Why are organisations reluctant to invest in training?

Published Date: 23 Mar 2015 Last Modified: 28 Apr 2017

The aim of this paper is to identify all there is to know about training, the impact it has on both firms and employees and then, the reason why, although it is beneficial provision to business growth, still some organisations and individuals are not willing to accept the idea of investing in training and development. In order to come to that claim, it is necessary to mention first the cost-effectiveness of training and development, by which methods it can be reinsured, and the involvement of training in an organisation's prosperity and even more, when it has to do with the integration in a international market.

To begin properly, it should be noticed that training at any level and in whatever form this can take, could have only positive aspect. Considering that, training means investing in people to enable them perform better and to empower them to make the best use of their natural abilities (Armstrong, 1996; 2003). Through the practice of a range of activities, it is believed that learning is an important clue here, as a means for developing a high performance culture and achieving business's competitive advantage (Pieper 1990, Salaman 1992, Tyson 1996). This appear clearly from the below definitions of training.

According to Heevy and Noon (2001), training is the process of changing the skills, attitudes, and knowledge of employees with the purpose of improving their level of competence. It is a planned process, usually involving a series of stages where incremental improvements can be identified. It takes two main focus 1) on the job training whereby an employee observing the tasks, being guided through them by experts, and then practising them. 2) Off the job training whereby an employee is instructed away from the place of work, either in a training room on the premises or at a separate location. This training is more often theory based and might even take the form of self learning packages (Heevy and Noon 2001). Furthermore, as Manpower Services Commission defined training in 1981, it is the following: "A planned process to modify attitude, knowledge or skill behavior through learning experience to achieve effective performance in an activity or range of activities. Its purpose, in the work situation, is to develop the abilities of the individual and to satisfy the current and future manpower needs of the organization". Seeing the definition of the training from the perspective of education as Smith put it: "Development refers to the growth of realization of a person's ability, through conscious or unconscious education", where education is "activities which aim at developing the knowledge, skills, moral values and understanding required in all aspects of life, rather than a knowledge and skill relating to only a limited field of activity" (Smith, 1992).

Besides the definition of training, the mention of the potential benefits for both employees and firms and from which methods these are derived, is essential in order to understand why training is so important for the business (Lonr 1990, Murray 2007). It is worthwhile to point that it cannot be any development without the training procedure. As it has already been mentioned, training aims to develop employees' competences and to improve their performance but also, to reduce the learning time needed for employees starting in a new job on appointment, transfer or promotion and to ensure that they will become fully competent as quickly and economically as possible (J. Swart et al, 2005). When a training programme being used effectively, then the benefits for employees are numerous and are illustrated on firm's performance. It also helps to manage changes and provide to employees the knowledge and skills they need to adjust with new situations and work demands, as well as to adopt new technologies and methods, to be innovative (Armstrong 2003). In that way, employees' motivation is increased and the same goes to efficiencies in processes resulting in firm's financial gain while employee's turnover is being reduced. Highly trained workforce provides higher levels of service to customers which enhance company's image (Mullins 2007).

The cost-effectiveness of training is a vital element because it can help the line manager to establish credibility, to reveal the value of the training by achieving both operational savings and increases in firm's revenue; then, enforce the organization to look training more as an investment and less as a dispensable cost of operation. By training their employees, companies maximize the potential of this investment (Campbell 1995). In order to improve the skills of its human resource, an organization can either train its existing employees or recruit pre-skilled labor forces that have been trained elsewhere (Booth 1998; Jameson 2000).

The importance of investment in training and development is matter of whether a firm is treating its employees as a resource or as a cost (Tysson 1996; Long 1990; Jackson 1989; Jameson 2000). By exploiting the meaning of each word that consists Human Resource Management; human implies the workforce, resource implies investment, management implies development (Sisson 1989). It is demonstrated that the consideration of human asset as investment for the firm through strategic development can maximize its potential, and the training is the tool that can provide it. So, companies with unwillingness to consider employees as investment, can simply be called "not HRM practicing". In adverse, companies reluctant to invest in their human resources, rely on a short-term human asset, which, mainly, is low skilled training, less loyalty to its work and easy replaceable due to the lower cost of loss for the firm (Harzing 1995;Jameson 2000;Mullins 2007).

Most managers recognize the vital role that continuous learning plays in today's marketplace in order to maximize company's competitive advantage (Harzing 1995; Gordon 1991). However, some managers are reluctant to invest in their employees and train them. The reasons why is happening are variable.

The market from its own, in which each company is doing business, deduct any potential training (Booth 1994; Graven 1998). More specific, the market is divided to the primary labour market, where jobs tend to be supplied by large, highly profitable firms with high capital to labour ratio and high productivity. Here, production is usually large scale with high investment in technology with more opportunities for training. The secondary labour market includes small firms with low capital to labour ratio, low productivity and small scale production. In these firms, wage and skill levels tend to be low, employment is unstable and training opportunities are usually limited. Significantly, small businesses experience problems in providing training for both owner-managers and workers. (Curran et al., 1996)

Reasons for not providing such training are that companies do not believe in the effectiveness of training and they do not consider it as a big component for a better performance. Hence, when profits are under pressure or other developments are on stake, the most common reaction is to cut training fund. Also, recruiting skilled labor is more economical than practicing training and development policies. But they neglect that teamwork, employees' initiatives, people talents are all part of the financial model and when these figures are maximized the same goes with the business economic growth (Bentley 1991; Campell1995) Traditional styles of management based on authoritarian, non-participatory tenets of employees and managers who have grown up in a system like this, is unlikely to be ready to abandon familiar tried and trusted methods and be welcomed to a better trained, self reliant and questioning human force (Sisson 1989).

