When businesses need to balance the books, they tend to cut corners in areas where they find it difficult to prove a return on investment. For this reason, employee development is often an aspect that gets hit - if not by outright budget cuts, then by general neglect and a lack of increased investment.
While a ROI on employee development programs can sometimes be difficult to prove, making increased investment tough to justify, it is an area where businesses get out what they put in. Below, we take a look at how neglecting your employee development programs can negatively impact your ROI.
The Value of Employee Development
The primary reason for investing in employee development programs for your employees is to provide them with the knowledge and skills they need to carry out their tasks. However, there are many ripple effects as well, ranging from improved productivity amongst those who are well-trained, to a competitive advantage over your rivals.
Of course, the value of employee development also extends to the customer as well. Generally speaking, organizations that invest in comprehensive development programs can expect to see a higher number of sales, as well as improvements to customer retention resulting from superior service.
When people think about staff development, they often view it as a synonym for training, but continuous coaching also has a role to play. Indeed, the CSO Insights 2016 Sales Enablement Optimization Study found that formal and dynamic coaching processes improved sales reps' quota attainment by as much as 10 percent.
Impact on Employee Retention
One of the biggest effects of neglecting the development of your employees comes in the form of staff turnover. There is a direct link between the amount of time and money you invest in development, and the likelihood of staff members choosing to leave your organization.
For example, businesses on the Fortune 100 “Best Companies to Work For” list provide almost double the number of training hours for full-time employees compared to companies that aren’t on the list. Those Fortune 100 organizations saw their ROI manifested in increased employee retention; they had 65 percent lower staff turnover than other businesses in the same sector.
In the CSO Insights 2015 Sales Compensation & Performance Management Study, it is revealed that turnover is five times higher among sales employees than the US national average. This is problematic, because a single salesperson leaving an organization has the capacity to disrupt that organization for up to a year.
Essentially, what this shows is that neglecting your development programs decreases your overall return on investment, while investing fully in development programs results in a much greater ROI.
The Consequences of Neglect
Crucially, however, it is not simply investment that wins the day. Continuous employee development is a vital part of talent management, meaning that development programs must be in a constant state of evolution, adapting as products, services, business practices and market conditions change.
Neglecting employee development by failing to update procedures, can result in outdated product knowledge, longer ramp up times and a competitive disadvantage when compared to other businesses in the same industry. Worse still, neglecting development by putting it off completely can result in poor morale and unskilled staff.
"Developing employees is the classic example of a management function that's both highly valued and highly neglected," says Victor Lipman, writing for Forbes. "For busy managers, generally with too much to do in too little time, it's a very easy task to put off to some indefinite point in the future."
Finally, it is crucial that investment in employee development extends beyond new hires, to experienced staff members. According to the 2017 CSO Insights Sales Manager Enablement Report, those who spend more than $5,000 per year on developing sales managers see increased quota and revenue attainment, and improved win rates. Nevertheless, sales managers are three times more likely to receive no training at all than salespeople are.
Staff development programs require significant investment, both in terms of time and money, as they must be high in quality and evolve along with business practices and market conditions. However, employee development is also an area where it can be difficult to prove a clear ROI, which is why it is often neglected.
While the most obvious form of neglect is the reduction or removal of development services, it can also manifest as a lack of increased investment when it is needed to meet business demands. Yet, high-quality coaching and training have clear benefits when it comes to improving win rates, as well as revenue and quota attainment.
The consequences of neglecting employee development are numerous and include lower levels of customer retention, out-dated product knowledge and poor quality customer service. Additionally, there is a direct correlation between training provisions and staff turnover, with neglect resulting in more employees leaving a company.
For these reasons, neglecting employee development has a detrimental impact on your ROI. The only way to generate the right level of return from your employee development program is to invest sufficiently, spend ample time on development practices and ensure development is continuous, rather than being targeted exclusively to new hires.
To learn more about employee retention, check out this fun infographic 6 Stats That Speak to Employee Retention.
About the Author
Monika Götzmann is the EMEA Marketing Director of Miller Heiman Group, a global employee development and sales training firm. It helps organizations develop effective talent management strategies through talent ready assessment. She enjoys sharing her insight and thoughts on talent management strategies and best practices.