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February 1999

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Doctoring The Health Care Industry

A Toast To The Future

Business, The Final Frontier

Formula For Success: Balance Technology And People


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Y2K Calling

by Peter Block

Have You Hugged Your Goalie Today?
by Bryan McGraw


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Formula For Success: Balance Technology and People
Report Shows Growing Gap Between Leading-edge and Average Companies

Although companies in the United States are spending more on training than ever before, the gap between the leading-edge company and the average company is widening—and companies that don't bridge that gap may face bottom-line repercussions, according to a report recently released by the American Society for Training & Development (ASTD).

The report takes a look at training data from more than 800 U.S. organizations, including business, nonprofit and government sectors.
"Despite all the talk that employees need to take responsibility for making themselves more marketable, the truth is that companies need skilled employees. The leading edge companies are responding by providing more training because it makes sense, both from a business standpoint and from a recruitment standpoint,” said Laurie Bassi, ASTD vice president of research.

Technology Boom
Bassi attributes the huge need for skilled employees to the continued growth of technology in the workplace. “Companies are scrambling to meet the technological requirements of their business,” Bassi adds.

The findings in the report revealed that most companies increased the amount of money they spent on employees by about $150 per employee. But leading-edge firms surveyed doubled that with an average increase of $300 per employee. Typical total expenditures for training grew from $1.4 million to $2 million for average firms, and leading-edge firms increased spending from $3.4 million to $4.1 million.

Predictions for the future show the trend continuing. Projected expenditures show that the gap between the average firm and leading-edge firms will continue to widen, with the industry average increasing to $2.1 million, while leading-edge firms are projected to spend $4.7 million on training.

A Greater Commitment
Training alone does not distinguish leading-edge companies from their competitors. Bassi cautions that leading-edge firms became that way not just by spending money on training, but by complementing training with enlightened management practices including:
- High performance work practices (self-directed teams and access to business information)
- Innovative compensation practices (profit sharing and group-based pay)
- Innovative training practices (mentoring or coaching and training information systems).

"Companies in this country spend 10 times as much on technology as they do on training,” Bassi said. “Leading-edge companies know that they have to make smart investments in both the workforce and technology.” This dual investment in people and technology was identified as a key characteristic in leading-edge companies.

"A company can invest all the money it wants in technology, but if there is no one around who knows how to run the machines, to fix the machines or to figure out how the machines fit in with the overall business goals, a company will never bridge the chasm between companies that thrive in a global economy, and those that fail,” Bassi said.

In Related News—Other Findings
Not only do most companies not spend as much per employee on training as do leading-edge companies, but most firms also train fewer employees (74 percent of employees get trained on average, as opposed to 86 percent for leading-edge companies).

Improved bottom-line results were also identified as benefits to increased training. Companies that invest the most in workplace learning were showed to yield higher net sales per employee, higher gross profits per employee and a higher ratio in market-to-book values.
Of all the industries in the study, the information technology and transportation/ public utility sectors spent the most on training ($3.9 million and $3.8 million respectively). These industries also led in terms of money spent per employee on training ($1,004 per employee and $943 per employee respectively).

February '99 News for a Change | Email Editor
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