Your Biggest Investment Will Equal Your Biggest Return!

A Message from Bob

Businesses facing rising costs and declining revenue often resort to the obvious: layoffs.
A number of studies have shown that this blunt approach destroys shareholder value over the long term. But what of the more common - and more insidious - corporate habit of cutting back or eliminating training and employee development efforts?

Three recent studies prove that investing in employee development boosts both gross profits and stock prices significantly.

The Harvard Business Review published the results of a research project conducted from 1997 to 2003 that followed the stock prices of hundreds of companies that invested twice the industry norm in employee development. From 1997 to 2001, most of these companies achieved better-than-average financial performance in a variety of areas, including shareholder return.

So the researchers - Laurie Bassi and Daniel McMurrer of Knowledge Asset Management, a money management firm in Maryland - invested money in three live portfolios of companies in 2003 that "spend aggressively on employee development."
All three portfolios outperformed the S&P 500 market index over their first year by a whopping 17 percent to 35 percent.

The American Society for Training and Development in Alexandria, Va., recently evaluated 540 U.S. companies in a similar study. Those that invested 3 percent to 6 percent of payroll on workplace learning achieved a 37 percent higher annual gross profit per employee than those that spent little or no funds on training.

An even larger study by the University of Pennsylvania, which included 3,200 companies, showed firms that increased spending for workforce training and development by 10 percent boosted productivity by 8.5 percent, while a similar increase in capital expenditures increased productivity by just 3.8 percent.

Factor in the high cost of frequent employee turnover and you begin to get the picture: Employees are indeed the most important asset a company has, and investing in their development pays off big time on the bottom line.

Bob

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