The Business Case for Executive Education

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Many companies spend thousands of dollars on professional training. Why? “If we invest in the abilities of our employees, it should improve our organization.” Ideally, after offering training, the company should become more productive and profitable.

Are companies actually seeing the results of this benefit? How do you measure the impact of executive education has on the organization? Does training improve your company’s overall capabilities and give it an advantage over its competitors? Why are so many states within the U.S. offering training grants to companies? Is your company taking advantage of these training funds?

According to the American Society for Training and Development (ASTD), a typical U.S. company dedicates an average of two percent of its payroll to training expenses. Additional research shows this is money well spent: ASTD found that an increase in training investment equal to an average of $680 per employee generates an average six percent improvement in total shareholder return the following year. (This was measure by change in stock price and dividends issued.) The study found similar results for gross profit margin, return on assets, ratio of price-to-book value and income per employee.

How to Get Started with Executive Training

The first step in developing an executive training program is to conduct a training evaluation of the organization:

  1. Review each person’s education and training within the department
  2. Audit each area of the company to determine where deficiencies may exist or where employees are not meeting company goals or standards.
  3. Plan an executive education program with specific goals and objectives that the company hopes to achieve.
  4. Implement the training, utilizing outside resources, such as area universities and training organizations, if needed.
  5. Measure the effect of the training program.

All training should be fully evaluated to see if the investment was successful. This will help in future training investments of high-potential employees.

Resources to Help with Funding Executive Training

Many states offer matching or free training grants to improve a company’s performance. These states realize that training allows a company to adapt and stay in business. Many states also view training grants as a way to entice companies to move to their state. The following is a sample of states and the various training grant programs they provide:

Arizona Department of Commerce

California Employee Development Department

New York State Department of Labor

Texas Workforce Commission

Workforce and Economic Development Network of Pennsylvania

As competition for business continues to increase, it’s crucial for companies to invest in strategic executive education opportunities for employees. And they can’t accord to waste money and time on training that will not provide a benefit to the organization. Executive training is key to the success of a company’s continuous improvement program.

Note: This post is an adaptation of an article that originally ran in Inside Supply Management, April 2008.

 

Patrick Penfield

Patrick Penfield

Director of Executive Education and Professor of Supply Chain Practice at Martin J. Whitman School of Management
Professor Penfield is director of executive education and assistant professor of supply chain management practice. He is interested in helping practitioners bring their supply chain management activities into the 21st century. Penfield was most recently the vice president of operations for a local manufacturing company and has more than 15 years of experience in supply chain management, working with Johnson & Johnson, Philips Electronics, and The Raymond/Toyota Corporation.
Patrick Penfield

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