Staff Training and Logistics

The announcement that Skills for Logistics has funding for a National Skills Academy is potentially great news for the industry with it providing employers guarantees of training quality, when this is combined with the courses offered by CILT, CIPs and Universities such as Hull and Cranfield it is clear that there is no shortage of excellent training available for logisticians in the UK. Despite this many companies fail to invest in their staff.  I have been thinking about this failure to invest for sometime therefore over the course of the next week or so I intend to discuss:-

• Reasons why firms do not train their staff
• Why firms should train their staff
• The type of skills that are needed in the logistics industry

The primary reason for training staff members is to improve business performance this could be by productivity improvements, by reducing labour turnover, to introduce a new product or to future proof a workforce an additional consideration in our industry is legislative training for example the CPC National and International, the Driver CPC and the DGSA qualifications.

As part of my investigation into why some firms fail to train staff I read a large number of official UK government reports, the UK government are especially interested in training due to its effect on productivity. A Department for Education report analysed the benefits and reasons for training staff within SMEs and found the following:-

Benefits from training

With so many compelling reasons to train it is therefore worth examining why some firms do not invest in training.

The reasons for the failure to train employees can be broadly grouped under two headings – A lack of a perceived need to train and constraints to training. Underneath each of these headings are a number of sub reasons which were given by respondents to a number of UK government surveys

1)      A lack of Perceived need to train

• the belief within a company that training does not deliver any benefits
• staff gained all the training they needed on recruitment

2)      Constraints to training

• a lack of finance to fund training
• the belief that by providing staff with training will ultimate lead them to leave the company.
• lost working time
• lack of training subsidy
• Falling sales
• poor quality of training

Reasons for not Providing Training

The results in the table above do not include the reason which is most commonly discussed in the literature and also amongst many business leaders – the idea that training an employee will lead to that employee leaving the company to gain more money elsewhere. I intend to spend the rest of this article discussing this idea.

The idea that training staff members simply leads them to leave the organisation is an argument I have heard from a large number of people in my career and it is also one which has been studied academically. In 1975 an economist called Gary Becker published a famous book called Human Capital. Becker viewed training as an investment which increases productivity, but comes with a cost due to the trainee’s freedom of employment (i.e. the trainee can leave once trained).

Becker classified two types of training – general training which raises performance in many firms and specific training which is only of value in the training firm with most training undertaken in firms combining general and specific training. His most important conclusions were that:-

• It is the employee who gains the benefit of general training. Becker argued this as general training raises the value of an employee in any company therefore to avoid other firms poaching trained staff their post training wage must be equal to their marginal product. This means that the training firm gains no benefit from such general training. Becker further concluded that due to this firms will not finance general training as all the benefits go to the worker.
• Firms will pay for specific training. Becker argued that this is because they gain the full benefit of such training as it raises productivity only in the training firm

Despite the strong logical argument that Becker made (and some very complex formulae) firms do and should provide general training to their staff why is this:-

• Becker assumed that the labour market is perfectly competitive,  it is not because of:-
• Information asymmetries. These exist because the training firm has more information regarding both the ability of their staff and the training they have received than any potential employer this means that the current employer has more knowledge of their true worth
• Employee Loyalty to the firm. May employees are loyal to the firm and therefore do not wish to leave, in fact some studies have shown that general training increases loyalty
• The job market is imperfect  in that there may not be a suitable job available for the employee
• It is often costly for employees to change jobs for example loss of employment rights, hassle factors, partner career
• Employees may not understand the value of the skills gained via general training, in fact with on the job style training they may not realise they have been trained!
• Training is neither perfectly general or perfectly specific – most training is a mix of the two therefore the value derived to the firm from the training is more than which accrues to the employees

Hopefully this short article has demonstrated why some firms do not trained and has dispelled some of the reasons in the next articles in this series I will look at:-

• Who gets trained within firms
• Why Firms should train staff
• What types of skills are needed