Economic Utility of Training Programs

In economic terms, training projects represent a major outlay for many corporations. In spite of the growing need to evaluate the cost-effectiveness of training programs in organizations, such cost-benefit analyses are rarely conducted. Moreover, the extant conceptual approaches and mathematical formulas typically used for this purpose produce inaccurate estimates of the economic utility of training programs for organizations.An amended approach to this procedure is elaborated and its benefits demonstrated. The proposed model regards any potential plan as an investment project that should be evaluated in a similar way to the assessment of other investment options. Thus, it is recommended that a training project be considered only if its potential real, post-tax rate of return exceeds the real, post-tax cost of capital to the firm, subject to the unique features of investment in human capital. This process could improve the potential financial benefits to the firm, from investment in training.

[1]  Michael J. Kavanagh,et al.  Applying Trained Skills on the Job: The Importance of the Work Environment , 1995 .

[2]  R. Noe.  Trainees' Attributes and Attitudes: Neglected Influences on Training Effectiveness , 1986 .

[3]  G. Latham,et al.  Developing and Training Human Resources in Organizations , 1991 .

[4]  Wayne F. Cascio,et al.  Using utility analysis to assess training outcomes. , 1989 .

[5]  G. Yukl,et al.  Training and development in work organizations. , 1992 .

[6]  Robert O. Brinkerhoff,et al.  Evaluating Training Programs in Business and Industry. , 1989 .

[7]  E. Kelloway,et al.  Effects of Transformational Leadership Training on Attitudinal and Financial Outcomes: A Field Experiment , 1996 .

[8]  F. Schmidt,et al.  ASSESSING THE ECONOMIC IMPACT OF PERSONNEL PROGRAMS ON WORKFORCE PRODUCTIVITY , 1982 .

[9]  H. Levy,et al.  Capital investment and financial decisions , 1978 .

[10]  Irwin L. Goldstein,et al.  Training and Development in Organizations , 1989 .

[11]  A. Saks.  Longitudinal field investigation of the moderating and mediating effects of self-efficacy on the relationship between training and newcomer adjustment. , 1995, The Journal of applied psychology.

[12]  Barry M. Staw,et al.  Psychological Dimensions of Organizational Behavior , 1991 .

[13]  J. Mincer.  Job Training: Costs, Returns, and Wage Profiles , 1989 .

[14]  J. Mathieu,et al.  Applying Utility Concepts to a Training Program in Supervisory Skills: A Time-Based Approach , 1987 .

[15]  Aharon Tziner,et al.  Assessing employee turnover costs: A revised approach , 1996 .

[16]  George F. Thomason.  A Textbook of Human Resource Management , 1988 .

[17]  E. Salas,et al.  Application of cognitive, skill-based, and affective theories of learning outcomes to new methods of training evaluation. , 1993 .

[18]  Anthony P. Carnevale.  Training in America: The Organization and Strategic Role of Training. ASTD Best Practices Series: Training for a Changing Work Force. First Edition. , 1990 .

[19]  Aharon Tziner,et al.  Personal and situational characteristics influencing the effectiveness of transfer of training improvement strategies , 1991 .