The Value of Training to Business Organizations

1. Introduction
Achieving a competitive advantage through the strategic deployment of a highly
committed and capable workforce (Storey, 1992) has become a crucial factor to the
success of business organizations. Its value to business organizations has gradually
been recognized. Among the several processes of Human Resource Management
(HRM), training is a key element which usually involves planned instructional
activities or other developmental activities and processes (Harrison, 2002). Training
focuses on organizational activity and is aimed at bettering the performance of
individuals and groups in organizational settings (Harrison, 2002). Seen in this light,
training has great value to business organizations.

Unfortunately, in organizations, training does not receive as much attention as it

should. According to the Labour Force Survey, only 15.6 per cent of workers have
received either on-or off-the-job training in Britain and 29 per cent of training lasts for
less than five days (DfES, 2003). Although duration does not necessarily relate to
training quality, it is unlikely that workers’ capacity could be essentially enhanced in
less than five days. The training provided to the workers in Britain is insufficient and,
most of the time, ineffective. In addition, the value of training is difficult to identify. A
possible reason for this is that most employers do not realize the training needs of
their employees. In accordance with Marchington and Wilkinson (2002), training
needs can be categorized into three different levels—organizational, occupational, and
personal level. In terms of investing people by providing them with training, one of
the most significant advantages is that it could enhance workers’ skills base, equip
them with expertise and change the way they worked. According to human capital
theory (Becker, 1964), the more investment an individual makes in themselves, the
greater their lifetime returns, through increased earnings, fewer (and shorter) periods
of unemployment and access to more interesting work. However, Becker’s human
capital theory individualizes the responsibility for acquiring and developing skills

1
(Redman and Wilkinson, 2006), it only identifies the training needs at a personal
level. For employers, understanding the organizational needs of training is essential.
Experts such as Harrison (2002) argue that training should be undertaken with broader
strategic goals. Only by integrating these three different levels of training needs can
business organizations experience the true value of training.

Walters (1983) points out nine sources which may be useful in aiding employers to
identify the organizational training needs. These nine sources are: organizational goals
and corporate plans; human resource and succession planning; personnel statistics;
exit interviews; consultation with senior managers; data on productivity, quality and
performance; departmental layout changes; management requests and knowledge of
financial plans.

These sources help employers locate training needs in an organizational context.

However, the sources presented above are mainly market-based. Under certain
circumstances, a regulated approach to training formulated by the government would
also help employers understand training needs.

In the following sections, this essay will present two papers representing different
research findings relevant to training. Importantly, this essay will then discuss the
value of training in business organizations from an organizational perspective.

2 Case Studies
In this section, the author will describe and present two different papers relevant to
training in business organizations.

2.1 Employer Characteristics and Employee Training Outcomes in

UK SMEs （Devins, Johnson, and Sutherland, 2004)
This paper discusses the impacts of training systems in several small to medium-sized

2
enterprises (SME) in UK, and it also reveals the positive results among employees as
a result of training practices. The research is based on the employee perspective,
which has rarely been considered in the past. Although this study only focuses on
SMEs in UK, the outcomes are still useful to the analysis of training systems in big
business organizations.

According to Devins and Johnson (2003), along with the growing of business
organizations, more and more formal training is taking place. The data in this study
was collected from the European Social Fund (ESF) Objective 4(O4) in UK.

Questionnaires, as well as the telephone interviews, were used to obtain various kinds
of data from employees in SMEs. About 1,000 people participated in this survey. The
objective of the survey was to explore the extent of improvement and personal
development as a result of training activities and whether these results were
influenced by employment characteristics. In this essay, more attention will be paid to
the former part of the survey in order to address the importance of training.

To employees, it is known that the main benefit of training events is the acquirement
of a qualification for a certain job or career. This research shows that employees may
get further profits as a result of training.

According to the statistics presented in the survey, firstly, the lion’s share of the
respondents in the survey believe that they are more confident after taking part in
certain training events as an informal measure. The survey shows a notable positive
result to both employees and employers. Secondly, over half of the people who
participated in the survey feel that training could provide them with qualifications in a
particular field, which is quite attractive to most respondents. Meanwhile, nearly half
of the respondents said that they will choose further training activities since they do
believe that these experiences will help them a lot in the future. However, since

3
promotion is a long-term activity, less than 20 percent of people got a promotion after
training. As a result, this causes the risk of losing employees after training because
they may obtain the opportunities or qualifications access to other organizations.
Nevertheless, employers do not think that this is a crucial problem (Devins et al.,
2001) and this will not stop them from putting training into practice.

In the last part of this paper, the authors demonstrate the importance of training as an
aspect of HRM. A formalized training program always leads to the positive result of
employee development. Consequently, employees should be encouraged to attend
different training programmes offered by employers. In general, systematic training
practices give rise to a “win-win” situation to both employers and employees, which
benefit the development of both business organizations and the employees
themselves.

2.2 The Development of Employer Training in Australia (Smith, 2006)

This report presents the extent of employer training in Australian enterprises from the
mid-1990s. Initially a poor performer in providing training within organizations,
Australia has gradually formed a high performing training system over a period of
ten-year. This research indicates that government policy, as long as it was framed
carefully, can be an effective method in dealing with employer investment in training.

