Training a smart move

How many Kiwi workers does it take to change a light bulb? If you subscribe to the view of German-born labour market commentator and Auckland University of Technology's recently appointed professor of economics Thomas Lange the answer is far too many.

Lange's take on New Zealand's labour market since arriving here from Europe last December is that too many employers struggle over the decision whether to recruit or retrain.

He says the country's dismal capital-to-labour ratio - those employed versus the productivity they deliver - supports the conclusion that many employers would rather hire more staff than train existing ones to be more productive. The net effect? He suspects the number of "bench-warmers" in good jobs only exacerbates the tight labour market.

Lange applauds employers for delivering the lowest unemployment level in 20 years. But the flipside of that (near full employment) milestone, says Lange, is the growing reputation Kiwi executives are building for being "great hirers" as opposed to fostering "work-smart" practices. Though New Zealand companies are catching up, the average 2.5 per cent of payroll they spend on training continues to lag behind global counterparts.

"The 2004 Treasury report suggests most productivity came from reduced unemployment rather than staff training," says Lange.

He claims many employers who skimp on training and staff development are really only playing "footsies" with their company's future.

He says results of a 2003 Business New Zealand and Industry Training NZ survey in which 52 per cent of employers cited cost as a prime reason for not training reveals a lot about the psyche of New Zealand executives.

To Lange this result illustrates a baffling unwillingness to accept what the rest of world takes for granted - training delivers a net return. Based on global rates of return (from training) averaging between 5 to 7 per cent he questions whether Kiwi managers can afford not to provide training.

And considering our labour skills shortage he says business owners and managers would be better served growing skills internally than going to the market for more talent.

He reminds executives that an investment in training drives better staff retention. When asked what drove their decision to stay in the same job, 43 per cent of the 2000 workers polled in a recent survey in Britain said training.

Closer to home, the Unlimited Best Places to Work Survey (2003) proves convincingly that employers who foster training are more likely to retain staff.

Lange suspects many Kiwi employers who "cry wolf" over not being to afford to train staff suffer from myopic business planning, and a reluctance to take staff off the job long enough to teach them new tricks.

"If 77 per cent of Kiwi companies [surveyed] admit training boosts profitability, why aren't they putting their money where their mouth is?"

There's also sufficient global evidence, argues Lange, to prove convincingly that companies refusing to train staff go backwards. A German-based study five years ago found that though 60 per cent of vocational training was applicable (on the job) in the first year, the figure dives to 39 per cent after six years.

Based on these numbers he says it's clear executives who don't train staff risk reduced productivity levels over time.

Here's a look at New Zealand industry sectors where research suggests lack of training is most acute:

* A third (30 per cent) of SMEs (six or less staff) don't offer training.

* Almost a quarter (23 per cent) of wholesalers don't offer training.

* A fifth (20 per cent) of hospitality/tourism companies don't offer training.

* And 15 per cent of manufacturers don't offer training.

Based on Business NZ and Industry Training NZ survey results most local staff training is compliance-driven. For most firms surveyed (80 per cent), health and safety and staff inductions dominate the training agenda. Meanwhile, 75 per cent of firms surveyed claimed to offer trade-oriented training, while half provide training to management.

What's clearly missing says Lange is a commitment to keep skills relevant to the jobs they're performing.

So how can managers improve their staff training without putting the company into insolvency?

There's some soul-searching required, says Lange. He says those managing the purse strings need to assess whether cash-flow allows for training or if there's an underlying scepticism over whether training will deliver a payback.

Lange says the first step is for executives to identify what training their staff need and how much it costs.

Depending on the economy and prevailing market conditions, he says internal skill shortages will always be a movable feast.

"But investing in training that's going to positively impact on the business today should make the payback as transparent as possible," says Lange who become the Britain's youngest professor at age 29 back in 1997.

"Remember, the best measure of the training you provide is staff turnover and productivity."

So if you can't put more money on the table for training, what other options do you have?

The first thing those in charge of training should be doing, suggests Lange, is to explore any free training that's available to their business or to their employees.

Interestingly enough, Business NZ and Industry Training NZ survey results also suggest many people fail to capitalise on training opportunities that might be right under their nose.

For example, only a third of Kiwi executives claimed to be aware of modern apprenticeships - compared with 57 per cent in Britain.

Even within the construction industry - a strong user of applied training - only 60 per cent of the firms surveyed claimed to know anything about modern apprenticeships.

Only 7 per cent of executives within the Government sector - one of the biggest advocates of industry training - were aware the modern apprenticeship scheme existed.

That's why Lange urges those in charge of training to find out what training their Industry Training Organisation (ITO) or any other industry-based organisations provide and whether subsidies are available for hiring apprenticeships.

But what if you don't have an ITO to help subsidise your training?

Talk to your staff, advises Lange, they may be willing to contribute to the cost of training - especially if they're going to develop highly transferable skills. That could mean meeting staff halfway on the cost of a course.

Alternatively, he suggests reimbursing staff once they've passed a course or once they've remained with the firm for a specific period of time.

"It could be worth going to your existing training provider and negotiating a better rate to train more of your staff," says Lange.

He reminds companies not to forget that their more experienced staff might be their best, cheapest and most untapped training resource. He suggests getting some of the company's top talent to take up the mantle on training.

"You may not have to shop elsewhere for training if you can create a 'learning-by-doing' environment."

For example, managers and IT-literate people could help develop in-house training programmes.

Cost-effective training

* Honestly assess training costs.
* Prioritise staff training needs.
* Fund training that maximises immediate returns.
* Explore free training options.
* Explore subsidies for hiring apprentices.
* Approach your IOT/industry associations.
* Contemplate asking staff to contribute.
* Negotiate bulk rates with your training provider.
* Develop in-house training programmes.
* Get experienced staff to mentor younger colleagues.
Source: Thomas Lange