Proof is in the Productivity

Need a reason to train?

Look no further than evidence and examples, from New Zealand and around the world, showing that investing in quality training results in improved productivity in the workplace.  That can be through improved safety, better staff morale, reduced turnover, and staff coming up with ideas to make the operations function more effectively.

The proof is in the productivity

Research carried out by the NZ Institute of Economic Research (NZIER) in 2004 found that, based on econometric analysis, recipients of industry training were likely to be between 5-20 percent more productive after industry training than before.

Up to 24% increases in productivity in some studies

For example, in the UK, the Institute for Fiscal Studies found that doubling the proportion of trained workers in industry from 10% to 20% increased individual productivity by as much as 24%.  The Institute also found that training had positive spill over effects – trained workers are more likely to develop innovative practices and processes that spread throughout the industry. Read more

There are high rates of return on investment

According to a Harvard University Warden Business School study, returns through industry training are nearly always positive.  For example, Motorola has estimated it receives a 30:1 return on every dollar invested in training.  Other studies state that returns vary between 30 and 7000%. 

That’s true in New Zealand as well

The Agriculture ITO has undertaken one of the most thorough projects in New Zealand looking at Return on Investment from training.  It found that an average dairy farm with staff undertaking training could expect to benefit up to  $8,239 per trainee, per year if there is management engagement.  Even after allowing for the costs of training that was a benefit-to-cost ratio of around 3.4:1 – or a return on investment of 340%.  For beef and cattle farmers, the benefits were even higher – a 490% return on investment.  (Figures based on data generated in 2005)

Firms that train say it works

The Industry Training Federation and Business New Zealand’s 2007 Skills and Training Survey found that an overwhelming majority of firms felt that training had a positive effect on the quality of output (84% of those surveyed), productivity (76%), and enabling business growth (74%).

And it’s their own firm that capture the benefits

Evidence from Australian enterprises suggests that the profitability of firms is directly related to the amount and quality of training that they provide and that the firms capture nearly all productivity gains that result from the training.

Training improves safety performance

There are significant links between training and improvements in safety performance.  For example, a case study completed by FITEC – the ITO for the wood industries, shows one Northland company reduced its Lost Time Injury 10-fold after training for productivity improvements.  This impacts on productivity itself, employer reputation and reduces cost for lost staff days and temporary replacements.

And training helps businesses stay afloat

A UK Sector Skills Development Agency found a failure rate of 27% among businesses that did not train their employees compared with 11% for companies that had strong training programmes.   Read more

Training supports increased wages as well as workplace profits

Training has a positive and significant impact on workers wages.  But several studies have shown this is not at the expense of the business as the increase in productivity is greater than the increases in wages, which makes investment in training profitable to the firm. Read more

Learning is most effective when linked to industry training

New Zealand workplaces were included in 2008 research for the Conference Board of Canada, which found workplace learning, when it is linked to industry training, is more effective at creating actual productivity gains.  Read more

To sum it up - people perform better with quality training

This paper contains just a sample of evidence pointing to training and its links to productivity. Other research shows that other benefits of training include improved staff morale, greater satisfaction, increased loyalty, reduced staff turnover, increased sales, and increased profits. 

 Proof is in the Productivity (237KB)