Statistics about training investments increasing company net worth, particularly in the area of high capital and skilled worker training, are widely known. However research on training and organizational effects is still relatively new. Tharenou, Saks and Moore (2007), noting that most training outcomes research focused on individual results, conducted a review of 67 pertinent studies to determine what – and to what extent – organizational outcomes were affected by training alone or training in the context of other business initiatives.

From analyzing 67 training/organizational outcomes studies with samples that included upwards of 150 businesses, Tharenou et al found that as a general rule, training had a direct effect on HR outcomes and an indirect effect on organizational and financial performance, mediated through HR outcomes.

Authors used three parts of the four-category definition of organizational effectiveness Dyer and Reeves (1995) proposed in order to classify and evaluate the effects of training on organizational changes. The four categories are:

  1. HR outcomes – low absenteeism and turnover, high motivation, high job performance
  2. Organizational performance outcomes – productivity/output, quality, service
  3. Financial or accounting outcomes – profit, return on invested capital(ROI), return on assets (ROA)
  4. Stock market outcomes (if publicly traded) – shareholder returns, stock value

The fourth category was not used by Tharenou, Saks and Moore because studies that could show verifiable correlations between HR initiatives and stock market outcomes were in short supply.  However, they did add three additional indicators considered to be pertinent to the categories of human resource outcomes and organizational performance outcomes.

For human resource outcomes the additional category was related to learning – skill acquisition and employee attitudes.  Two categories to related to organizational performance outcomes: internal business operations which considered quality service, rework, and cycle time; and customer outcomes using metrics around on-time delivery and customer satisfaction.

Human resource outcomes

Under HR outcomes, positive employee attitudes were the highest improvement factor directly related to training. Because companies frequently trained their staff with the express purpose of improving retention, significant data on training relating to retention was available. Approximately half the studies reported positive results related to retention, some showed no effects and a few showed negative effects.

When researchers looked more carefully at the overall business results category specifically with regard to retention, they found that in companies whose retention improvements could be directly linked to training the changes were due to the improved workplace climate initiated and sustained by training.  So, the training created a new climate, which caused an increase in retention rates.

Let’s take a second step back: if we consider that the strongest correlation between training and organizational change was improved employee attitude, it follows that positive employee attitudes resulting from training contributed to a more positive organizational climate, which then resulted in improved retention.  In the end, then, training improves employee attitudes, which positively alter organizational climate, and these together result in better retention.

Organizational and financial performance outcomes

Tharenou et al (2007) then further analyzed organizational performance outcomes under five usual business outcomes to consider where other training impacts could be found. These categories were:

  1. Productivity – labour productivity/value added per employee, productivity growth, Labour efficiency, export growth
  2. Sales – sales per employee, sales output, sales growth, new sales
  3. Quality- waste/defects, accuracy, customer satisfaction, customer feedback
  4. General performance – general productivity, quality, customer satisfaction and growth
  5. Perceptual measures – managers and executives perceptions of overall performance

Findings showed that approximately 50% of companies considered saw increased productivity, 75% saw improved quality particularly with regard to customer response, and 100% perceived that training had impacted organizational performance. In fact, the perception of improvement was significantly higher than actual gains.

Equally interesting is the almost identical pattern with regard to financial outcomes. 30% of companies saw increased profit related to training, 75% saw general financial outcome improvements and 100% perceived the financial improvements of the company to be directly related to training.  This “exaggerated effects” perception issue, is partially explained by Gelade and Ivery’s 2003 study correlating positive training effects on organizational performance to improved organizational climate.

Adding it all up

In summary, according to the Tharenou et al meta-analysis, there are gains to HR outcomes from training mainly with regard to improved employee attitude.  Organizational and financial outcomes existed to a lesser degree, yet were perceived by managers to be much higher. One wonders if this phenomenon is related to the improved organizational climate noted in the Gelade and Ivery study.

We know that no effects occur in isolation of their environment. Individuals are not independent of systems; systems are affected by the individual composites within them. To better understand the kind of impact training could have on organizational climate, and why improvements to the system could so easily be perceived of as bigger than they are, it can be useful to look at a case study. To this end, we offer one such training and assessment experience with a past client, Olymel Pork.

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References:

Dyer, L., & Reeves, T. (1995). Human resources strategies and firm performance. International Journal of Human Resource Management 6:656-670.

Gelade, B.A., & Ivery, M. (2003). The impact of human resource management and work climate on organizational performance. Personnel Psychology, 56:383-404.

Tharenou, P., Saks, A., Moore, C. (2007). A review and  critique of research on training and organizational-level outcomes. Human Resource Management Review 17:251-273.