I was taught at a very young age to put some pennies in my savings account each week. Money given by generous relatives at birthdays and Christmas also went into the same account. And if I did simple chores around the house, then I was sometimes rewarded with some more to add to the savings. And it grew, slowly but surely.
But it never occurred to me that there were other ways to make my money grow more quickly. And I don’t think it occurred to my parents either. They were never very well off and they worked hard for every penny they ever had. It is only as an adult that I have learnt about investment and compound interest.
Investment is a subject which we would do well to learn about, as employers. Investment in the skills of our employees can pay rich dividends.
What do savings and investment have to do with employing people?
It is sensible to save into an emergency fund, both in personal terms and in business. Your business may win a piece of work which requires some unusual skills not found in your workforce, or you may just need extra people, or some equipment. If you have an emergency fund, this enables you to hire in temporary help, or people with the required skills. Or it allows you to buy a piece of essential equipment.
Training and developing your employees is more of an investment. Your future plans may highlight the need for new skills or a different approach and if you were to invest in training your employees, those skills will be available when the need arises.
What is the benefit of investing in my employees?
If we make an investment, we are seeking two types of return. Investment needs to bring either a regular income, or an increase in the value of the investment. Preferably, both.
The same rules apply when we invest in our employees. If we buy new equipment, or some skills training, or even an additional employee, we need to know that the money has been well spent and the return will be worth the investment. There has to be an increase in the amount or quality of work done, or increased efficiency. This, in itself, is evidence of increased productivity.
But more importantly, there is likely to be an exponential effect on productivity in general. Where employees feel valued, they will be more productive. If people have evidence that their employer is prepared to invest in them, they will go the extra mile and productivity will naturally increase.
The alternative is a decrease in productivity, brought about when employees feel undervalued, sidelined or taken for granted. Our natural inclination is to do a good job but that can slide into mediocrity if our efforts are not recognised.
Return on Investment
Many employers are reluctant to invest in skills training for their employees. In these days of austerity and tight budgets, that is understandable. Such training can turn out to be a waste of time and money. The person either does not learn the right thing, or they fail to put it into practice properly. It can feel as though you are spending the money for the employee’s benefit, rather than for your business. Especially if the employee then leaves to work for someone else, with their new-found skills.
To get the very best return on investment, it is wise to plan beforehand. We want to be sure the skills training is appropriate and is likely to achieve the required result. And what about the employee? Do they want to do the training? Do they have the right attitude, aptitude and attention span? Is there a clear plan for implementing the training as soon as it is done?
This also applies to an investment in equipment or new employees. Or, indeed, to any type of investment.