to key organizational metrics such as customer satisfaction index, bottom line, product or service quality, and others as relevant to the employee’s role. This way the success measurement for the employee and the employer are aligned. Such an ROI measurement framework needs to extend beyond the classroom and be a continuous process. In addition, necessary data correlations between the ‘investment’ and the ‘pay back’ will need to be in place. Such measurement frameworks will differ based on the type of industry in question. These steps will make all stakeholders happy, including the CFO, CEO and the employee!
Related Read: Future of HR: It’s Not Rocket Science, But Behaviour Science !
India is projected to become one of the top 5 global economies in the next decade. One can expect significant increase in employee L&D spends to facilitate this growth. With the right measurement frameworks in place, Indian companies could aim for a much bigger ‘bang for the buck’ from their L&D budgets – and outcompete their more developed counterparts globally!
(Disclaimer: This is a guest post submitted on Techstory by the mentioned authors.All the contents and images in the article have been provided to Techstory by the authors of the article. Techstory is not responsible or liable for any content in this article.)
About The Author:
Subrata Ghosh is the Founder & CEO of Redstone Learning, a global professional learning company with presence in the US, Middle East and India. It provides Online and On-demand Learning & Expertise solutions for Organizations and Individuals – focused on business functions like Regulatory Compliance, Strategy and Operations, HR, Project and IT/Quality Management.
Redstone has over 200 business skilling courses and 30+ professional certifications. It trains around over 10,000 people globally every year. Redstone currently has over 500 empaneled expert trainers across the globe. It runs 2 well-known online consumer learning brands globally – Compliance.world and ezCertifications.