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Chris Bell

What is the Cost of Failing to Train Your Employees?



Three years ago, Starbucks took a huge risk, when they announced that they are offering low-cost college degrees for their employees – including part-time workers.

The coffee giant rolled out a program for young people who work for them at least half-time to earn an online degree from Arizona State. What’s more, Starbucks doesn’t even require the employees to remain employed at their company after they complete the program and earn a degree.

As AZ Central reports, since the launch, the program helped more than 8,600 people – and 1,000 more students are expected to graduate by the end of the calendar year. And while it didn’t directly help their bottom line, it seems like the program is actually doing wonders for Starbucks’s brand.

The degree program further solidified Starbucks’s position as an employer of choice for young people all across the United States.

What Can You Learn From This?

The takeaway is rather simple in this case: this move ensured that, for however long they wish to stay employed, workers will remain loyal to Starbucks.

But some small businesses are still torn on this matter – most of them want their employees to be capable and productive but they fear that their newly trained employees will leave them for other companies that can offer them a lot more money.

However, as we’re about to show you, this view is not only a narrow one, it’s also potentially dangerous for the future of your organization.

According to research from California Corporate College, companies that invest as little as $1,500 per employee annually average 24% higher profit margins than companies that don’t invest in employee training at all.

And if even that isn’t enough to persuade you to dedicate a part of your budget for employee training, let’s look at some ways untrained employees can affect your company.

The True Cost of Not providing Employee Training

·         Training Current Employees is Cheaper than Hiring New Ones

For starter, lack of training usually leads to workers who feel underappreciated at their job and have a sense that their job doesn’t really affect the company. Once an employee starts feeling like this, he or she usually gets fired because of their performance, or simply leave the company.

You’re probably thinking, with so many job-posting sites out there, finding another capable employee is not so hard. But you couldn’t be more wring. According to statistics compiled by CDL Insights, hiring a new employee can cost you up to 30% of the job’s salary.

So if you’re paying a person around 40,000 dollars per year, it would cost you more than 12,000 dollars to hire someone new. On the other hand, employee training can only cost a few hundred dollars per year, and will probably take a lot less time.

But you may be thinking that replacing one employee won’t be a big deal. However, you need to keep in mind that for every three employees you replace, you’ll end up wasting an entire employee salary with no visible gains.

Things like overtime, recruitment and hiring are not cheap and according to a study conducted by Right Management, 70% of business managers feel that employee turnover has a negative financial impact on their bottom line…

·         Fully Trained Employees are More Efficient and Motivated

Your company is only worth as your employees, and your staff members are only worth as the resources you put into them. If you’ve already fired and replaced a dozen employees who keep on making the same mistakes, it’s definitely time to look at the training you’ve offered them thus far…

Untrained employees often waste time attempting to perform different tasks they have no business handling, simply because they’ve never been trained otherwise. The money and time it takes to correct simple mistakes can be reduced significantly, when your employees have the tools and the knowledge needed to do the task right in the first place.

And let’s get back to your bottom line once more. According to research from Bersin & Associates, companies that don’t provide quality training for their staff, see real losses in revenue per employee. In fact, the usually make less than 50% of median revenue per employee.

Once again – providing employee training might seem like a time-wasting, time-consuming task for most business owners – but today, you have an effective alternative to week-long training courses. You see, there is a number of online training courses, which can be taken at a worker’s own schedule and pace.

·         Effective Employee Training Leads to More Productivity

You can’t really send you staff members off for a weekend lecture and call it “employee training” – no – your training needs to be catered to your specific business needs and it needs to be an ongoing process. Technology advances happen almost on a daily basis, which means you’ll regularly need to update the skills of your employees.

And don’t worry, most of today’s employees are used to this process. As a matter of fact, a majority of modern graduates get their start at internship training programs like Premium Graduate, which provide them the skills they need in the professional world.

Basically, most of your workers want to improve their skills and further their knowledge, and this will surely have a positive impact on the overall productivity of your workforce. Moreover, your workers will feel more motivated and you’ll be able to create a loyal workforce that shares your values and feels invested in your company’s future.

You also don’t need to invest thousands of dollars and hours in your training. A recent study from the US National Center on the Educational Quality of the Workforce revealed that even a 10% increase in educational development produces an 8.6% increase in employee productivity.

Final Thoughts

As you can see from all of the examples above, not providing the right training for your employees could potentially end up costing you a lot down the line.

So the few things you need to remember – if you don’t train your employees properly, your company is going to be a lot less productive; the costs of employee turnover are still huge and you can lose a ton of customers due to mistakes made untrained employees.

Keep in mind that the happiness and training of your employees is just as much as an asset to your company as the employees themselves.


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