CHAPTER 1: INTRODUCTION

Background of the Topic

With advancements in technology, particularly information technology, knowledge is being generated and spread at a remarkable rate. During the years 1900-1950, human knowledge increased twofold; after that human knowledge has been doubling every 5-8 years. The inference from this observation is that knowledge is becoming outdated so rapidly, implying that individuals must double their knowledge base twofold after 2-3 years to keep up with advancements in technology (Allen & Kimberly, 2006). Then again, the mounting uncertainty, complexity and turbulence of the business environment pose the need to have diverse and greater amounts of knowledge. Businesses in the present day require higher levels of knowledge that are insufficiently available in the official school education system; this implies that the gap existing between business needs and knowledge offered in schools is mounting (Anderson & Smith, 2006). The business environment is past the period of mass production as consumers are becoming increasingly selective. As a result, increased customer demands pose the need for new knowledge and solutions. Because of the mounting competition in the present day business environment, there is the need for organizations to regularly revise their service and product mix, methods of management and improve on productivity (Armstrong, 2003). The present day business conditions associated with dynamic competition, knowledge-based economies, and globalization markets have increased the significance of human resources in an enterprise. These business conditions have compelled organizations to consider human resources as a strategic resource for every enterprise. In fact, differences existing among organizations are because of the differences existing in terms of human capital, that is, their human resources and their methods of management and development (Hubbar & Beamish, 2011).

In a global, turbulent and complex business environment, organizations can rely only in knowledge to develop sustainable competitive advantage. The primary significance of conventional factors of production such as labour and capital is decreasing; as a result, there is the need for organizations to locate corporative knowledge and develop it through training and development to attain organizational goals and objectives (Dessler, 2000). Because organizational knowledge is largely found in the human mind, since humans are carriers of activities and knowledge, human resources is increasingly becoming a critical success factor for various organizations. Organizational growth and development depends on human knowledge; for this reason, employee training and development are some of the ideal solutions to tackle complex business issues, and HRM is becoming a central component of contemporary management. Through employee training and development, HRM offers steady knowledge innovation, produces an environment for the mutual exchange of knowledge and experience; this makes considerable contributions to competitive advantage and employee satisfaction when undertaking business procedures (Edwards, 2005).

All firms have the responsibility of effectively managing four core resources which include people, information, equipment and money. Investing in better equipments helps in speeding up the process of production and reducing operational costs, which makes significant contributions to the profitability of the organization. In the business world, information is power; this is because being in procession of information regarding products, customers and prices is vital for the growth of any business (Hubbar & Beamish, 2011). Investing in the training and development of employees helps in increasing their efficiency and productivity, which contributes directly to the bottom line. The fundamental objective implementing training and development programs is improving the capabilities of employees at both organizational and individual level. When an organization adopts strategies to enhance the knowledge and skills of its workforce, the returns on investment goes beyond just having employees who are effective and productive (LLoyd, 2002). Training and development programs can focus on either team or individual performance, depending on the training needs of the organization. The fundamental prerequisite before implementing and managing employee training and development programs is that they should base on the management and training needs of the business enterprise identified through a needs analysis process; this is helpful in ensuring that employee training and development is aligned to the strategic mission of the organization (McKenzie & Van Winkelen, 2004).

In order for training and development programs to be effective, there is the need to take into consideration the fact that members of staff are adult learners (Mitki & Herstein, 2007). As a result, training and development programs must draw upon the five tenets of adult learning theory, which includes the following. First, adults must know the reason for their learning; adults are usually self-directed; adults incorporate work-related experiences in the learning process; adults make use of problem-centered learning approach; and adults learn through intrinsic and extrinsic motivation. These elements of adult learning theory are essential in ensuring that organizations design effective employee training programs (Noe, Hollenbeck, Gerhart, & Wright, 2003). The fundamental argument is that an effective employee training program results in a considerable return on investment.

At the organizational levels, employees are usually at varying phases of their careers; this denotes the need for different forms of training for dissimilar forms of development experiences. According to Lloyd (2002), maximizing the effectiveness of employee training requires organizations to regularly evaluate their employees’ needs current training requirements in order to prepare them for their subsequent position. Achieving this requires organizations to acknowledge that different members of staff have different training needs, and that these training needs evolve over time as employees develop their careers (Noe et al., 2003). A recent survey pointed out that approximately 40% of employees who get poor job training depart their job positions after one year. In the light of these circumstances, it is essential for firms to take into consideration the cost of turnover (Hubbar & Beamish, 2011). With fewer employees, the organization’s productivity decreases. In addition, the existing employees are compelled to over work themselves resulting in diminishing staff morale. An inference from this observation is that the cost of failing to training employees is more than the staff turnover, which justifies the need to train employees (Noe, 2008).

