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How Bad Employee Training Can Lead To High Training Costs

Smart companies know the value of professional development. Here’s why investing in employee training costs can improve your bottom line.

June 23, 2022 by Amy Foxwell

When it comes to building your team, investments need to be made for both the recruitment and retention of staff. Smart companies understand the consequences of high employee turnover rates and place value on the creation of strong corporate learning and development (L&D) programs. Here’s why creating quality L&D programs is well worth the training costs.

The Hidden Cost of Training Employees Poorly

When companies discuss training costs, they’re often focused on the direct expenses of onboarding or L&D programs — for example, the cost of training software, travel, and labor. However, these immediate training costs are often miniscule compared to financial consequences of not making these investments. Here are four common expenses associated with ineffective employee training.

1. Loss of Productivity

The effects of a poorly structured or nonexistent L&D program on current employees can’t be ignored. When companies don’t invest in the development of their team members, feelings of underappreciation can lead to poor job performance and negative team morale — and as morale sinks, employee engagement does, too.

On the other hand, investing 10% more in employee education can boost productivity by 8.6%.

IBM has completed extensive research into the benefits derived from well-developed skills training programs. According to IBM, employees who feel there is no room for career growth at a company are over 12 times more likely to leave it, while new employees are 42% more likely to stay when they undergo robust onboarding. This means poor training isn’t just an issue of decreased productivity, but an issue of turnover, too.

2. Severance Pay

Employee turnover may sound like a minor inconvenience for large companies, but when you calculate the hidden expenses associated with it, you’ll find that retention is well worth the training costs. Severance pay alone can cost tens of thousands of dollars.

When an employee is fired from a company — perhaps due to poor performance or negligence, as a result of ineffective training — most businesses provide 1-2 weeks of paid salary per year worked. If an employee has a $52,000 salary and has worked with your company for three years, this can mean a $3,000 to $6,000 loss for your company.

3. Recruitment

The most expensive cost associated with employee turnover is the cost of finding a new employee. According to Jörgen Sundberg, CEO of London-based Link Humans, recruiting, hiring, and onboarding a new worker can cost as much as $240,000. This total factors in both the money spent on recruitment efforts, as well as the time invested in screening and interviewing potential candidates.

Even after selecting a job candidate, you’ll still need to spend more money onboarding your employee. While investing in the training of new employees can certainly aid their performance, it can take time before they work at the level of your previous employee.

If the new hire doesn’t work out in the end, you’re looking at additional, unforeseen costs.

4. Liability Costs

The hidden cost of training employees poorly can also come from liability risks. When your team members are inadequately trained, the entire company can face regulatory consequences, litigation fees, charges of negligence, potential safety hazards, and public relations disasters.

Why Professional Development Is Worth the Training Cost

Building an L&D program isn’t always cheap. Most small companies with under 1,000 employees spend $1,678 per learner. However, companies that reported an increase in training costs also successfully reduced turnover, which means thousands more dollars are saved in the process.

Offering professional development opportunities is an effective way to show your employees you value their career growth, which in turn can increase employee job satisfaction, reduce staff turnover, and improve your bottom line. Companies that prioritize L&D programs make double the amount of revenue per employee compared to those that neglect to develop a program. IBM studies show similar correlations between training programs and overall business value; when teams are well-trained, their productivity increases by 10% and they can save their company around $70,000 annually.

However, it’s important to recognize that some companies still fall short. A survey issued by Open University Business School recorded that only 20% of L&D decision makers say their companies deliver consistent global learning programs, and 50% believe their company doesn’t have the capability to respond to the demand for a better program. When training costs are poorly prioritized, the hidden cost of training employees poorly remains high.

The compelling case for employee training costs (by the numbers)

Purchasing software to enhance employee training is a smart move for any business. For example, companies looking to attract better-quality talent, improve overall retention, enhance organizational performance, and serve their highly diverse workforces (which may include a generational mix, employees with language challenges, and remote workers) would be smart to invest in ReadSpeaker technologies.

Our text-to-speech solutions support the unique learning needs of employees by converting digital content into lifelike audio, making L&D programs more engaging and easier to access. As a result, all your employees are on equal footing when it comes to understanding and retaining your training and learning materials.

With ReadSpeaker, L&D professionals can:

  • Create an inclusive environment by delivering courses and content to employees that may have varying technology skill sets, reading abilities, or learning preferences through our text to speech online product portfolio.
  • Cater to a multicultural workforce that speaks multiple languages with our speech production tools. Generate audio files on-demand, whenever needed, in a multitude of languages and embed them into your e-learning materials and presentations for online or offline usage.
  • Effortlessly embed engaging, lifelike voices into mobile applications, installed software applications, or hardware devices with our embedded solutions.

This is only a piece of what ReadSpeaker can do to help boost your corporate learning program.

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