institute for employment studies
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The Return on Investors
Hillage J, Moralee J
commissioned by the Department for Education and Employment
Increasing attention is being given to the training and development of employees in the workplace. The importance of raising the skills of the nation’s workforce is exemplified by the priority attached by the government to encouraging employers to meet the Investors in People standard. Launched in October 1991, Investors provides a framework for employers to align the development of employees with business goals.
In 1993 the Department for Education and Employment (DfEE) commissioned the Institute for Employment Studies (IES) to research the way employers were developing their training and development practices and, in particular, evaluate the impact of Investors in People. The study has been carried out in three stages, based largely around a longitudinal survey of 1,800 workplaces, supplemented by surveys of employees and in-depth interviews with employers.
This summary presents the main findings of the latest report from the study. It compares the latest findings with those from previous surveys and includes analyses of the responses from the employers who took part in all three surveys. It represents an overview of the results from the three stages of the evaluation, and addresses directly the extent to which employers achieve a return on their investment in people.
Getting involved with Investors
Source: IES Survey 1995
Employers see a wide range of potential benefits from participation in the Investors initiative. The most commonly cited reasons include (Figure 1):
The next most frequently reported areas where employers felt that Investors could contribute are:
Other benefits cited include acting as a catalyst for change and providing an external benchmark.
TECs are key agents in the process of getting employers involved in Investors. Although there is a high level of joint involvement in Investors and other quality standards such as BS5750, and in training initiatives such as NVQs, we found relatively little evidence of one leading to another.
Around 15 per cent of non-involved employers said they were very likely to become involved in the future and a further 35 to 40 per cent were undecided. Non-involved employers mostly fall into one of five camps:
Looking particularly at small employers (ie those with fewer than 50 employees) and comparing them with larger ones, we found that:
Progress to the standard
It currently takes employers an average of two years from start to finish to meet the Investors in People standard. The time taken to achieve recognition has doubled since the first batch of employers signed up to the process (see Figure 2).
Source: IES Survey 1995
Employers committing to becoming Investors in People in recent years have generally found it harder than expected to achieve the standard. Reasons include:
However, despite the difficulties some had encountered, employers involved in Investors were keen to carry on trying to meet the standard. Although the numbers dropping out have risen slightly over the course of the three studies, they are still small, with about eight per cent of those involved on hold and four per cent deciding not to continue. Similarly, nearly all (95 per cent) the employers who had reached the standard intended to maintain it.
Looking at small employers, we found that, in comparison with larger employers, they:
Impact on practice
A consistent overall picture has emerged over our three surveys, with employers believing that their involvement with Investors has a significant, positive influence on their approach to training.
Three-quarters of the employers who anticipated training benefits from Investors said they had achieved the improvements they had expected. However, two-thirds also said that they could have achieved the same result by other means. Investors is therefore not a unique vehicle for bringing about improvements to training systems and outcomes. However, relatively few employers (15 per cent) would have made the same changes at the same time in the absence of Investors. Generally, Investors has influenced employers to make changes they would not otherwise have made (29 per cent of cases) or make the changes earlier (another 29 per cent) or on a larger scale (25 per cent) than they would have done otherwise.
As a result of Investors:
Source: IES Survey 1995
The effects of Investors on the training practices among recognised employers are set out is Figure 3. By and large, Investors appears to have more of an impact on the quality rather than the quantity of training. The amount of training provided rose over the three years of the study, among both organisations involved in Investors and those which were not. While we found some evidence of a switch from off-the-job to on-the-job training among Investors employers, it was not overwhelming. We found more convincing evidence of a greater amount of induction training being undertaken as a result of Investors.
Four in ten involved in Investors saw training costs rise as a result. There were two main sets of costs:
One in seven saw their training costs fall as they adopted a more targeted approach, used their training resources more efficiently, and altered the balance between in-house and external training.
We found a clear Investors effect on the approach adopted to business planning. As employers move through the Investors process they increasingly adopt more formal practices, such as written mission statements, business plans and HR strategies.
The impact of Investors on training and management practices is different among small employers in that:
Impact on business performance
Employers are interested in Investors as a means of improving the skills and motivation of their workforce and workplace relationships. Two-thirds of employers involved in Investors said that these benefits had been achieved. Although between 60 and 70 per cent said they could also have been achieved by other means, the study does not examine these alternatives or their relative merits.
Six in ten employers involved in Investors said that they had seen improvements in their workforce as a result of their participation in the standard (Figure 4).
Source: IES Survey 1995
The main improvements were in the areas of:
Source: IES Surveys, 1994, 1995
We compared a matched sample of employers involved in all three surveys. Although the level of sickness absence in Investors employers is generally higher than in non-Investors, we found those involved in Investors were more likely to have falling rates of sickness absence. Employers involved in Investors also reported fewer skill shortages year on year, while the level of shortages rose among non-participants (Figure 5). The differential pattern is statistically significant.
Improved financial performance is not a primary motivation for employers who seek to be an Investor in People. Fewer employers identified improved financial performance as a benefit they were looking to gain from Investors than those who were looking for training or workforce benefits. Of those that did, only 43 per cent said that their anticipated benefits had been achieved, and 80 per cent of those said that they could have been achieved by other means. However, 40 per cent of employers who said that the training or workforce objectives they sought from Investors had been realised, felt that there was a flow through to improved financial performance.
Nearly 40 per cent of employers said that Investors had made a direct contribution to improved business performance and a further third said that it had had an indirect effect. Of the rest, almost 70 per cent said that Investors would have an effect in the future and would take at least a year to feed through.
The main areas of business improvement were:
More objective evidence from our longitudinal sample to back up the perceptions of our respondents was difficult to unearth. There did appear to be an association between employers moving through the Investors process, and improved profit performance, but this association was not sufficiently strong to be statistically significant.
Multiple regression analysis indicated that being a recognised Investor in People was positively related with profitability, but the finding was not statistically significant. Investment in training (ie training expenditure) was the only significant influence on profitability per employee, with increased expenditure on training leading to increased profitability — a finding consistent with other studies.
We found further evidence that the smaller employers see the impact of Investors at an earlier stage than larger ones. Almost two-thirds of committed employers with under 50 employees told us that their involvement with Investors had led to workforce improvements, compared with less than half of those with 200 or more employees. The key area of improvement for small employers was in their employees’ understanding of the business.
Smaller employers were also more likely to:
Ten key messages emerge from the study:
The Return on Investors, Hillage J, Moralee J. Report 314, Institute for Employment Studies, 1996.
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