Investing in human capital through employee training helps in improving employee capabilities at both individual and organizational level; however, investing in employees is not similar to investments in machinery and equipments. For instance, when a firm invests in the purchase of new computers, the costs tend to depreciate with time; however, when a firm invests in training employees, costs are not subject to depreciation (Woods, 2001). The expected outcomes when firms invest in equipments is that the equipment will facilitate faster production, and reduced waste and maintenance costs; hence, paying for itself. However, when a firm invests in enhancing the skills and knowledge of its workforce, there are numerous benefits for the firm although the significant challenge involves measuring the returns on investment for training employees. As a result, most organizations are undermining the significance of investing in employees, and focusing more in investing in machinery and equipments because of the tangibility of the returns on investment (Wiseke, Ulrich, Christ, & Dick, 2007). In addition, organizations fear training employees because of the fear that they become more attractive to other potential employers. After employees have been trained and developed, they have the freedom of leaving the firm and work for another corporation, which is likely to increase turnover. This counterproductive logic argues that there is no need to train employees for the benefit of a competitor. Such biases impose a significant impediment for firms to embark on people investment (Thomson, 2005). As a result, the goal of this paper is take a critical review on the return on investment of employee training and development in order to conclude that employee training is worthwhile. This paper seeks to affirm that employee training and development is vital for the continued success of every company. Despite the fact, that the Internet and technological advancements have facilitated competition and collaboration at the global level, it is apparent that people are the source of competitive advantage for any organization. In addition, training and developing employees ensures that employees widen the competencies and skills needed for bottom line outcomes for the company (McKenzie & Van Winkelen, 2004).

Thesis

            It is worthwhile for a company to invest in the human resources department, which has the responsibility of training employees. The paper maintains that employee training is cheaper than the associated turnover, and that employee training can affect the company and result in positive results. As a result, organizations must embark on effective employee training programs that are aligned to the business goals and objectives for positive outcomes for the firm.

CHAPTER 2: DISCUSSION

Key Concepts in Employee Training and Development

In the context of human resource management, employee training and development focuses on organizational activities having the primary objective of bettering both individual and organizational performance (Rose & THomsen, 2004). Employee training and development entails three primary activities including education, training and development, which separate and interrelated activities. Training is focused on and evaluated against the job position that an employee holds currently whereas education focuses on job positions that an employee is likely to hold in future and is usually evaluated against future job positions (Robbins & Coulter, 2007). Development activities focus on organizational or individual activities that may be undertaken in future, and is almost impractical to assess. Stakeholders involved in employee training and development include sponsors, clients, participants, facilitators and providers. Sponsors include the top level management of the organization, who have the primary responsibility of ensuring that employee training and development is aligned with the strategic goals and objectives of the organization. Clients of employee training and development include the business planners such as line managers who have the responsible of monitoring resources, coaching and performance. Employees who actually take part in the training are the participants whereas facilitators comprise of the HR staff. Providers comprise of specialists in employee training and development (Hubbar & Beamish, 2011). It is essential to note the various stakeholders in training and development have their own reasons and agendas, which increases the likelihood of conflict between various stakeholders. Irrespective of the conflicts, the underlying argument is that employee training results in positive outcomes for the organization and reduces the turnover on employees.

Understanding the concept of training and development needs an insight to all changes taking place because of learning. Since employee training and development generates new knowledge, it is placed in the wider strategic context of the management of human resources with the goal of benefitting both employees and the organization (LLoyd, 2002). In order for organizations to create and maintain competitive advantage, they must have the capability of creating new knowledge instead of relying on existing knowledge. As a result, continuous employee training and development plays a significant role in developing organization and individual performance. In addition, the strategic processes involving employee training and development must focus on creativity, invention and shape organizational knowledge in a manner that positions the organization as unique and different from others (Dessler, 2000).

