Education as an Investment not an Expense

We've all heard that "workforce training is linked to increased productivity and reduced turnover," but how much truth is there to this? A lot. Just Google the concepts: "training", "education", "investment", "productivity" to find an endless number of articles and studies from respected sources that confirm that the costs incurred by a company to train its workforce are more of an investment than an expense that brings measurable benefits for companies.

Clearly, education and the right training plans improve employees' skills, but training not only contributes to the intellectual and technical training of the individual, but it also increases staff motivation and therefore improves the work environment and reduces attrition.

According to recent research by the Universidad del Valle de México entitled Impact of employee turnover in Mexico and published in the scientific electronic magazine Global Negotium, employee turnover in Mexico reaches up to 70% in most sectors. There are several factors that influence this turnover, including dissatisfaction with the work environment or low salaries, as well as an oversupply of similar jobs in the industrial manufacturing sector, which makes it easy for workers to "jump" from one factory to another. As a result, companies are hesitant to invest in training for the core workforce without realizing that the lack of training and education plans could directly impact employee motivation and their sense of belonging to the company. When employees have a training plan at entry-level, they will feel more valuable to the company and understand the value of their work. We often see that the common practice among electronics manufacturing companies is what we call "job shadowing", which is a process of observation where new employees follow and observe an operator or engineer that not necessarily have to be better trained or skilled. However, this "training" process is usually not properly structured or supervised and we do not know if the knowledge being acquired is correct or complete, which in the long run will produce greater losses to the company.

Nowadays, when technology is much more available to everyone, it is essential to educate employees to perform new tasks in less time, this is what will help build a tangible competitive advantage.

Some of the benefits that a company finds when properly training its personnel are:

• Higher productivity
• Better quality
• Employee loyalty and trust
• Contributes to better decision making and problem-solving
• Contributes to improving the stability of the organization by reducing staff turnover
• Reduces the need to supervise the work of others
• Improves the organization's image in the eyes of employees and competitors
• Training as an investment in human capital

Around the world, world-class manufacturing companies understand that investing in their human capital is critical to achieving and maintaining their competitive advantage, while less savvy companies relegate training and development to a minor line item in the annual budget. This translates into capital investments such as equipment and technology being adequately supplied while education initiatives are generally left out of final budgets. A major challenge is that HR teams, plant managers and supervisors know that poor training will result in productivity, quality and even safety problems but are not usually heard by upper management. Proper investment in training and staff development can and must change for the good of the industry and our country, which relies heavily on the manufacturing sector.

There are several articles and references that discuss how a company can - and should - demonstrate the ROI of their investments in training. According to an article published by Tooling U entitled "Proving Training ROI: Moving from Expense to Necessity," all companies should link the training and education of their staff to the company's bottom line. High-impact learning organizations (HILOs) that have a strong learning culture significantly outperform their competitors in productivity, customer satisfaction, quality, and market value. There is an interesting study by Bersin Research, an independent group of analysts from Deloitte that focuses on human resources, which indicates that 94% of the companies studied are at a reactive level of maturity in terms of learning culture, and only 6% are at an anticipatory level and linked to results, that is, the vast majority of companies do not plan ahead according to their business objectives for training programs for their workforce.

The question is, why are investments in training and development regularly viewed as an annoying expense? I think the answer is simple because there is no habit or need to validate the positive impact of trained personnel against the bottom line. This can be achieved by proving the return on investment (ROI) by measuring key performance indicators such as an increase in productivity, reduction of learning curve time, reduction of downtime, etc. When we start measuring these indicators and their effect on the company's results is proven, training will go from being an expense to an investment.
The topic of education and training is exciting and especially in the current situation in Mexico where the manufacturing industry may be threatened by the fierce competition from countries like China, India or South Korea with more agile processes and lower costs, it is essential to change the traditional thinking that many companies have and seek to move our perception from spending to investment in education and development plans for our employees.

Fortunately, technology is on our side and helps companies educate their employees to perform new tasks in less time which will help build a tangible competitive advantage. We must remember that not all education is created equal and having in-house training plans do not necessarily mean that they are the right ones, just as allocating budget to training plans do not ensure their success, but this is what I would like to talk to you about in our next blog.

If you are interested in learning more about the education and certification programs that we have at IPC, contact me and I will gladly get back in touch with you to schedule a chat or you can visit our website where you will find more information about it at https://mexico.ipc.org.