Dollars and Sense: The Business Rationale for Training

By Shanna Germain

If you’re in the specialty coffee business, you probably know a great deal about employee training. You’ve read articles, you understand the reasoning, and you likely have a system set up to train new and continuing employees. Chances are good that you also agree with the philosophy that says that having well-trained employees makes for a happier employee, a better customer experience and, ideally, better coffee.

But do those things equate to a better business, strictly in terms of dollars and cents? Is the time, money and effort that it takes to train your employees really worth it for your bottom line? And how do you track that money that goes out versus the money that comes in?

When it comes to training employees, it’s much easier for a business to track the money that goes out than the money that comes back. And there is a lot of money going out—according to the American Society for Training and Development’s (ASTD) 2008 State of the Industry report, U.S. organizations spent $134.07 billion on employee learning and development. The majority of that money—nearly 80 billion—was spent on internal learning processes, like staff salaries and development costs. The remainder went to external services like workshops and events.

That’s hardly chump change. So what does the cost-benefit analysis look like when it comes to training? And how does the measure up against your bottom line?

TRAINING BENNIES

If we skip the money-talk first, and just look at the semi-intangible benefits that come with employee training, it’s easy to see why smart, growing companies keep it at the top of their to-do list.

“Training—or as we like to call it, education—is a win-win for both employee and employer,” says Josh Ferguson, co-owner of Kaldi’s Coffee Roasting Company. “As team members grow their coffee knowledge, we see direct improvements in beverage quality, customer experience and team member retention. We allocate training dollars for training in our own cafes, for wholesale customers and community events. The financial commitment is relatively small when compared to the potential return on investment.”

Those companies that have created quality training programs for their employees agree that the investment—both in terms of money and time—tends to come back ten-fold when it’s done right.

“From a business perspective, providing training for your employees does give you an advantage, particularly when you work with a specialty product,” suggests Heather Ringwood, operations director at Batdorf & Bronson Coffee Roasters. “In addition to providing a basic ingredient for growth, an investment in training people is no different than investing in a company. When you invest in a company, you send a message that you believe in what they are doing. When you invest in an employee, as a roaster or as a retailer, you send a message to the employees that you believe in them, and this equates, somewhat counter-intuitively, to lower training costs over the long run.”

Training has other intangible, but moneymaking benefits as well, from increased job satisfaction and knowledge, to better customer service, to lower turnover.

“Consistent, well-educated and engaged staff provide customers with the information they need to learn, get engaged in your store and product, and to purchase more than they would have when they initially walked through your door,” adds Ringwood. “It also builds a relationship with your customer and they become regulars and repeat customers to the businesses they trust and know are knowledgeable.”

Here are just a few of the reasons—financial and otherwise—that solid training and education can make your employees more beneficial to your business.

I [heart] My Job

When employees love what they do, it shows—to other employees, to customers, even to the people they meet on the street. Training is, not surprisingly, one of the simplest ways to ensure that employees love what they do.

“Associates who feel like they are equipped to do the job they have been hired to do and haven’t been ‘thrown to the wolves’ are more competent and confident in their roles,” says Samantha Veide, sales learning and development manager for Mars Drinks. “Confidence and competence leads to employees feeling happier about their work—after all who wants to feel incompetent and lacking in confidence? This has immense benefits for the associate herself, but also for the team working with this person. Good morale spreads.”

I Rock My Job

We’ve already talked about how training provides employees with the necessary tools to make great coffee. But it goes above and beyond that. From a financial perspective, well-trained employees are faster, sharper and more likely to get orders right the first time.

“Properly trained team members produce quality drinks which drive sales,” says Ferguson. “They also reduce waste of milk, coffee, additives and the like, which improves profitability. And ultimately well-trained team members have more fun at work.”

All of that leads to a better experience in all elements of your business—the employees, the managerial staff, the customers, the coffee and the till.

I Am Committed to My Job

Despite what you might think, the chances are slim that the person you spend all that time training will up and leave you for another company. Instead, the opposite tends to be true.

“Employees who receive training will report lower levels of turnover cognitions—thoughts of quitting, search intentions, and turnover intentions—than those employees who do not receive training,” says Veide.

This is especially cost saving, as a recent study by the ASTD estimated that the cost of replacing a typical professional is about one and a half times that person’s annual salary. And to make matters worse—the longer the position stays empty, the higher that cost rises. By training employees, you make them feel valued, which in turn makes them want to stay employed with you.

“I know that with the training that we provide for employees at their initial hire and throughout their time in the company has enabled us to reduce our average time of employment in the company from the ‘typical’ six months to a year to two years and more,” says Ringwood. “There is no doubt that an increased investment up front results in savings over time because it decreases turn-over.”

CHECKS AND BALANCES 

While we can imagine that those intangible benefits are adding to our till on a drink-by-drink basis, it’s still hard to quantify exactly how much good it’s doing. Although it would be fairly difficult, if not impossible, to create a system where you could account for the increased profits based on training, there is a way to make the cash-flow/education loop at least fairly accountable. Creating a checks-and-balances system that attempts to measure return on investment (ROI) is one tried-and-true method for keeping track, suggests Veide.

“This is one of the hardest challenges of a learning and development department,” she says. “The companies that are doing this well are doing this on Level 4 of the Kirkpatrick model for measuring ROI.”

Level 1: Did employees like it?

Level 2: Did they learn something? Do they know more now than they did when they arrived?

Level 3: Are they able to use what they’ve learned while on the job?

Level 4: Did their change in behaviors have positive results on the business?

While measuring Level 4 is difficult, it’s not impossible. The trick, says Veide, is to quantify the value of the result.

“Let’s take the example of a barista who hasn’t been trained and is producing defective, unserviceable drinks,” she says. “If the training program is designed to affect this outcome—to get the barista to make better drinks—and after the training the barista does indeed make better drinks and reduce the amount of waste, you can intuit that the training is tied to the associate’s behavior change.”

“You then need to figure out how much the lack of training is costing the company in lost product, figure out how much the training will cost and determine if the cost of training the barista will, in the long run, prove to be a wise investment because of the saved money resulting in the reduction of waste.”

Spending money to save money—not as counterintuitive as it seems. But isn’t it great to know that all that training is doing more than just producing great coffee, happy customers, and smart employees? It’s also helping to keep your business afloat from a financial perspective.

Training, like coffee, seems to be set squarely in the middle between subjective and objective, quantifiable and intangible. While most of us will agree that it’s a necessary part of any successful coffee business in terms of quality—quality coffee, quality employees, quality experience—we can’t always find the right equation to explain how, exactly, it benefits our bottom line. We only know that it does, and that having a quality training program makes sense when it comes to dollars and cents.

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