“If you think training is expensive, try ignorance.”
Intuitively most people know that a skilled workforce is likely to be more effective. But when it comes to the numbers, it isn’t always easy to justify investment.
The main problem is that accounting finance treats training as an expense, meaning that it comes straight off this year’s bottom line. Lower profits are not what executives want to hear about. But not only do profits fall, there is no recognition in the accounts that anything of value has been created; there is no entry in the balance sheet for skills or employee motivation. On the other hand, buy a new photocopier and an asset shows up on the balance sheet.
Yet which is likely to yield the greatest future benefit, a skilled employee or a photocopier?
“Accounting profits encourage an excessively short-term view of business. They also encourage an under-investment in information-based assets – staff, brands, and customer and supplier relationships … In today’s information age, the accounting focus only on tangible assets makes little sense now that these intangible assets are the overwhelming source of value creation.”
Professor Peter Doyle
But then, how much should be spent on training? And what about the argument for not training but ‘head-hunting’ staff trained by other organisations?
Justifying investment in HR and training activities requires a sophisticated approach that recognises financial impact over many years.
By taking our courses you will learn how to build a sophisticated sensitivity model that links ‘soft’ performance drivers such as culture, skills, leadership, motivation and relationships to hard, financial outcomes. You will become fluent in the language finance and will be able to justify your proposals with robust analysis incorporating:
- payback period
- net present value
- IRR
In addition, you will explore how to create appropriate KPIs and scorecards which enhance your commercial reputation and support future investments.