The Business Case

Return on Investment

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The Business Case for Workforce Development

Career Development is a Key Motivator in Improving Employee Satisfaction and Retention

• Career growth, learning and development were cited as the #1 most common reason respondents gave for wanting to stay with a company.
  
  -- "Tag, You're it" by Beverly Kaye and Sharon Jordan-Evans,
  Training & Development, April 2000 v54 i4 p29
  
  
  
• Employee satisfaction with advancement opportunities, opportunities to learn new skills and coaching and counseling from one's supervisor were cited as the three largest differences between loyal workers and exiting workers, all ahead of 'pay' which was ranked seventh.
  
  -- "The Retention Dilemma Working Paper", led by Dawn Sherman,
  William Alper and Alan Wolfson, 2001, The Hay Group

Value of Hiring and Retaining Good Employees

• The US Department of Labor estimates that it costs a company one-third of a new hire's annual salary to replace an employee. Using a wage rate of only $7 an hour, it costs a company $4,350 for each departing employee. Estimates of the cost to replace supervisory, technical and management personnel run from 50% to several hundred percent of their salaries.
  
  -- "Employee Turnover Hurts Small and Large Company Profitability"
  (SHRM white paper), Richard Galbreath,SPHR, September 2001
  
  
  
• According to a recent report from the Voluntary Hospitals of America (VHA), it costs approximately 100 percent of a nurse's salary to fill a vacated nursing position. For a medical/surgical nurse, that averages about $46,000; the cost is $64,000 for a critical care nurse. Assuming a turnover rate of 20% - current average turnover rate among health care workers - a hospital employing 600 nurses at $46,000 per nurse per year will spend $5,520,000 a year in replacement costs.
  
  -- Health Care at the Crossroads, Strategies for Addressing the
  Evolving Nursing Crisis,Joint Commission on
  Accreditation of Healthcare Organizations, 2002.
  
  
• As a rule, each manager or professional who resigns costs the company the equivalent of 18 months salary. Hourly workers cost about a half-year's salary. This cost includes money spent on direct replacement expenses such as advertising, headhunter fees and employee development. It does not include, however, indirect opportunity costs such as lost sales, lower productivity and customer defections. These latter costs, harder to quantify, may be even more damaging to companies than the direct costs of attrition.
  
  -- The Retention Dilemma, Why Productive Workers Leave
  -Seven Suggestions for Keeping Them, Hay Group Working Paper,
  by Dawn Sherman, William Alper and Alan Wolfson, Hay Group, 2001.

Increased Profit Potential Through Investment in Career Development Efforts

• A study released in August 2000 by the American Society of Training and Development indicated that the top 25% of firms - those who invest on average $1,595 per employee in training-experienced 24% higher gross profit margins, 218% higher income per employee, and 26% higher price-to-book ratios than firms in the bottom quarter who invested, on average, only $128 per employee.
  
  -- "Employers in Every Industry Watch Hospitals' Staffing Solutions,
  by Todd Raphael, www.workforceonline.com, August 2002
  
  
  
• Conference Board research shows that improving employee skills creates employees who work smarter and better and who cope will with change in the workplace, improves union/management relations, and increases output and profitability.
  
  
• Employees with better basic skills make fewer errors, which means less repetition of tasks, thus cutting costs and improving the quality of products and services.
  
  
• As companies increase employees' skills and their capacity to apply them at work, they can directly improve their bottom line. Companies gain even more because these basic skills enhance employees' capacity to acquire higher technical and job-specific skills that make them high performers.
  
  -- "Turning Skills Into Profit: Economic Benefits of Workplace
  Education Programs", by Michael R. Bloom and
  Brenda Lafleur, The Conference Board, 1999.

The ability to find and retain qualified workers is, and will continue to be, a key challenge.

• Nearly half of Massachusetts's current workforce has only a high school degree or less.
  
  -- "Opportunity Knocks, Training the Commonwealth's Workers for the
  New Economy", a joint project by Mellon New England, and The
  Massachusetts Institute for a New Commonwealth, March 2000.
  
  
  
• Every so many years, literally one-half of your current job knowledge and skills become outdated or obsolete… according to the federal Department of Labor, today's best estimates of occupational half-life are in the range of thirty to thirty-six months. A constantly changing job combined with a constantly eroding skill base leaves employees feeling more disconnected from their jobs than ever.
  
  -- "Finding and Keeping Great Employees", Jim Harris, PH.D. and
  Joan Brannick, PH.D., American Management Association, 1999.
  
  
  
• The number of trained professionals, most of them baby boomers themselves, may decline as the need for their services rises. For example, about half of the registered nurses are at least 45 years old, higher than the average across all occupations. Their retirement will aggravate an already severe nursing shortage. Bureau of Labor statistics estimates that employers will need to find replacements for 331,000 RN's between 1998 and 2008.
  
  
• A 2001 report by the Paraprofessional Healthcare Institute notes that this caregiver gap will widen over the next 30 years-when the elderly population will double-while the population of traditional caregivers is expected to grow by only 7%.
  
  -- "The State of Aging and Health in America", report by Merck
  Institute of Aging and Health and The Gerontological
  Society of America, November 2002