Some of them claim that there is limited time for the practice of training program. Indeed, a training program to be effective needs a lot of both employer's and employee's time and commitment, it also may take all employees' job-life to be efficient. Job conditions change constantly in the business environment, so the continuous learning is required but nobody has the state or the emotional strength to be in a training position all the time. In that point, there are two categories that can be distinguished (Armstrong 2003; Murray 2007; Currie 1997).

Employers that do not believe in the importance of the process and employees that do not find interest to be trained, specifically if they have obtained a high image in the firm and they are known for their distinctive qualifications. Contrary to that, some employees want to develop their skills and knowledge whereby they will contribute to their company's success (Keep 1989). They want training but their managers do not want to be confronted by this task, they are unwillingness to try, and simply they avoid it.

From the perspective of the length of a training program, which could take weeks, months or even the entire career of the employees it can be a major expense especially for firms with traditionally high turnover. Besides, the common belief that is the responsibility of the school system to train people to be workers and is the worker's responsibility to learn how to do a job so they can get hired is another reason why employers not practice their manpower (Collin 2003). Government regulations, insurance coverages, and common sense dictate relevant training that should be given to every employee. Still, few employers do not find it significant to train their human force (Collin 2003; Noon 2001).

A discouragement of not training is, also, the gap that arises when trainees are transferred from the training course to a job, to apply their knowledge and skills in practice. As long as they are in a training centre, they are sheltered from the realities of the rough and tumble workplace. For managers and team leaders, the problem of transferring from learning situation to the real conditions may be even more difficult because most of management training tends to deal with relatively abstract concepts like motivation and leadership, and the connection between what is being learned in the class room and what is really happening in work, may not always be apparent. That is why the training must always be compatible to employees' needs (Armstrong 2003, Noon 2001).

Another reason of not practicing training can be regarded the difficulty in measuring the effectiveness of a training program. Measuring cost of training needs a lot of efforts from the senior manager because apart from training results are also other interacting variables such as administrative costs, relocation, course design and material costs that have to be taken into account. Therefore are different methods that can be used from the manager in order to derive an acceptable figure for the effectiveness of training course. Those methods vary from sector and company's size. Hence manager has to have the ability to choose the one, which fit to the business needs. Any failure to the accounting of training-cost can mislead to wrong results, to an ineffective training proposal and that will discourage the company to practice training (Murley 2007; Belcour 1995t; Gordon 1991).

Moreover, it can be said that firms are not invested in training because of the flexible working environment. They claim that investing in people can be a boomerang for their business competitive advantage, as it is likely employees will leave the company and transfer their knowledge into competitor's firm. Despite the likelihood of this event, employers have to understand that the key for organization's success is the human factor. By investing in human asset training, they invest in employees' commitment to the firm and more as the firm invests in the development of their skills (Armstrong 2003; Craven 1994; Hall 1991).

It cannot be ignored the providence of the HRDF, a levy reimbursement scheme establishing in 1992. Under HRDF, employers pay a payroll contribution of one percent and are eligible to claim a portion of allowable training expenditures up to the limit of their total levy for any given year. The reimbursement rates vary by sector and type of training. Empirical analysis showed that firms least likely to claim from HRDF are small firms and firms providing no training or only informal training. Important factors that employers cite as inhibiting their training: the limited resources available for it, the use of mature technology with low skill requirements, the adequacy of skills provided by schools, and the availability of skilled workers who can be hired from other firms (Tan and Gill 1998).

Generally, levy schemes have led to an increase in quantity of training. In some countries levy schemes have had some impact on increasing training. A common feature of schemes in which training has increased has been the fact that an effective system is in place for administering the levy - both for levy collection as well as administration of grants. On the other hand, there were very complicated rules governing training requirements for the levy and the criteria for approval, dissuade employers from investing in it (Edwards, 1997).

Firms which may have otherwise invested more in training, tend to reduce their effort to the level required by law in order to receive the minimum rebate or tax credit. There is also some evidence which suggests that if firms are reluctant to train, they organize training which is not relevant to their needs in order to qualify for the rebate or tax credit. Additionally, smaller firms may be less likely to train their workers as they feel that costs are significant and the training which is provided may not be relevant to their needs. Even if training is provided, the bureaucracy involved in persuing reimbursements dissuades firms from submitting claims for reimbursements. (Herschbach, 1993).

Concluding, this paper attempted to define the reasons why there are organizations that are reluctant to see their manpower as an important asset in business success and so invest on them and train them. Now, the interplay between the benefits that are derived from any form of training and the cost-effectiveness of training for the firms is seemed to be more clear. In general, companies which operate in the increasingly competitive international market were forced to attach training and development as equal to the vital acknowledgement that the training needs are more like an investment rather than a cost and that, partly due the cultural diversity that the international integration occurs and partly because of the rapid economic and technological growth. All these also reflect the companies' outlook on how important is the quality of those they recruit, because a company's image is as good as is its personnel and it is vital to select and train the best. (Upton 1987) Unfortunately, in many cases this process is considered by many managers as meaningless, too time consuming, a bureaucratic exercise only, or even as something that intervene to their department's work. For some organizations, the maintenance and the wellbeing of the equipment and machinery seems more important than to make an effort to the wellbeing and development of their own employees (Sun, 2001). But as it has been already highlighted, the key for success, even profit, for any firm at any size is its human asset and to invest in them infer to business future (Hall 1991, Armstrong2003).