How is Training and Development like Dental Floss?

Ask anyone today, "Is flossing daily a good idea?" and I'm certain that you'll find that almost everyone will say yes. But then, ask them, "Do you floss daily?" and, according to Wikipedia, the American Dental Association indicates that only 12% of us are daily practitioners. In fact, 39% of us floss less than daily and 49% never floss. So everyone would agree that it's a good idea, but few actually do it.

Most people agree that employee training and development is a good idea when I ask them. But, like flossing, it is something that few will commit to do consistently. In an economic environment like the current one, training and development are some of the first items to face the axe.

This is the situation many Chief Learning Officers (CLOs) HR folks, and even small-to-medium sized business owners are struggling with today. While they may believe that training and development is a good idea, they may not be convinced until they can see a positive ROI (return on investment).

How many times has a CLO or an HR Director stood before a decision maker and tried to explain why it's necessary, even in this environment, to sustain the training and development budget? In fact, this is exactly the right time to increase that budget!

I found this very interesting piece of research while doing some work for a potential client. The research was conducted by Laurie Bassi, Bassi Investments Inc; Paul Harrison, Federal Reserve Board of Governors; Jens Ludwig, Georgetown University; and Daniel McMurrer, Bassi Investments Inc.

In this report, I found the following:

• Companies (publicly traded) who spend more in training and development outperformed those who invest less in the training and development of their employees; in bull and bear markets.
• The chicken or egg argument doesn't work in this case. The research shows that the most successful companies became successful due to their commitment to invest in training and development.
• It isn't the largest companies with the most resources who benefit from the investment in training and development; the smaller companies benefit as well.

The researchers also hit on the reasons why more attention is not paid to which companies are investing more in research and development:

• In the US, there is no required transparency in the financial numbers.
• Training and development costs are buried in the SG&A numbers and are difficult to gather.
• Decision makers are reluctant to heavily invest in training and development because employees can easily move from firm to firm.

As I read the report, and reflected on my experience in the wealth management industry, I realized that there is a lot of validity in investing in companies with the highest training and development budgets on a per employee basis. Wouldn't it make sense that the best-trained and developed employees would be the best asset of any company? Why have I never heard one Wall Street analyst ever mention this metric in their research reports?

I can't imagine saying to my children, "You know there's a recession. We need to cut the family budget. The expenses of your going to school (i.e. clothes, car, gas, insurance, books, tuition, lunch money, etc) are going to be eliminated. We'll revisit this when we have more confidence in the economy."

Fighting for the best employees is something that every enterprise is engaged in today. Whether they are trying to retain them or attract them. One thing that employees are demanding more today is the opportunity for professional development and training. The companies that articulate that this is part of their culture will be more successful in retaining and attracting the best employees.

Until someone forces the accounting rules to change, only very smart people like Bassi Investments will benefit from truly insightful investment analysis.

So the next time a decision maker says that there is no room in the budget for more training and development, ask them, "Do you believe that flossing daily is a good idea?" and then ask them to read this article.

Jim O'Brien is the President of PalmBeach 360. We work with organizations who believe their employees are a solution. Jim has spent more than 10 years in management roles turning unsuccessful business units into successful business units. He can be reached at PalmBeach 360 at 561-743-3399 or by email at jim@palmbeach-360.com.