The proportion of employers who provide training to their employees has

dramatically increased, from only 22 per cent in 1989 to over 80 per cent at the end of
this period. The author argues that industrial relations, guided by the government and
vocational education and training (VET) policy in the 1990s, facilitated the
development of training within enterprises.

The Training Guarantee Scheme in 1990 encouraged Australian enterprises to carry

out any form of training for their workers. In fact, the employer training statistics
indicate the increase of the incidence of employer-sponsored training.

4
There are some key periods of development in this process. First, the government
provided funds for training and encouraged the country to shape a private training
market. It is a unique feature of VET in Australia by which enterprises can register
with the government to become providers of training in their own right and award
national qualification to their employees. As a result, enterprises can provide training
by themselves and do not have to work with the public training providers (TAFE
institutes). In this way, the spread of structured training in these enterprises has been
quickened. In addition, employment and training incentives have lured employers into
buying the national training system by employing trainees or putting their existing
workers through traineeships. Besides, the roll out of training packages to industry
since 1997 has helped nationally recognized training expand into industries and
occupations.

This paper indicates that the government acts as a guide to the development of
training in Australia and helps the Australian enterprises form a prosperous market.
The distinctive characteristic of employer training in Australia is the integration of
training with the national training system.

3. Case Analysis and Training Value

In the following section, the author will present his own independent and critical
analysis of the two papers and discuss the value of training to business organizations.

3.1. Training Needs in Three Different Levels

It is obvious that manpower is becoming the most important asset within any business
organization. Training of the employer and employee, combined with other human
resource specialization within management, ensures a pool of manpower having the
required levels of expertise at the right time. This benefits both the organization as
well as individuals by helping them to achieve their full potential.

5
In the first research paper, 1,000 employees in SMEs of UK were asked to participate
in the survey in order to explore the extent of improvement of personal development
as a result of training activities and to investigate whether these results were
influenced by employment characteristics. The survey results reveal significant
positive effects in terms of the employees who had received previous training. As a
consequence of attending certain training courses, employees’ work relative skills
base is enhanced and their expertise in particular field is increased. At the same time,
the main benefit of training events is the acquirement of a qualification for a certain
job or career. Training’s occupational needs are satisfied in this way. The first research
attaches great importance to the occupational and personal training needs; it argues
that employees benefit a lot from training. But there are also some drawbacks. For
example, some employees doubt about the possibility of getting a promotion as a
result of training courses, and employers fear job-hopping among employees.

According to the three training needs theory by Marchington and Wilkinson (2002),
understanding the differences of these three training needs and satisfying all three
training needs is crucial to the process of carrying out training within business
organizations. Simply focusing training on one or two levels would lead to the
ineffectiveness and inefficiency of training. In the second research paper, the
development of training in Australia reveals that it was not until the introduction of
government policy on training did Australian business organizations realized the
importance of training to their companies. In the beginning of training’s development
history in Australia, some specific policy and rules were framed by the government in
order to drive and encourage the employers to carry out a certain quality and quantity
of training every year. Initially, organizational training needs were not identified.
Gradually, business organizations realized the importance of implementing training in
an era of rapid economic growth. Training not only brings numerous benefits to
individuals and their occupations, but also increases the competitiveness of business

6
organizations. Only by integrating organizational, occupational and personal training
needs at the beginning of training process can training be most effective and efficient,
and as a result, business organizations can benefit the most from training’s values.

However, the research findings of training development in Australia also reveal that,
in certain situations, some policies and regulations formulated by the government and
business organizations are also important in helping business organizations identify
training needs.

3.2. Voluntarist and Regulated Approaches to Training

According to Redman and Wilkinson (2006), there are two principal approaches to
training at a national level, namely voluntarist (market-based) and regulated
(educational) approach. The voluntarist approach suggests that business organizations
operate more effectively when unfettered by regulation (Redman and Wilkinson,
2006). As the research findings in paper one show, SMEs in UK mainly use
voluntarist approach to training. This approach results in high performance in the UK
since business organizations are able to tailor their training schedules to different
conditions, or merge their unique culture into it.

On the other hand, the Australian government has been putting great efforts on
building the national training system, indicating the use of the regulated training
approach. This approach considers training to be a public good and an effective way
to recruit highly skilled workforce in a long term (Redman and Wilkinson, 2006).
Given the situation that business organizations in Australia did not provide training at
the very beginning, it is reasonable that Australian government used the regulated
approach to support training as an integral part of a nation’s broader economic and
social policy.

7
As a result of Australian business organizations not providing training initially, the
usage of regulated approach is important in helping enterprises identify training
needs. It is not easy to tell whether training needs should be identified on the basis of
market needs or government regulations, while a mix of these two systems
represented itself recently. Currently Australian business organizations are gradually
recognizing the important role that VET plays in integrating career progression and
organizational changing processes as well as in preparing job seekers with skills and
knowledge to enter the workforce and in providing existing workers with new skills.
Australian enterprises have increased their use of nationally recognized training and
got involved with the VET system in order to benefit their organizations to the largest
extent. The training system does help Australian business organizations address
current and future skill needs and understand the challenges that lie ahead. The
implementing of the training approach could be used by other business organizations
in different countries or areas. Since not only the government but also business
organizations are involved in the process of acknowledging training needs.

