Sunday, April 17

Training Pays Off

CDW does not just let new telephone reps loose, first they must complete a six and half week training course. And their training continues with a six-month Academy and then a Master's Curriculum. While the stock market has gone down over the last five years, CDW's stock price is up fifty percent.

This is because they, like others, see training as an investment rather than an operating expense. Laurie Bassi, one-time professor of economics at Georgetown University and former vice president of ASTD says that organizations that make large investments in people do much better than others. She further says that the education and training variable is the most significant predictor of an organization's success as compared to price-to-earning ratios, price-to-book statistics, and measures of risk and volatility.

Bassi puts her theories to the test -- her and a fellow partner launched an investment firm that buys stocks in companies, such as CDW, that invest heavily in employee training. It has returned 24 percent a year over the past two years, topping the S&P by four percentage points.

In the Human Equation, Jeffery Pfeffer writes, "Virtually all descriptions of high performance management practices emphasize training" (p.85). Yet, on the very next page he writes that in times of economic stringency, many U.S. organizations reduce training to make profit goals.

Training works, yet it remains at the bottom of the pole in many an organization. But my guess is that it will not remain this way for long. The baby-boomers are starting to retire. There may be quite a few people out of work now, but when the pool of workers slowly starts to dry-up, then it is going to make the labor shortages of the late 90s look like a small bump in the road. How do we best prepare for it?

Donald Clark

For more on Bassi, see:
Carnahan, Ira (2005). Forbes. "Blame the Accountants". April 25, 2005, p. 48.

Delahoussaye, M & Ellis, K. & Bolch, M. (2002). Training Magazine. "Measuring Corporate Smarts." August 2002, pp. 20-35.


Anonymous said...


You say "Training works, yet it remains at the bottom of the pole in many an organization. But my guess is that it will not remain this way for long."

I think it will for as long as we (the professionals), managers and learners think of it as something separate from work/life/productivity. We need to take the leap and integrate learning into everything we do - build it into systems, meetings, communications, work etc. Once it becomes part of our being we can no longer 'cut it out' or 'drop it off' by simply not resourcing it or getting around to it. You may as well consider cutting off an arm or a leg.

Anonymous said...

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Emory Reabs

Anonymous said...

Great post. Quite helpful in my research on the ROI of training.

Anonymous said...

I agree with Donald. Training should be a part of everyone's workday. Education is the key to success and training is basically educating on process improvement strategies.

Great post by the way!