Training tomorrow’s business leaders – should you invest?

Peter Crush

Thursday 22 January 2015

Businesses are often reluctant to invest in training schemes as employee turnover makes it hard to justify. However, for those organisations willing to spend the time and money on employee education, the return can greatly outweigh the cost.

It’s one of those unwritten business truisms: when times get tough, training faces the chop first. In the year following the banking crisis, average training budgets per employee fell 11 per cent, while the Institute of Directors found 20 per cent of companies cut training spend. This is despite most employers reporting near-constant skills crises and the benefits of training generally being irrefutable. Research shows firms who spend above average levels of training have 24 per cent higher profit margins compared to those with lower yearly training investments. Moreover, these same companies enjoy 218 per cent higher income per employee. This isn’t bad considering the UK is currently experiencing its lowest productivity for 20 years.

So far, so good. What’s less clear cut, however, is just how readily organisations should be providing much higher level, and expensive, MBA (or equivalent) level training – qualifications where the ROI debate is actually often less clear.

Because an MBA is not a specific or corrective course that fulfils an immediate need, but instead provides general business acumen, organisations can struggle to pin down exactly what they’ll get back. “MBAs are a crash course in generic management functions,” says Professor Jocken Runde, who directed the MBA Programme at Judge Business School, Cambridge (2008-2013). “It’s a rounding out in all the things you have to do in business,” says Wendy Alexander, associate dean of London Business School. “What MBAs are trying to do is get people to think about their personal development. It’s IQ that got people here, but it’s EQ [emotional intelligence] that an MBA provides. It’s a mindset change, as much as skillset change.”

Aware that ‘strategic thinking ability’ is difficult to pin a specific ROI to, European business schools in particular have been working hard to promote a unique learning environment. ESCP Europe Business School, for example, is currently collaborating with Cornell University in New York on its Executive MBA, within an existing partnership offering dual-degrees. In 2014, Bradford School of Management launched the world’s first Circular Economy MBA, while INSEAD, the 5th-ranked provider of MBAs (according to the annual Financial Times listing), now has opportunities for students to study in its newest campus in Abu Dhabi, with updated modules on organisational behaviour, multi-cultural differences and dispersed virtual teams. Amongst its tutors is renowned thinker Erin Meyer. She explains: “The MBA brand is still strong. We didn’t really see a dip during the recession because those companies supporting it understand the strategic value students bring back to their organisation.”

Of course, an MBA is only one option. At leadership institute Roffey Park, it used to run MBAs, but now does MSC’s, and also shorter, but more specific courses such as ‘Interpersonal relationships’, ‘Leading and delivering change’ and ‘Organisational development.’ Alex Swarbrick, senior consultant, Roffey Park Institute, elaborates: “Our training is designed more to fit around people’s jobs and we see this is something employers are increasingly wanting.”

It’s also worth noting that time-intensive, MBA-level education is facing just as much competition from newer ‘just-in-time’ methods of learning. Gerry Griffin is founder of Skill Pill – an organisation that provides bite-sized nuggets of learning on specific topics as they’re needed, in the form of animations via an employee’s smartphone or tablet. He says: “More and more organisations are recognising that learning is increasingly not about memorising lots of management theory en masse, but dipping in and learning to refresh one’s skills as and when they need to.” For one IT brand client, the ‘Skill Pills’ it distributed to its salesforce saw the company improve desired behaviours by between 11 and 19 per cent (measured on Salesforce.com, comparing one month’s worth of pre- and post-training).

With the average tech company thought to lose between 10-30 per cent of its original organisational capabilities each year, the case for providing training isn’t really in question –what is, is what type and what style of learning. Should learning be traditional ‘chalk and talk’? Or more an immersive experience, such as incorporating the gamification technology used in video games? This is clearly where future debate lies. In the meantime though, learning (via whatever channel), will pay dividends. Some say spending money on learning is a bit like spending money advertising – you know it’s useful, but not sure which bit of it is. It may not be scientific, but at least it’s a good starting point.

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