The Economics of a Training/Learning Culture
Perceptions and old habits are hard to break. In the CPA profession, training is associated with continuing professional education (CPE); however, in today’s environment training and learning are broader in scope for several reasons. Training reaches well beyond just the accountants and their CPE requirements. Yet firms still devote limited resources to training and learning while expecting employees to “get it on their own”.
Training in the 21st century
There are several reasons why the requirements for training and learning have grown over the past 20 years and are imperative today in firms of all sizes.
- The international firms no longer provide the training ground for the profession.
- The body of knowledge has exploded with diversified services and increased regulations.
- Technology has provided additional capacity and allowed processes to become more efficient. Many employees do not have the required IT skills to compete efficiently.
- An increasingly diverse work force (experiences and education) is utilized.
- Commoditization of many services (obsolescence in some cases) has occurred.
Training is part of the professional journey. It needs to be embedded in what we do as a profession and firm. Today’s environment calls for proactive rather than reactive training. Sadly, the reaction of many firm owners is we don’t have the time or can’t afford to provide a training program.
For the last eight years we have conducted a national training symposium with partners and learning directors from both large and smaller firms in attendance. These are the transformation agents of the profession. They understand the requirements, the resources, the plan, and economics of creating a training and learning culture. Many have fought battles within their own firms, but today their partners realize the importance and actively support the training and learning culture. As with any firm problem, leadership is the key ingredient to developing and implementing a solution. It has taken these firms several years to conduct needs assessments, develop individual curriculums and classes, identify resources, conduct training, test for accountability and measure results. The resources are available today with many summarized in the recently published The Boomer Advantage: Guide to Training and Learning.
In 2000, the Gartner Group stated for every hour of training, five hours of increased capacity is obtained. According to our statistics for the past few years, firms are just over 50% chargeable (charge hours divided by total hours of all personnel), so the excuse that firms don’t have time to train does not hold credibility. In fact, firms with a training and learning culture are proving (through increased revenue per full-time-equivalent) that training is a great investment with significant returns (financial and cultural). Administrative personnel and partners tend to benefit the most from technology and soft skills training. Training and learning are a two-way street. Good teachers make great learners and visa versa.
The following economic model should help you to see the leverage and profitability investing in a training and learning culture. I encourage you to use your own numbers and assumptions to personalize the model.
| Assumption | Calculation |
| Number of people in your firm | 50 |
| Assume each taught a 1 hour session | 1 |
| Hours of training available | 50 |
| Assume 50% attendance at these sessions | 50% |
| Hours of training attended | 25 |
| Increased capacity gained per Gartner Group | 5 |
| Total increase in capacity per person | 125 |
| Assume an average hourly rate of | $110 |
| Increased revenue per person | $13,750 |
| Cost of hours spent in training | $40 |
| Number of hours spent in training | 25 |
| Total cost of time spent per person | $1000 |
| Net Increase per person | $12750 |
| Number of people from above | 50 |
| Total increase in firm capacity/revenue | $637,500 |
The interesting conclusions that can be drawn from this model are:
- The average 50 person firm probably has current revenue of approximately $6M.
- The increased net revenue of $637,500 is approximately 11% of existing revenue.
- The $1,000 cost per employee is already in non-chargeable time and there is probably no additional cost to the firm resulting in another $50,000 of net income.
- Most of the increase will fall directly to net income before partners’ salaries.
In order to develop a training and learning culture, a firm must have committed leadership (Managing Partner or Chief Executive Officers), a professional educator in charge of the program, accountability and discipline. Training and learning must become a firm priority and part of the firm’s strategic plan. Measurable goals, strategic initiatives, due dates and responsible parties must be assigned and held responsible. It is further suggested this be incorporated into the firm’s compensation package as part of the Balanced Score Card approach. It takes time, but the reward in being able to attract and retain quality people makes it an excellent long-term investment that continues to produce a positive return on investment. If you are still not convinced, what is the alternative?