The positive effect of professional development and training: you’ll keep your personnel

Sometimes bosses ask themselves if they should invest in training of their personnel as there is a chance that they’ll take their new knowledge to another place afterwards.

This new study shows that the retention of skilled workers benefits from training.

From the press release:

Especially in times of shortage of skilled workers, some companies do not offer continuing education that improves the employees’ chances on the labour market. Behind this restraint is the employer’s fear that employees who have undergone extensive training will use their improved opportunities to switch to other companies.

Their fear seems to be unfounded, as Professor Thomas Zwick of Julius-Maximilians-Universität (JMU) Würzburg in Bavaria, Germany, and Dr. Daniel Dietz found out. “On average, training significantly increases employee loyalty to the company providing training by more than ten percentage points,” says Zwick, who heads the JMU Chair of Human Resource Management and Organisation.

Higher company loyalty, rising productivity

In a publication in the International Journal of Human Resource Management, the economists show that training not only increases the productivity of employees, it also reduces the tendency to leave the company.

“Interestingly, the retention effect also occurs in the case of training content that would enable employees to take a wage-increasing career step outside the company,” says the JMU professor. Even if the participants receive a certificate from an external training provider and can provide convincing evidence of their newly acquired skills, the retention effect remains positive.

Data basis of the analysis

For their study, Zwick and Dietz analysed the continuing education and career information of approximately 4,300 employees in 150 German companies over five consecutive years. All the companies studied were participants in the company panel of the Institute for Employment Research (IAB) in Nuremberg, Germany.

From this database, the researchers were able to ascertain, among other things, when employees had participated in continuing education, at which company they had worked during their training and whether they were still employed there in the following calendar year. Another key aspect of the study was whether the content of the trainings was also of interest to other employers, whether training was certified and whether the certificates came from external providers.

Abstract of the study:

This paper analyses the effect of training participation on employees’ retention in the training establishment. On the basis of the human capital and monopsony theories the effect of portability, visibility, and credibility of training on employee retention is jointly calculated. We use an extensive German linked employer–employee panel data set with detailed survey information on the training history and administrative labour market information of 4318 employees working in 149 establishments (WeLL-ADIAB). In multivariate panel regressions including internal instruments we compare the probability of staying with the same employer between training participants and employees who were by chance unable to participate in a planned training event. The high portability of training contents and training visibility provided by training certificates reduce the retention effect of training independently. Retention is reduced further when training content is reported credibly, that is, it is provided and certified by external institutions. However, the total effect of portable, visible, and credible training on retention is still positive. This paper therefore implies that employers can reap a double dividend of higher productivity and increased retention even from general, visible, and credible training.

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