Employee and leadership training has been found to positively impact key business metrics with significant return on investments across every industry. Many peer-reviewed and published studies have revealed outstanding Return on Investment (ROI) outcomes including several companies that reported a return of more than 1000% (2).
The American Society of Training and Development, in a study of more than 575 organizations, found the level of funding provided to employee training predicted Total Shareholder Return for the company. Also, the firms that were in the top 25% of investment per employee of training, enjoyed 24% higher profit margins, and 218% higher income per employee than those at the bottom of the investment per employee list (3).
1. A.P. Carvenale, A.P., “Learning: The Critical Technology.” Training and Development 1992, s2-s16.
2. Philips, J.J. “ROI: The Search for Best Practices.” Training and Development Vol. 50, No. 2, February, 1996.
3. Bassi, L.J., Ludwig, J., McMurrer D.P., Van Buren, M.V. “Profiting From Learning: Do Firms’ Investments in Education and Training Pay Off?” Singapore Management Review Vol. 24, 6.
It’s never a good idea to follow a best practice for the sake of being like others. However, insight into the actions of successful organizations can help us understand key success factors. Likewise, knowing specific data benchmarks allows an organization to assess and compare current practices.
According to a 2013 state-of-the-industry report from the American Society of Training and Development (ASTD) the average employee averaged 30.3 hours of training in 2012 (1). However, employees at top-performing companies participated in significantly higher amounts of training –an average of 57.7 hours per person. According to the study, the top three areas of training content in 2012 were managerial and supervisory (13.5%); mandatory and compliance (10.8%); and processes, procedures and business practices (9.9%).
According to the ASTD report, employers spent an average of $1,195 per employee. Companies with less than 500 employees typically spend more on training per employee than larger organizations.
A review of Training Magazine’s list of Top 125 Training Companies for 2014 reveals that companies that are considered to be effectively harnessing human capital have training and development budgets averaging 5.84 percent of payroll (2). Jiffy Lube, the company ranked first on the Top 125 list, reportedly doubled the number of training hours it provides to employees and found a correlation with success: stores with a 100% training certification completion rate reported 9% higher sales in comparison to other stores.
1. American Society of Training and Development (ASTD) 2013 State of the Industry Report. https://www.td.org/Publications/Research-Reports/2013/2013-State-of-the-Industry
2. Training Magazine’s list of Top 125 Training Companies for 2014 http://www.trainingmag.com/training-magazine-ranks-2014-top-125-organizations
A 2013 Gallup study reveals that only 30% of U.S. workers are fully engaged in their work (1). Gallup’s research also estimates U.S. companies are losing $450 - $550 billion dollars in lost productivity.
In 2012, Gallup conducted its eighth meta-analysis on the Q12 using 263 research studies of 192 organizations across 49 industries and 34 countries (2). Gallup researchers carefully calculated the work-unit-level relationship between employee engagement and performance outcomes that the organizations supplied.
Nearly 1.4 million employees across 49,928 work units were studied. The meta-analysis further confirmed the well-established connection between employee engagement and key performance outcomes including:
Aon Hewitt’s research reveals a strong correlation between employee engagement and an organization’s financial performance (3). The statistics were consistent even during difficult economic periods. Highly engaged organizations (65% or greater) outperformed the total stock market index and yielded total shareholder returns 22% higher than average in 2010.
Organizations with low engagement (45% or less) had a total shareholder return that was 28% lower than the average. Aon Hewitt’s research found that highly engaged organizations achieved a competitive advantage through their people. They designated these companies as “Best Employers.” These companies have significantly less turnover, larger talent pools, and better financial performance.
Aon Hewitt’s research found the top five drivers of engagement to be the following:
A study conducted by Bamboo HR (4), sought to understand why people leave their jobs. The top 5 reasons include:
1. Gallup State of the American Workplace Study 2013. http://www.gallup.com/services/178514/state-american-workplace.aspx
2. Gallup Q2012 Meta Analysis: The Relationship Between Engagement at Work and Organizational Outcomes. http://www.gallup.com/services/177047/q12-meta-analysis.aspx
3. Aon Hewitt, Trends in Global Employee Engagement. 2013. http://www.aon.com/attachments/thought-leadership/Trends_Global_Employee_Engagement_Final.pdf
4. Bamboo HR Survey 2014. http://www.bamboohr.com/blog/employee-breaking-point
Due to the cost of hiring qualified external coaches, organizations are rightly concerned they are receiving a healthy return on their investment. While we understand this concern, we would join the chorus of researchers that prescribe caution when attempting to accurately pinpoint the ROI on coaching. Although the numbers in peer-reviewed journals are remarkably strong, we view the impact of coaching to go beyond what is typically measured.
For additional reading, we would recommend Anthony Grant’s 2012(1) article in which he reviews the value of ROI in assessing coaching success. In Grant’s article, he cites a range of ROI results offered for coaching that include estimates of 221%(2), 545%(3) and 788%(4), with a range of 500% and 700% consistently reported as an appropriate range for the ROI for executive coaching (5).
Strata Leadership utilizes best practices and proven methodologies for our training and coaching services which results in reported positive direct impact on several key metrics including but not limited to:
1. Grant, A.M. “ROI is a Poor Measure of Coaching Success: Towards a More Holistic Approach Using a Well-being and Engagement Framework.” Coaching: An International Journal of Theory, Research and Practice 2012, 1-12.
2. Phillips, J.J. “Measuring the ROI of a Coaching Intervention.” Performance Improvement 2007, 46(10), 10-23.
3. McGovern, J., et al. “Maximizing the Impact of Executive Coaching: Behavioral Change, Organizational Outcomes and Return on Investment.” The Manchester Review 2001, 6(1), 1-9.
4. Kampa-Kokesch, S., Anderson, M.Z. “Executive Coaching: A Comprehensive Review of the Literature.” Consulting Psychology Journal: Practice and Research 001, 53(4), 205-228.
5. Anderson, M.C. “What ROI Studies of Executive Coaching Tell Us.” The Linkage Leader 2008, Retrieved from: http://www.linkageinc.com/thinking/linkageleader/Documents/Merrill_C_ Anderson_What_ROI_Studies_of_Executive_Coaching_Tell_Us_1004.pdf.
There are three common factors that impact an organizations effectiveness and success. First, macroeconomic factors significantly affect the organizations of all types and sizes. These factors are common to organizations and companies within a particular industry and are often common across organizations of all industries.
A second factor of impact is an organization’s strategy. In most industries, the strategies of organizations are very similar. Certain variations such as innovations, unique processes, and specific decisions made by leadership can create some significant difference. Largely, most strategies are similar in form and function.
The third common factor is the organization’s people. The impact of people accounts for the largest amount of difference. People encapsulate the competence and the character of an organization. The competence of people include the skill, ability, and knowledge of the people, while character is each person’s will, attitudes, and behavior standards. Increasing amounts of data continue to show the significant impact of people on a business.
Strata Leadership uses proven methods of adult learning, motivation, and behavior within all of our products and services to develop both the character and competence of employees at every level of an organization. We utilize a combination of learning methods that have stood the test of time and our unique approach to character development. While many companies will create training and development programs that will emphasize competency building, Strata, teaches the character qualities that make up the foundation of the skill first. It is the building of the character and then the competence of a person that creates sustained and consistent application. It is through this consistent application that organizations can find competitive advantage through their people.