Valuing the investment in organizational training

Abstract

Purpose -The purpose of this paper is to provide a better methodology for evaluating the value of corporate training to make it easier to compare with other organizational investments. The paper also seeks to propose and demonstrate how ''time value of money'' and ''hurdle rate'', which are significant components of traditional investment valuation methods, can and should be incorporated into the valuation of organization training.Design/methodology/approach -The training investment evaluation methods most commonly used by the training professionals were identified and compared to investment evaluation techniques used to measure the value of other investments made to improve and expand business activities.Findings -The survey of training investment evaluation literature showed that there are two major problems in the methods utilized by the training professionals. One of the problems was associated with the measurement and monetization of costs and benefits of the training activity. The other was the non-comparable return values' generated by the non-uniform methodologies used by the training professionals. Both of these issues were addressed and shortcomings of the currently used methodologies where changes should be made to improve this process were identified. A new methodology, which will make the evaluation process more acceptable to the company management, was developed and its use was demonstrated.Research limitations/implications -Unfortunately, the issues associated with monetization of costs and benefits could not be fully addressed. This is much more organization specific and specific to the type of training provided. However, some examples were provided of how this activity could be uniformly applied.Practical implications -The paper provides a new and more acceptable methodology for the use of training professionals and organizations to evaluate the value of training. Originality/value -This paper applies a ''financial analyst'' or a Chief Financial Officer perspective to organizational investment in training and provides a tool for evaluating its value the same way organizations evaluate their other investments (e.g. acquisitions, factory expansions, product development).

“People as Technology” Conceptual Model: Toward a New Value Creation Paradigm for Strategic Human Resource Development

“…This model points to ways that employees seem to be less valued than technology in some workplace environments. Most organizations have financial statements that take into consideration all aspects of technology development but show very limited consideration of HRD (Murray & Efendioglu, 2007). Evaluating ways to provide concrete value to the whole person as opposed to just their physical existence within the organization provides multiple ways to enhance employee performance.…”

Determination of Human Capital Value in Macro Level

“…The theoretical and practical research performed for the HC evaluation both at micro (Low, 2000;Sveiby, 2002;Bontis & Fitz-enz, 2002;Fitz-enz & Davidson, 2002;Flamholtz, Kannan-Narasimhan & Bullen, 2004;Wang & Spitzer, 2005;Wright, 2006;Scholz, 2007;Scholz, Stein & Muller, 2007;Fitz-enz, 2009) and macro level (Acemoglu, 2001;Noorbakhsh, Paloni & Youssef, 2001;Wei, 2003;Le, Gibson & Oxley, 2003;Scholz, Stein & Bechtel, 2004;Baier, Dwyer & Tamura, 2006;Kleynhans, 2006) allows stating that the HC value is related to many factors. The managerial aspect of the HC evaluation problem is researched quite widespread (Mayo, 2001;Baron & Armstrong, 2007;Murray & Efendioglu, 2007;Schwarz & Murphy, 2008;AL-Ma'ani & Jaradat, 2010) revealing the quantity of HC and education, its rate of utilization, the aspects of motivation and other factors at the enterprise level. However, the conception of economic HC evaluation is missing, especially at macro level.…”

SHOULD A COMPANY INVEST IN TRAINING - Costs/Benefits of PMP Certification on a Construction Project

“…More and more organizations recognize the need for skills improvement, which is added to the experience gained during the work engagements. The management appreciates how training is linked to work, so it comes as no surprise that statistics provided by almost all national organizations show continual increases in monies invested in its various forms (Murray and Efendioglu 2007).…”