Sample Paper Market Implications of Human Capital Investment in Training

Market Implications of Human Capital Investment in Training

An organization’s success largely depends on the competency of its employees. It is for this reason that human resource teams have strived to recruit employees possessing skills or competencies considered critical in improving an organization’s performance. Furthermore, employee development has proved to be essential in improving the employees’ competencies, especially when there is need to align them to market or industry changes (Burkholder, Edwards & Sartain, 2004, p. 348-349). This paper discusses the benefits of investing in employee development programs, and the metrics for evaluating their eventual performance. It achieves this by analyzing how the market is impacted by an organization’s investment in its employees’ training as described by Chih-Hsien, Songtao, and Grant (2011) in their article titled “Market implication of human capital investment in training.”

Organizations normally train their employees with the intention of enhancing their knowledge and competencies which are capable of providing it some competitive advantage in the market. Although employees’ expertise is assured through certification after undergoing the training program, the success of the training is evaluated through linking the employees’ expertise to the business processes, rather than jobs (Burkholder, Edwards & Sartain, 2004, p. 348). This enables the organization to focus the developed expertise towards realization of organizational goals, such as profitability and enhanced organizational processes. The performance effect of investing in employee development is to enable an organization achieve a balanced scorecard, that is, performance outcomes that are a reflection of the employee’s attitudes and behavior, the organization’s internal performance such as production output and quality, and also external indicators such as its sales and financial performance (Chih-Hsien, Songtao & Grant, 2011, p. 66). Attaining a balanced scorecard because of these performance outcomes usually improves the firm’s value in the long-term.

Performance Metrics in Employee Training/Development

The main objective of training employees is to enhance or improve firm performance. Firms can effectively track their training performance using metrics. They achieve through linking the tracked metrics to the firm’s training or employee development programs. The first metric for measuring employee training undertaken by human resources teams is the employee’s retention rate. Firms that train their employees tend to have high retention rates than those that do not because they increase the employees’ intrinsic motivation and job satisfaction (Luthans et al., 2010, p. 46-47). The second metric is new employee referral. Effective training often results in few new employee referrals because the firm already posses the capacity to improve their employees’ potential and competencies. Such firms therefore prefer building the capacity of their employees in ways that would facilitate realization of its goals and objectives. Turnover is another importance performance metric in employee training. A firm with an effective employee development program has a low turnover rate because its workers are usually motivated, satisfied with their job, thus would prefer working with the firm for longer periods.  Product development as a performance metric in training is particularly important as it indicates whether the training improved the employees’ innovativeness. Improved product development is an indication that the training improved the employees’ creativity and innovativeness in order to fill the existing market gaps or take advantage of market opportunities. Quality as a performance metric in training measures its impact on improving competencies or expertise in the development of a product or delivery of service (Chih-Hsien, Songtao & Grant, 2011, p. 74). Improving quality is among the most important goals that firms strive to achieve through organizing employee training. Productivity is another key performance metric in training. It normally measure the change in output by comparing the variation in production before and after the training has taken place. Employee training programs are normally expected to result in increased productivity. Another important performance metric in training is the firm’s customer service. Employee training programs are supposed to transform the way employees, who are representatives of the firm, interact with their firm’s customers. This is because part of the firm’s reason for existence is to meet the demands of these customers. Effective training programs should always result in superior customer service, an indication of improved performance. Customer loyalty is also an important performance metric in training because the resulting improved quality of services and products would ensure it retains its satisfied customers (Burkholder, Edwards & Sartain, 2004, p. 369). Apart from customer loyalty, revenue is another important performance metric in employee development. The reason for this is that training programs are aimed at improving the quality of work and increase productivity or output. This would lead to increased sales, which translate in to increased revenues for the firm. Finally, market share is an important performance metric in training, as the resulting productivity, quality of work, innovativeness, and even customer service is expected to attract more customers to the firm, thereby increasing its market share.

It is evident that employee training influences performance at each and every level of organization in both financial and non-financial ways (Chih-Hsien, Songtao & Grant, 2011, p. 81). The effectiveness of the training is determined using metrics, where the employees’ expertise resulting from the training is linked to the eventual performance outcomes. Therefore, performance metrics are critical in determining the impacts or effectiveness of employee development initiatives on the employees, the organization, shareholders, and even its customers and the public.

References

Burkholder, N. C., Edwards, P. J., & Sartain, L. (2004). On Staffing : Advice and Perspectives From HR Leaders. Hoboken, N.J.: Wiley.

Chih-Hsien, L., Songtao, M., & Grant, J. (2011). Market implication of human capital investment in training. Academy Of Accounting & Financial Studies Journal, 59-87.

Luthans, F., Avey, J. B., Avolio, B. J., & Peterson, S. J. (2010). The development and resulting performance impact of positive psychological capital.Human Resource Development Quarterly21(1), 41-67.