Companies facing pressure to reduce costs may be tempted to trim workforce development, whose returns are hard to assess quickly, Dr. Philios Andreou Sphika argued in a Nov. 3 Bangkok Post column.
His column discusses budget decisions in general rather than an announced reduction at a named employer. Sphika argues that the immediate outlay can be easier to see than the later value of skills built through development programs. He does not say every program warrants protection; his concern is that businesses may judge such spending over a shorter horizon than its benefits allow.
A paper published in 2000 covered 575 publicly traded U.S. firms, using observations from 1996 through 1998. It sorted firms around the midpoint of training investment. Those above that mark averaged 36.9% in total shareholder return the following year, while those below averaged 19.8%. The authors reported the S&P 500’s annual weighted return during the same period as 25.5%.
That pattern shows a link within the sample, but not that training drove stock performance. The comparison does not separate training’s role from differences among firms or market conditions, nor does it show whether a particular course paid off. The results also come from a period nearly three decades ago and cannot set the expected payoff for current programs.
The researchers cited a measurement problem: companies did not face a training-investment disclosure requirement comparable to the one for research and development spending, and a standard method for valuing training was lacking.
Josh Bersin wrote in a Sept. 21, 2008, post that forthcoming research indicated an 11% drop in corporate training spending, without stating the period used for comparison. He also said 54% of respondents to an August research panel identified cost reduction as their leading business challenge.
Those figures offer a historical snapshot of cost pressure, not evidence about current employers. Sphika’s argument is that budgets register the immediate expense before a company can assess the longer-term value of improved skills.
