How Training Benefits a Small Business

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How Training Benefits a Small Business

• Workshop at NZ Tourism Conference 2003

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Small Business in NZ

• 93 of all NZ enterprises have fewer than 10
  employees.
• These businesses employ 31 of the workforce.
• 80 of the workforce of 2013 is already in work
• 25 of those aged 25-64 have no qualification, a
  further 20 have only a school qualification.

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Benefits of training?

• What are the benefits of training?
• How do you assess them?
• How different is this for smaller and larger
  businesses?

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Research on training benefits

• International Study 15 OCED countries (Cooper
  Lybrand, 1996)
• Productivity improvements
• Greater workforce flexibility
• Savings on materials and capital costs
• More motivated workforce
• Improved quality of final product or service

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Quantifying the benefits

• Rate of return analysis can be applied to
  training just as to any other business investment
• Australian research has shown these gains can be
  dramatic, even for small firms
• A training project introducing new technology
  doubled the productivity of four people, yeilding
  an annual gain of 100,000 - adding 1m to the
  NPV of the firm (at a priceearnings ration of
  101)

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Maximising the Benefits

• Training is most valuable when it is clearly
  linked to business strategy, and
• When the outcomes sought are clear.
• Training needs to be supported by good HRM
  practices.

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NZ Research

• Firm Foundations - MED
• 2,700 firms 60 of leaders offer training to
  75 of employees
• Business NZ Skills Training Survey 2003 (with
  ITF/Dept of Labour)
• 479 respondents
• 27 with lt10 employees
• 12 in the Tourism sector

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Prevalence of training

• 89 of respondent enterprises indicated they were
  currently providing training for their employees.
  
• Smaller firms were less likely to be offering
  training - e.g. 78 for firms with 6-9 employees.
  
• 95 of firms indicated they were likely to offer
  training in the next 12 months (87 for those
  with 6-9 employees)

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Reasons to train

• Skill shortages within the enterprise and if
  suitable courses to meet training needs were
  available (55).
• Customer requirements (49),
• A desire to grow the enterprise (48)
• Skill shortages in the industry (where these
  exist) (48),
• Actual growth in the enterprise (47).

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Reasons to train (2)

• Around one-third of respondents identified their
  improved knowledge of industry training as a
  consideration in deciding to provide training.
• Approximately a quarter of respondents saw
  Government subsidies for training, or changed
  regulations or incentives as key considerations
  in deciding to provide training.
• Neither high or low staff turn-over appeared to
  be particularly significant in decision making
  about training.

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Barriers to training

• Cost was the most cited reason not to provide
  training, or provide less than might otherwise be
  desirable (52).
• The availability (or otherwise) of suitable
  training opportunities was also seen as a key
  factor (46).
• Lack of interest from employees was seen as a
  barrier to training by 31 of respondents.

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Barriers to training (2)

• Both uncertainty in the business environment and
  actual decline in business performance were cited
  as relevant factors by about a quarter of
  respondents.
• Approximately 20 of respondents saw red tape
  and a lack of information about training as
  potential barriers to offering optimal levels of
  training.

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Barriers to training (3)

• 14 of firms stated they were too small to
  provide training (or at least all of their
  training needs).
• Only 11 of firms suggested that the possibility
  of staff being poached within one year or more
  of their being provided training was a
  disincentive to train.
• Significant numbers of firms indicated
  (unprompted) that they would always provide
  training, irrespective of any reasons why they
  might not.

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Identified benefits of training

• quality of output
• productivity / motivation of staff
• business growth
• health and safety
• retention of staff
• innovation
• profitability
• reduced costs

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Assessing value of training

• Only a small percentage of firms were making use
  of formal cost / benefit analyses to assess the
  value of training (21).
• Most respondents assessed the value of training
  using staff feedback (78 of respondents).
• A large number of respondents also used customer
  feedback (53) and assessments by HR Line
  Managers (35).

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Assessing value of training

• A range of quantitative measures were used by
  respondents firms including
• reduced errors / reworking (70),
• productivity increases (61),
• reduced accidents (49),
• achievement of qualifications and standards
  (47),
• improved turn-over and sales (36),
• cost savings (35), and
• reduced absenteeism (22).

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Overall value

• The substantial majority of respondents (74)
  believed that skill development and training
  contributed to improved performance for their
  firm.
• This was even larger for those who engaged in
  training (81).
• 86 of firms with 6-9 employees that engaged in
  training believed it contributed to improved
  performance.

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Small business and training

• Making workplace learning more accessible and
  responsive to small business
• Improving relevance of qualifications,
  particularly business management qualifications
• Promoting greater understanding of workplace
  learning

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skill new zealand

• Government, business and unions see skills as
  critical to growth.
• Skill development in the workplace is key.
• Target of 250,000 in formal workplace learning by
  2007.
• Expanding to involve more small businesses - will
  involve 30-40,000 firms.

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Further information

• http//www.businessnz.org.nz