The impact of training practices on individual, organisation, and industry skill development.

Author:Kennett, Geraldine
Position:Contributed Article - Report
 
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Abstract

This article discusses the way in which employers provide training and how it has an impact on individual, organisational, and industry skill development. It uses findings from a research study of the relationship between training and development and employee turnover. The study uncovered three training and development models that had likely consequences for employee turnover. These models were labelled Individual Development, Team Development, and Organisational Development. Individual Development contributed to higher employee turnover when it was adopted in a work environment which lacked employment-growth opportunities, and where employees perceived more external]oh alternatives. Team Development was likely to contribute to lower employee turnover if adopted in conjunction with other high-performance work practices, or if there was evidence of job embeddedness in the organisation. Finally, the Organisational Development model appeared to contribute to higher employee turnover when the training activities contributed to a lack of role clarity and to poorer employee commitment to the organisation.

  1. Introduction

    Employers expect their investment in training to raise the capacity of the organisation's collective skills and thereby to improve its productivity. This assumption may rely on trained workers remaining within the investing organisation. The standard belief is that investment in certain forms of training and development has costs and economic benefits for the individual and the organisation (Becker 1962, 1964, 1993; Elliot 1991). An individual may decide to stay or leave an organisation after considering the costs and benefits of the training and development that they receive.

    Investment in training and development benefits individuals by equipping them with skills that improve their productivity, thereby increasing their likelihood of promotion and making them more attractive to employers (Altonji and Spletzer 1991; Barron, Black, and Lowenstein 1989; Brown 1989; Blundell et al. 1999; Duncan and Hoffman 1979; Lynch 1991; Mincer 1988). Many studies have suggested that organisations benefit from training by being more productive, more competitive, and consequently more profitable in the future (Becker 1993; Blundell et al. 1999, Lynch 1992). Generally, the body of work suggests that investment in human capital can improve an organisation's productivity by improving the knowledge, skills, and abilities of its employees (Becker and Gerhart 1996; Ichniowski, Shaw and Prennushi 1997; Youndt, Snell and Lepak 1996). Research suggests that an increase of 10 hours per year in the amount of training per employee leads to an increase in productivity of 0.6 per cent (Pischke 2004; Leuven 2005; Almeida and Carneiro 2005).

    This article discusses how an examination of a study on the relationship between employer-provided training and development and employee turnover may reveal how such a relationship has consequences for investment in individual, organisational, and industry skill development.

    Employers have conflicting views about the relationship between training and development and employee turnover. Some employers a re reluctant to invest in training and development because they fear that their employees may leave as a result of their improved skills. Other employers use training and development as a strategy to retain employees and to build organisational capacity. For example in their study of regulatory training in the United Kingdom, Gospel and Lewis (2010) found that one of the major fears expressed by employers is that having incurred training costs, they would see newly trained workers poached by other employers. Felstead et al. (1999) also reported that the mere expectation of employee turnover is sufficient to deter employer investment in training. By contrast, Forrier and Sels (2003) found that organisations with high employee turnover were more likely to organise more training in order to secure employee commitment to the organisation.

    In terms of the amount of training offered in Australia, one report indicated that employer-provided training declined or, at best, remained static from 1997 to 2005 (Australian Bureau of Statistics 2007). The data revealed the total work-related training hours were 139.0 million hours in 2005 compared with 143.4 million hours in 2001, and 148.6 million hours in 1997. On the other hand, the Australian Industry Group (2006) reported that of 526 employers surveyed, 87 per cent planned to increase their training and development expenditure as a way of retaining employees.

    In their desire to retain skilled workers in a market of short labour supply, employers have become more concerned about the relationship between training and employee turnover. Available statistics indicate that the Australia n labour market is entering a period of supply shortage that could last for many years. With unemployment in Australia remaining at around 5 per cent, and with the workforce continuing to grow, many have argued that the result is emerging skills shortages (Australian Industry Group 2006; State Services Authority 2006; Smith, Oczkowski and Selby Smith 2008). Replacing departed workers imposes costs on organisations; therefore, the question of how employers might retain their workers and build organisational skills in a tight labour market is a significant question.

  2. Theory and Existing Evidence

    Three areas of the literature attempt to examine the relationship between employer-provided training and development and employee turnover. These areas are the economics of training, employer-provided training and development practices, and employee-turnover studies. How they relate to the retention of skilled workers is outlined below.

    The economics of training

    The literature on the economics of training largely focuses on the impact of firm-specific and general training on employee mobility across organisations. According to early studies of human capital theory, workers who receive a great deal of firm-specific training funded by the employer have lower rates of labour turnover (Becket 1962, 1964, 1993; Parsons 1972). By contrast, general training--which is often not funded by the employer--has the effect of increasing employee mobility. Yet, as later studies indicate, some training that is of value to employers other than the one providing the training (termed 'general transferable training') may be funded by employers (Stevens 1994). In this case, the employer's investment in general training can be readily traded in the labour market and, hence, it funds skill development for the broader industry sector (Smith, Oczkowski and Selby Smith 2011).

    Employer-provided training and development

    Employer-provided training and development practices encompass training activities planned by an organisation to facilitate the learning of skills, knowledge, and attitudes that improve the performance of its employees (Smith 1998).The literature describes a number of ways in which employer-provided training and development is undertaken in organisations. For the purpose of this article, the way organisations undertake employer-provided training is called the 'format for training and development'. This consists of the structure of training (whether the training is formal or informal, unaccredited or accredited, and internal or external) and the method of training (such as workshops, online computer-aided, on-the-job training, lectures, and learning circles). The research on employer-provided training and development practices provides evidence that training reduces the probability of employee turnover for women (Elisa 1994) and for men who complete an apprenticeship (Booth and Satchell 1994; Winkelman 1994). One study (Martin 2003) found a complex relationship between turnover and training. Martin (2003) examined how on-the-job training, continual training, and training to be multi-skilled related to employee turnover. Organisations that enhance the skills of existing workers have lower turnover rates, but turnover is higher when workers are trained to be multi-skilled (Martin 2003).

    Other studies investigate the converse proposition: the impact of training on the likelihood that employees will search for a job (Felstead et al. 1999; Loewenstein and Spletzer 1998; Lynch and Black 1995). Felstead et al. (1999) found that where employers provided training, and when it was oriented towards securing the greater commitment of trainees to the organisation, there was more likely to be a negative impact on employee turnover. The research found that when training is entirely employer-provided, approximately 12 per cent of individuals say they would look for another job, whereas if employees funded their own training they were more likely to search in 40 per cent of cases and less likely to search in 5 per cent. The research also found that if employees judged the training as providing skills that are more firm-specific, job search is likely to be substantially reduced compared with their view of genera I skills. Therefore, consistent with h u man capital theory Felstead et al. (1999) conclude that training is more likely to lead to lower mobility when it is less transferable and is provided by the employer.

    Employee-turnover studies

    Employee-turnover studies examine a range of factors likely to predict employee turnover. These factors include the decision-making path to withdrawal from an organisation, personal characteristics (age, gender, marital status, tenure, ethnicity, and education), work-related factors (job satisfaction, supervisor satisfaction, co-worker satisfaction, and organisational commitment), and perceptions of external factors (availability of alternative jobs) (Cotton and Tuttle 1986; Griffeth, Hom and Gaertner 2000; Mobley et al. 1979; Porter and Steers 1973). While there are many studies investigating the factors likely to predict employee turnover, none...

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