At present, the procession of knowledge by organization is a primary determinant for competitive advantage. As Noe (2008) proposes, the logical sequence of employee training and development involves knowledge creation, innovation and competitive advantage. However, knowledge is only important if it is of strategic importance to the organization because it helps in enhancing the value of the organization and is significant to the strategy of the organization. Noe (2008) affirms that organizations should not just embark on training and development without any apparent rationalization; as a result, employee training and development should draw upon feasible needs to facilitate innovation and result in competitive advantage. In addition, training and development impose a positive outcome on the individual and organizational performance only if they are synchronized according to the needs of the company, organization goals, and employees’ goals (LLoyd, 2002). The following subsection discusses the return on investment on employee training and development to affirm that training and development leads to positive outcomes for the organization.

Organizations can embark on training and developing its employees for a number of reasons depending on the identified training needs. First, employee training and development can be implemented when performance appraisals indentify the need for a performance improvement. Performance appraisals have the primary objective of identifying performance gaps within the organization and among employees (Armstrong, 2003). As a result, organizations can tackle performance-based issues by training and developing its employees. The second reason why organizations can initiate employee training is to set a standard for the status of improvement in an effort to increase organizational performance. In the light of this view, training and developing employees serves as a benchmarking tool for the status of improvement, and employees can be trained and developed to achieve the established benchmark. In addition, organizations can embark on training and developing its employees as a component of the professional development initiative, especially when there is the need to establish career and professional development platforms for employees in the organization (Lockwood, 2004). Organizations can also integrate training and development as a component of succession planning in order to prepare employees for position changes in the company. Furthermore, training and development can be helpful in assessing the operation and effectiveness of new performance systems implemented in the organization. According to the outcomes of a needs analysis, training and development can be used for educating employees on specific topics such as communications, ICT skills, customer service, diversity, ethics, human relations, quality initiatives, and occupational safety (Hubbar & Beamish, 2011).

Benefits Accrued from Employee Training and Development

It is imperative to note that effective employee training and development draws upon a succession of benefits that commence with improvements in the performance of employees, which are then transferred to the localized workplace that ultimately impose a positive outcome on the organizational performance (Mitki & Herstein, 2007). In addition, the scale, scope and size of the impact are not necessarily important provided the results are positive and progressing. Some of the benefits of employee training and development discussed in this paper include high levels of job satisfaction and employee morale; increased levels of motivation among employees; improved efficiencies in business processes leading to financial gain; and decreased employee turnover. In addition, employee training and development increases the organization’s capacity to adopt and implement new methods and technologies, enhances organizational image, and serves as a tool for risk management. Other benefits of employee training and development include improved recruitment and retention of employees, and facilitating knowledge transfer. Irrespective of the monetary costs associated with employee training and development, it has significant returns on investment (Dessler, 2000).

High Levels of Job Satisfaction and Employee Morale

According to Noe (2008), job satisfaction involves a positive or pleasing emotional state of an individual emanating from an evaluation of his or her job. Job satisfaction is also viewed from the perspective of the attitude that a person has towards his or her job. Several affect the levels of job satisfaction including the needs and desires of an employee, the quality and style managerial practices in the organization, job design, levels of compensation, social relationships, working conditions, perceived opportunities within the organization, and perceived opportunities outside the organization. LLoyd (2002) affirms that job satisfaction imposes a considerable impact on employees’ organizational turnover, grievances, absenteeism, and employee turnover. An inference from this observation is that satisfied employees tend to enhance organizational productivity because reduced turnover and less absenteeism.

Employee training and development is one of the most effective HR practices that an organization can use to increase job satisfaction among its employees. Employee training and development plays significant role in eliminating feelings associated with employee dissatisfaction, especially when the working conditions offers little time to pursue personal and professional goals. In addition, employees normally have a hard time focusing their energy on the success of the organization if they do not hold the belief that the organization cares about them (Lockwood, 2004). The bottom line is that employees acknowledge the value of working for an organization that is enthusiastic to invest in its employees, even if the investment solely profits the company. Employee satisfaction and commitment relies on employees’ feelings that the company can undertake its commitments to its employees, and the sentiment that the organization values its employees and regards them as crucial towards the success of the organization. As a result, organizations do not only require employees for their success, but also employees have to feel that their efforts are playing a crucial role in the attainment of business goals.