3.3 The Value of Training

As one of the most important aspects of HRM, training’s value to business
organizations reflects the importance of implementing HRM within business
organizations. The value of training is indicated in the benefits listed below.

1. Training upgrades employee’s qualification. According to Jinks (1979), a well-

trained employee is capable of delivering high-efficient performance, reducing cost
during working and lowering the occurrence of accidents. In the long-term
development of business organizations, training will eventually enhances business
organizations’ competitiveness via developing human resources.

2. Training enhances employee’s ability of developing new products. Whether a

business organization is able to deliver new products to the market closely relates to

8
the market share of the organization (Jobber, 2004). During training, employees’
creativity could be nurtured and it motivates employees to develop and create new
products in order to satisfy the market’s needs. In this way, the business organization’s
market share could be largely expanded. At the same time, business organizations will
waste less money of recruiting more employees since they are gaining more and more
sophisticated employees by training, which means less labor turnover (Jinks, 1979).

3. Training plays a significant role in employee motivation. Surveys indicate that

within the business organizations which provide employees with excellent training
opportunities, fewer complaints are found compared with those business organizations
which do not provide (or provide less) training opportunities. The reason is that,
employees fulfill their personal value through training and they are willing to take up
more interesting and challenging work. Some famous business organizations in
United States even use training opportunities as a reward in order to motivate
employees.

4. Training is also great for enhancing the cohesive force within the business
organization. By attending training programmes, employees could understand the
company’s development strategies, business philosophy, management style, business
values and corporate culture. It is important for business organization in order to unite
all the employees together. Employees could also gain a sense of belonging during
training. This strong cohesive force drives business organization forward.

4. Conclusion
In order for training to be truly effective, business organizations should integrate
organizational, occupational and personal training needs in the training
implementation. Training is most likely to be effective when these three conditions
apply (Marchington and Wilkinson, 2002). In this way, training will receive positive
feedback within organizations, and employees would feel that the training has been

9
worthwhile. Most importantly, training should be incorporated into future
organizational plans which will eventually benefit the company. As with other
components of HRM, the training arena is changing rapidly, this is not just due to the
availability of technology but also in terms of meeting organizational requirements
(Mayo, 2000) In the process of identifying training needs, regulations by government
are also important as guidelines to business organizations. Considering the numerous
benefits that training can bring to the business organizations, it is wise to put training
into practice.

The value of HRM to business organizations is precisely reflected in the utilization of

training. HRM theory attaches great importance to organizational goals, but it also
gives full play to man’s initiative. By applying HRM theory to the operation of
business organizations, employers could not only motivate staff, but also fully
develop the potential of employees. With highly committee and capable workforce,
the competitiveness of business organizations will be greatly enhanced, and more
profits will eventually be made as well.

10
Reference
Becker, G..S. (1964) Human Capital, Chicago, IL: University of Chicago Press.
Department for Education and Skills (2003) Statistics of Education: Education and
Training Statistics for the United Kingdom, London: TSO.
Devins, D., Johnson, S. and Bolam, F. (2004) ‘Employer Characteristics and
Employee Training Outcomes in UK SMEs’, Journal of Small Business and
Enterprise Development, Vol.11, No.4, pp449-457.
Devins, D. and Johnson, S. (2003) ‘Training and development activities in SMEs:
some findings from an evaluation of the ESF Objective 4 Programme in Britain’,
International Small Business Journal, Vol.21 No.2 pp.205-18.
Devins, D., Johnson, S. and Bolam, F. (2001) Adapting to Change: An Evaluation of
the ESF Objective 4 Programme in Britain (1998-2000), Research Report
No.RR288, DfES, Nottingham.
Harrison, R. (2002) Learning and Development, London, CIPD.
Jinks, M. (1979) Training, 1st Edition, Bland ford Press ltd.
Jobber, D. (2004) Principles and Practice of Marketing, 4th Edition, McGraw-Hill
Education.
Marchington, M. and Wilkinson, A. (2002) People Management and Development:
Human Resource Management at Work, 2nd Edition, CIPD Publishing.
Mayo, A. (2000) ‘The role of employee development in the growth of intellectual
capital’, Personnel Review, Vol.29, No.4.
Redman, T. and Wilkinson, A. (2006) Contemporary Human Resource Management:
Text and Cases, 2nd Edition, Financial Times/ Prentice Hall.
Smith, A. (2006) ‘The development of employer training in Australia’,
Education+Training, Vol.48, No.4, pp252-261.
Storey, J. (1992) Development in the Management of Human Resources, Oxford:
Blackwell.
Walters, R. (1983) ‘Identifying training needs’, A Textbook of Techniques and
Strategies in Personnel Management, London, Institute of Personnel Management.

11