Training and the Bottom Line

Training and the Bottom Line

Business leaders of large publicly traded corporations need to move beyond only paying lip-service to the importance of human capital to actually making substantial investments in education and training solutions that build the skilled talent needed for today and tomorrow.

The 2015 Manpower Talent Shortage Survey indicated that approximately 20 percent of businesses offered training to their employees. After 40 years in the Training and Development field, I continue to search for answers on why only some organizations invest in their human capital as a key business strategy to improve their productivity, performance, and profits. Many others complain in multiple industry surveys about shortages of skilled workers but remain focused on maximizing short-term profit by continually cutting costs. Investments for the long term, including training and development, too often are forgotten. How can we change this business-culture mindset?

What are some of the insights we can share from those executives who have made a strong business commitment to investing in their human capital? To find out, I conducted a series of interviews with executives from Training Top 125 companies that are recognized for their excellence in training and human capital development. I asked them three basic questions:

  1. To what degree are the top decision-makers in your organization committed to investing in their human capital?
  2. How did they arrive at the realization that employee training and education is a strong driver of employees’ performance and overall business productivity and profit?
  3. How have they been able to satisfy stockholders’ and Wall Street’s fixation on maximizing short-term profit by cutting what often is viewed by financial specialists as extraneous non-core costs such as employee training and development?

Here are some of their thought-provoking insights:

  • “We know we succeed only through others. And that means we have to lift our people up by investing in them.”
  • “Investing in education led to extraordinary ROI for all stakeholders.. .That’s how we became an education-based company.” —John Davis, President, Keller Williams
  • “We train and promote our own talent.. .Ninety-eight percent.. .of leadership positions filled internally for 2014.”
  •  “Two of our four core values are that our clients come first and we believe in a quality-oriented, long-term investment philosophy.. .Training our branch staff will make this possible.”
  • “We believe considering training as an investment, not an expense, is a model more companies should adopt. It has been incredibly successful for us.” —Ken Cella, Branch Development Principal, Member, Executive Committee, Edward Jones
  • “ CEO’s commitment and realization that learning and a highly developed staff are a competitive advantage.” —Francine T. Robinson, Media Relations Manager, CareSource
  • “We don’t just build buildings, we build people. This has been a value and part of our culture since day one.” —Charles Mogab, Manager, Team Member Development, SpawGlass
  • “Without skilled people, we will fail.” — Robin Renschen, Director, Training & Development, McCarthy Building Companies

THE TALENT CHALLENGE
Many Fortune 500 organizations, such as Boeing, United Technologies, Walgreens, Disney, and McDonald’s, have corporate universities, institutes, and large technical training programs. Others, such as Starbucks and Chipotle, have concentrated on employer tuition assistance. Some publicly traded corporations, including Comcast, Microsoft, IBM, and IP Morgan Chase, use their foundations to fund nonprofits that train students of all ages to potentially become employees. Foreign-owned companies, such as Stihl and Siemens, have been joined by Northrop Grumman and other U.S. firms in offering apprenticeship programs.

But what is the overall talent picture today? Manpower reported that 35 percent of the 38,000 employers it surveyed in 2015 had difficulty filling jobs due to the lack of available talent. Some companies remain reluctant to pay enough to fill the estimated 5.4 to 7.8 million vacant jobs across the U.S. economy. Yet training remains the major problem. The Society for Human Resource Management (SHRM) reported in October 2015 that 33 percent of HR professionals have increasing difficulty filling jobs at all skill levels and 55 percent filling skilled jobs. This trend has increased over the last 17 consecutive months.

One reason employers won’t pay or train is the illusion that there is considerable slack in the U.S. labor market, i.e., a large pool of unemployed workers is still available. In September 2015, the U.S. Bureau of Labor Statistics (BLS) reported that the U.S. labor participation rate was 62.4 percent, the lowest rate since 1977. The BLS also found that 94.7 million American are “not in the workforce.” Approximately 50 million are retirees, but more than 37 million are prime-aged workers (ages 25 to 54). The real difficulty is that the U.S. labor market has an acute shortage of skilled workers who can meet the demands of the 21st century workplace.

The latest PricewaterhouseCoopers survey of CEOs in 77 countries reported that 78 percent of them ranked skill shortages as the greatest threat to their companies; this was a 10 percent jump from the 2014 results. And 81 percent of the CEOs said their firms are looking for a much broader range of skills than previously.

Deloitte’s 2015 Global Human Capital Trends report surveyed and interviewed 3,300 business and HR executives from 106 nations, and 85 percent rated the talent challenge as “very important” or “important,” a 21 percent increase from 2014 results. Yet only 28 percent of those surveyed said their businesses are prepared to deal with this talent deficit.

PUBLIC VS. PRIVATE PERSPECTIVE
These surveys clearly show that the global nature of the skills-jobs disconnect makes it unlikely that American businesses can find the skilled workers they need simply by recruiting them from abroad. In general, it seems that larger family-owned and employee- owned businesses, partnerships, nonprofits, and leading-edge technology-driven companies are recognizing that they need to invest in education and training to meet their talent needs. On the other hand, many publicly traded for-profit companies are still relying on poaching, using H-1B visas or merger and acquisition strategies to obtain skilled workers. They remain reluctant to increase their training and development expenditures.

What is triggering this talent hypocrisy syndrome among such companies? On the one hand, they complain about skilled worker shortages and trumpet the value of their human capital, but on the other hand, they don’t “walk the talk.” At least in part, the Federal Reserve’s ultra-low interest rate policy has unintentionally encouraged short-term talent fixes. It has helped fuel the current $2.15 trillion merger and acquisition surge. Businesses are using M&A partially to buy up other companies’ skilled talent and fill their vacant positions. Many companies are borrowing at low rates to finance stock buy-backs, which may reach an all-time high of $1 trillion in 2015. This tactic, along with increased dividend payments, has kept stock prices high and has pumped up top executive salaries and bonuses that also are on track to reach a record high this year.

Janet Yellen continues to signal that the Federal Reserve is likely to raise interest rates later this year. The Fed’s Quantitative Easing Programs I, II, and III were designed to push increasing investment in the U.S. economy. Instead, businesses mainly have used cheap money to drive up short-term profits, not to make long-term physical and human capital investments.

Once the cheap money spigot is turned off, perhaps business leaders of large publicly traded corporations will move beyond only paying lip-service to the importance of human capital to making investments in education and training solutions that build the skilled talent needed for today and tomorrow. What job vacancy level finally will raise alarm across the business community?

Businesses across America have a shared responsibility with local communities to provide the education and training needed for 21st century careers. The survival of many U.S. businesses and America’s future economic growth depends on a higher proportion of the U.S. population gaining the skills required in today’s high-tech workplaces through a restructured education-to-employment system. D

Edward E. Gordon is the president of Imperial Consulting Corporation (www.imperialcorp.com). His latest book is “Future Jobs: Solving the Employment and Skills Crisis" (Praeger, 2013), which is a 2015 Independent Publishers Book Award winner.

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