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relationship between training and business performance, The

Labour Market Trends, Oct 2003

NEW RESEARCH has identified a significant link between the intensity of training by businesses and their performance. Firms with higher levels of training had greater growth ambitions and were more innovative. A statistically significant link was found between training spend and business growth in terms of employment and turnover. Half the businesses surveyed felt that training had increased their turnover and profit margin and three-quarters thought that it had improved labour productivity.

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The study was commissioned for the Department for Education and Skills and conducted by the Centre for Business Research. It examined a number of subjects: the level of training provided by businesses; which employees were most likely to receive training; and which type of business was most likely to provide training. The researchers used regression analysis to identify the determinants of variations in firms' training expenditure and the impact of training on business performance. Telephone interviews with 2,500 firms, stratified by size and sector, were supplemented by financial information on the firms participating in the research and case studies of 32 firms.

The research found that levels of training varied according to size of business and between employee groups. Smaller businesses were less likely to provide training, particularly off-the-job training. Some 38 per cent of firms employing less than 10 people provided off-the job training compared with over 90 per cent of firms employing 100 or more people. Smaller firms were also less likely to provide training for their managers and senior administrators than larger ones. Employees working in operative and assembly occupations were considerably less likely to receive off-the-job training than other employees, but more likely to receive on-- the-job training. Employees in other manual occupations were the least likely to receive either type of training. Just 44 per cent received off-the-job training and 61 per cent were trained on the job.

The regression analysis found that the most significant determinants of the level of businesses' training expenditure were: employment size; length of time taken to train an employee; growth ambitions of the firm; difficulties in recruiting managers and senior administrators; initiatives to involve employees in work design and practices; the use of more sophisticated management tools such as total quality management and job rotation; firms' being part of a larger group; and in smaller firms (employing less than 100), written training plans and a director responsible for employees.

The case studies confirmed that smaller firms tended to provide informal, on-the-job training. Generally, they used training intermittently to meet new needs such as a new employee or a new piece of equipment. Small businesses which used large amounts of technology, had rigorous health and safety requirements, or employed professionals who were legally required to maintain their development were more likely to provide off-the-job training.

As firms grew in size there was a tendency for training to become more formal with more off-the-job training. Case study firms that were not performing well tended to concentrate on on-the-job and informal training, as they lacked the financial resources and were unable to lose the time from production to train off the job. However, there were also firms in a precarious state of survival that resorted to formal off-the-job training in an attempt to survive.

Businesses that provided a higher level of training were more likely to have a business plan, a human resources plan and a written training plan. They were also more likely to have a specified budget for training, a senior manager with responsibility for training, separate training facilities and staff to design and teach courses.

Copyright The Controller of Her Majesty's Stationery Office Oct 2003
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relationship between training and business performance, The

Labour Market Trends, Oct 2003

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