Near five-fold ROI for training investments

Published on the 12/04/2022 | Written by Heather Wright

Learning and development should be ‘strategic priority’…

Companies investing in learning and development are reaping a nearly five-fold return on their investment according to new research from Deakin University’s DeakinCo.

The Deakin report, prepared with Deloitte Access Economics, found that for every $1 invested in learning and development, a company reaped $4.70 in additional revenue, with leading L&D organisations also reporting a significantly lower attrition rate – just 14 percent, compared to almost 25 percent for ‘laggard’ L&D performers. 

“Without an understanding of the ROI, it can be difficult to assess the costs and benefits of adopting a L&D program, leading to an under-investment in learning.”

With companies desperate to retain talent amidst a significant war for talent, the report points to the need for companies to make learning and development a strategic priority. Even with migration slowly starting to flow back into Australia and, to a lesser extent New Zealand, strong international competition and a significant backlog of skill needs mean that battle remains acute, the report says. 

Securing and retaining talent is rated as the number one business risk by Australian businesses in 2022, David Rumbens, Deloitte Access Economics partners says.

The DeakinCo report reiterates that learning and development (L&D) leads to increased profits, higher customer engagement, better staff retention and loyalty and improved productivity and employee engagement. Also noted are fewer safety incidents.

The DeakinCo report, The Business Return on Learning and Development, follows a slew of other reports and commentary on the benefits of training, but unlike many, offers up some tangible figures around ROI payoffs for businesses. 

That’s a critical factor, with the DeakinCo report also noting that it’s the difficulty in ascertaining the commercial benefits and get an understanding on the return on investment, that is hampering investment in learning. 

And, as with other reports, DeakinCo found that despite the strong case for training, there’s a serious lack of investment.

The Business Return on Learning and Development says 87 percent of businesses in Australia could do more to enhance L&D, with just 13 percent classified as advanced learning organisations – companies at the forefront of investing in skills and knowledge for their teams. 

Research from AlphaBeta and AWS last month, specifically around digital training, found that just 25 percent of Kiwi companies and 30 percent of Australian were training their teams.

“While most businesses undertake L&D to some degree, the commercial benefits are not easily quantified,” The Business Return on Learning and Development says. 

“Without an understanding of the return on investment, it can be difficult for businesses to assess the costs and benefits of adopting a L&D program, leading to an under-investment in learning.”

At an economy-wide level, the report says this could slow down the country’s recovery if businesses cannot access the skills they need in the job market and do not invest enough to build skills internally.

While most businesses recognise the benefits of L&D, 51 percent said they wanted beetter evidence of the benefits of training for organisational performance, something DeakinCo says points to ‘a significant lack of understanding into the quantifiable benefits of L&D activities’.

“Of the 68 percent of businesses who report they track L&D-related outcomes, the majority (56 percent) measure their ROI through employee satisfaction surveys or changes in productivity (50 percent). Meanwhile, only one third (33 percent) of businesses report tracking returns to L&D through financial metrics. This suggests most businesses lack the necessary information about their programs’ efficacy to properly capitalise on the benefits of L&D.”

Glenn Campbell, DeakinCo CEO, says the report’s research ‘very clearly demonstrates the financial benefits of L&D’.

“We hope businesses can now feel more confident investing in their people knowing that every $1 invested translates to an additional $4.70 in business revenue per employee,” Campbell says. 

“What’s more, investing in L&D leads to better staff retention… And in the context of the major skills shortages Australia is currently experiencing, this is an obvious opportunity for businesses who are wanting to retain talent and tackle skills gaps.

“Skills shortages are here to stay, and Australian businesses need to take action. L&D will help to counteract this challenge — not only by improving employee innovation and productivity, but also by preparing businesses for the future state of work.”

Employee productivity increases were the most common benefit cited by businesses in the survey  at 47 percent. Upskilling and re-skilling staff (44 percent) and improving employee retention (38 percent) followed. 

On the flip side, the difficulties associated with Covid-19 and a lack of time were identified as top barriers to implementing L&D, selected by 45 percent and 47 percent of the 206 business leaders and HR professionals across Australia surveyed. 

The Covid factor is also at play in accelerating the rapid digitalisation of businesses, and compounding the labour shortages thanks to border closures.

Research in 2021 indicates that 64 percent of Australian workers apply digital skills in their jobs today, the report notes. And though most businesses may have some level of digital literacy, 26 percent of all businesses surveyed reported digital literacy as a key skills gap.

“In this context, L&D plays a crucial role in helping businesses to upskill and re-skill employees so they can deliver the specific digital skills businesses will require to survive in the rapidly changing business landscape.”

Topping the list as the most common types of training implemented by businesses were mandatory compliance training – accounting for 29 percent of all training activity – formal, on-the-job training initiatives (25 percent) and coaching and mentoring. 

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