Studies have reported that organizations using employee training and development programs are reporting higher job satisfaction among employees and reduced turnover rates; this is because employee and training and development increases company loyalty since employees have a feeling that the company is making investments in their futures. In addition, employee satisfaction is high among organizations deploying in-house and provide support for continuing education. It is difficult to quantify company loyalty, although it is imperative to intrinsic rewards associated with employees’ feelings (McKenzie & Van Winkelen, 2004). When employees feel that they are playing a vital role in helping the organization’s bottom line, they normally have a good feeling and are motivated to continue making significant contributions towards the success of the company. This is because employees are positive that their efforts have purpose and are vital to the organization. Top performing employees rarely desert a job because of the pay; rather, it is because their job positions are not aligned with their personal and professional goals and other things required for their happiness (LLoyd, 2002). Despite the fact, that benefits and salaries play a crucial role in the recruitment and retention of employees, individuals also seek for opportunities to expand their knowledge, face the challenge associated with new responsibilities, and the prospect of professional and personal development. Employee training and development comes in handy to satisfy these intrinsic needs, which helps in nurturing trust, boosting employee morale, company loyalty, and resulting to overall hob satisfaction among employees (Anderson & Smith, 2006).

Organizations are relying on new-hire training programs and continuing training and development for employees at all levels with the aim of increasing organizational loyalty a motivating employees to work efficiently and harder. Training and development programs impose considerable impacts on the morale of employees within an organization. First, training and development creates a team environment within the organization. Organizations with good reputations have learnt the art of motivating employees and creating teamwork in the organization (Hubbar & Beamish, 2011). Training and development programs play a crucial role in establishing a team atmosphere through nurturing the culture of group work among employees whereby employees learn to solve problems, make decisions and work together. Comprehensive training and development programs also build confidence among employees since employees have confidence about the skills of other employees, which is vital in fostering a team environment within the organization. Second, training and development increases employee morale because they tend to motivate employees. Most training and development programs are adopted with the goal of providing employees with the tools they required to perform effectively and efficiently. As a result, employees are motivated to deliver their best (LLoyd, 2002). Employee training and development also enhances workforce morale because they feel valued. Training and development programs are costly in terms of money and loss of productivity time; however, when organizations invest considerable amount of resources and times on its employees, the organization is simply conveying a message that its employees are worth the investment and valued, which results in high levels of employee satisfaction and morale (Edwards, 2005).

Smart organizations acknowledge the fact that, there is a direct correlation between employee satisfaction and morale and the productivity of employees; as a result, employee training and development serves as an effective strategy for enhancing employee productivity, which has considerable returns required for the success and continuity of the organization. It is essential to acknowledge that employee satisfaction and moral is a critical success factor for the organization, and so is employee training and development (McKenzie & Van Winkelen, 2004). The underlying argument is that the success of a company depends on the attitudes of its employees and how they enjoy their jobs. On the other hand, the business costs of low morale and employee dissatisfaction are evident; for instance, low employee morale results in reduced productivity, increased employee turnover unresolved conflicts at the workplace, and increased unproductive time, which results in negative outcomes on the overall organizational performance (Lockwood, 2004). As a result, employee training and development serves as a solution for a number of issues leading to low employee morale and dissatisfaction. Overall, despite the costs in terms of money and loss of productive time associated with employee training, the end results are positive and make significant contributions to the performance of the organization.

Increased Levels of Motivation among Employees

A direct outcome of employee training and development is increased motivation levels of workforce. A significant determinant of employee motivation is the availability of growth opportunities for employees to develop their careers using training and development. Fundamentally, the goal of employee motivation is to get employees perform their duties because they want to perform their jobs. Noe (2008) observes that one of the factors affecting motivation levels for employees is the need for new training in order to enhance their expertise and develop their careers. It is evident that every individual appreciates to feel valued and empowered, and every person needs to grow; as a result, training and development can be helpful in satisfying this need among employees, which ultimately results to increased organizational performance emanating from cumulative individual performances. Increased employee motivation produces personal development, which results in long lasting competencies (McKenzie & Van Winkelen, 2004).

