Performance Training Systems^®, Inc.

Lyau, N. & Pucel, D.J. (1995). An Organization's Economic Return on Training Investment. Performance Improvement Quarterly 8 (3), pp. 68-79

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This study addressed the relationship between an investment in training and the return to a company at the organization level. A sample of 237 large and medium size Taiwan firms that produce auto parts was selected to be studied. Data were gathered through a survey instrument sent to each of the firms.

A significant relationship was found between a firm's investment in training and labor productivity as measured by value added per worker (sales output minus material cost). This relationship held even while statistically controlling for other variables which the literature suggested might confound the relationship. This suggests that the relationship between investment in training and return to the bottom line tends to hold even when controlling for the effects of many other variables. The results also held when considering a firm's opportunity costs in addition to the direct costs of training. This suggests that the relationship between an investment in training and returned productivity is able to account for total costs of training. Hence, there appears to be a positive relationship between training and labor productivity at the organizational level. The study also established a methodology for predicting how much of a return could be expected from an investment in training. Within the specific firms studied, it was found that a $28 investment in training per worker had the potential of returning $430.

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