The Economics of a Training/Learning Culture

Perceptions and old habits are hard to break. Our profession associates training with continuing professional education (CPE). However, in today’s environment, training and learning are broader in scope for several reasons. Training reaches well beyond just the accountants and their CPE requirements. Yet, firms still devote limited resources to training and learning, while expecting employees to “get it on their own.”

There are several reasons why the requirements for training and learning have grown over the past 20 years and are imperative today in firms of all sizes. Here are some of those reasons:

  • International firms no longer provide a training ground for the profession.
  • Diversified services and increased regulations create an exploding body of knowledge.
  • Technology provides additional capacity and allows processes to become more efficient.
  • Many employees do not have the required IT skills to compete efficiently.
  • The workforce continues to grow increasingly diverse (experiences and education).
  • Commoditization of many services and obsolescence, in some cases.

Training is part of the professional journey. It needs to be embedded in what we do as a profession. Today’s environment calls for proactive, rather than reactive, training. Sadly, the reaction of many firm owners is, “We don’t have time,” or “We can’t afford it.”

For the last several years, we have conducted a national training symposium, with partners and learning directors from both large and smaller firms in attendance. These are the transformation agents of the profession. They understand the requirements, the resources, the plan and the economics of creating a training and learning culture. Many fought battles within their own firms, but today, their partners realize the importance and actively support a training and learning culture.

As with any problem, leadership is the key ingredient to developing and implementing a solution. It has taken these firms several years to conduct needs assessments, develop individual curriculums and classes, identify resources, conduct training, test for accountability, and measure results.

In 2000, the Gartner Group stated that companies gain five hours of increased capacity for every hour of training. According to our statistics, firms are just over 50% chargeable (charge hours divided by total hours of all personnel), so the excuse that firms don’t have time to train does not hold up. In fact, firms with a training and learning culture are proving (through increased revenue per full-time-equivalent) that training is a great investment with significant returns (financial and cultural). Administrative personnel and partners tend to benefit the most from technology and soft skills training. Training and learning is a two-way street; good teachers make great learners, and vice versa.

The following economic model should help you to see the leverage and profitability from investing in a training and learning culture. I encourage you to use your own numbers and assumptions to personalize the model.

 

The interesting conclusions that can be drawn from this model are:

  1. The average 50-person firm probably has current revenue of approximately $6,000,000.
  2. The increased net revenue of $637,500 is approximately 11 percent of existing revenue.
  3. The $1,000 cost per employee is already in non-chargeable time, and there is probably no additional cost to the firm, resulting in another $50,000 of net income.
  4. Most of the increase will fall directly to net income before partners’ salaries.

To develop a training and learning culture, a firm must have committed leadership (A managing partner or chief executive officers), a professional educator in charge of the program, accountability and discipline. Training and learning must become a priority and part of the strategic plan. Responsible parties must be assigned measurable goals, strategic initiatives and due dates. We also suggest that this be incorporated into the firm’s compensation package, as part of the Balanced Score Card approach. It takes time, but the reward in being able to attract and retain quality people makes it an excellent long-term investment that continues to produce a positive return on investment. If you are still not convinced, what is the alternative?