Organizations are usually filled with employees who are eager to acquire new skills and development. In addition, organizations aim at harnessing the full potential and value of their workforce and build loyalty and retention; as a result, employee training and development is a winning prospect for all stakeholders. In the light of this view, training and development fosters employee motivation in various ways including understanding, improvement and creating opportunities personal and career development. With respect to understanding, it is evident that every employee makes a significant contribution towards the overall function of the organization; however, employees having a limited scope jobs tend to have a feeling that they may not be vital in the overall function of the organization (Hubbar & Beamish, 2011). As a result, training and development plays an integral role in helping employees have an understanding of how their work is aligned with the structure, goals, achievements and mission of the organization. The outcome is that the levels of motivation among employees tend to increase and they normally become excited about their jobs because they have an understanding how their concerted efforts contribute to organizational success (Hubbar & Beamish, 2011).

Employee training and development also fosters improvement, in the sense that employees are aware of the circumstances they can improve their processes and productivity. According to Noe (2008), employees usually lack the tools and education needed to achieve their potential fully. As a result, training and development, especially for departments and other business divisions, play an integral role in ensuring things get back on track in order to improve the quality of work and result in positive outcomes. The outcome of employee training and development is that employees are happier when undertaking their duties and feel the excitement associated with the prospects of growth and success at both the individual and organizational level. Training and development also increases employee motivation through providing opportunities for career development (Woods, 2001). Many employees join an organization with the goal of not only having a job but also developing their careers. Consequently, opportunities for growing their careers are a vital tool for employee motivation. However, if these growth opportunities are not available in the organization, employees tend to depict low levels of motivation, and may opt to seek other organizations that are willing to support their quest for career development. Training and development plays a significant role in helping employees to achieve their goals through providing them with the education and skills required to perform betters, and acquire knowledge relating to new aspects of the business that they can apply in future. From a HRM perspective, training and development is a form of investment that organization makes in its employees. When organizations adopt training and development programs as part of their business strategies, the organization is pointing out that it values its employees and their respective efforts; this provides an effective platform for motivating employees towards organizational and individual achievements. The outcome of a motivated staff is loyalty, attachment and enthusiasm, which leads to enhanced productivity and positive outcomes for the organization (Edwards, 2005).

Statistics point out that about 75% of employee recruitment entails the replacement of employees who quit their job positions (Hubbar & Beamish, 2011). In addition, organizations incur average losses of $ 1 million yearly for professional and managerial employees quitting their job positions. This dismal statistics are attributed to the disengaged and unmotivated employees who do not perceive any growth opportunities in organizations, which is mainly attributed to the lack of training and development initiatives implemented in the organizations (Hubbar & Beamish, 2011). It is apparent that failing to adopt training and development programs to satisfy employees needs for growth results in low motivation levels, which is costly to the organization in terms of high turnover rates and reduced productivity leading to low organizational performance. Employee motivation is driven by the need to develop a good image as a worker, which results in increased growth and productivity at both individual and organizational levels. Once employees achieve this goal, the next phase of their lives working in the organization entails self actualization. If the organization does not assist in the quest for esteem by failing to provide skills development training, it is apparent that employees will seek opportunities outside the organization to satisfy this intrinsic motivation. In addition, failure by the company to affirm that it values the contributions of its employees by investing in them produces a motivation killing message, wherein employees perceive their work for the organization as a dead-end job (Edwards, 2005).

Organizations accrue a number of benefits associated with giving a motivated staff, particularly after employee training and development, including increased productivity, reduced absenteeism, reduced staff turnover rates, enhanced industrial relations, good company reputation, and improvements in product or service quality. Improved productivity results in reduced costs of production, which gives the business a strategic advantage compared to its competitors. In addition, reduced absenteeism and staff turnover rates tend to lower the recruitment and training costs implying that training and development of employees offsets the costs associated with high employee turnover rates. It is apparent from the advantages of a motivated workforce that training and development results in positive outcomes for the organization and is cheaper than employee turnover (McKenzie & Van Winkelen, 2004).

Improved Efficiencies in Business Processes Leading to Financial Gains

Empirical studies point out that there is a strong and positive correlation between employee training and development and competence, which influences the efficiency of business processes. Conventional knowledge indicates that there training and development results in improved competency. The underlying argument is that training and developing employees increases their competency, which results in organizational competency by facilitating efficient business process. Despite the fact that, research report mixed findings regarding the impact of training and development, this paper argues that cases where training and development does not have an effect on employee competency can be attributed to training and development programs that were designed and implemented poorly (Hubbar & Beamish, 2011).

Hubbar & Beamish (2011) argue that relevant and well-designed training and development programs have a direct impact on the competencies of employees. If training and development are designed and implemented in accordance to organizational and individual needs, the participating empl