November 13, 2018
Activities: Employment, Human Services
Geography:
Demographics:
Annual ROI: 0.0%
Image source: Casey Brooke Photography
Workforce development programs are a critical aspect of social services provided to a city’s population. For those out of work, it helps provide tools and techniques to learn new skills, train for employment and find careers. It helps get people on their feet.
But many programs do it wrong.
For your city or state to get its work training and placement done right, you want to maximize potential in candidates. Lower unemployment, higher salaries, and more fulfilled citizens help to lower crime, increase tax revenues, and ensure a more productive voting population for years to come.
Nonprofit organization Generation offers up six lessons for agencies looking to successfully implement workforce training and placement programs:
1. Return on Investment (ROI) Is Essential, but It’s Not Everything
According to one survey, fewer than 10 percent of CEOs know the ROI of their recruitment and training efforts. In a sense, that is not surprising. No spreadsheet has a cell that details the full cost of workforce development—including time spent interviewing and overtime costs due to an insufficient workforce.
From the start, Generation sought to create that cell, tallying employer ROI in the form of reduced recruitment and training costs, productivity and quality outcomes, retention, and speed to promotion to produce a number that employers could understand. Our analysis of one company in dire need of technicians, for example, found that hiring cost an average $6,000 per person. Using an online ROI Estimator we devised—which determines value lost due to turnover or poor productivity, adjusted to salary and company size, and then compared to the performance of Generation graduates—we determined we could cut that in half.
However, in our experience, demonstrating ROI is not enough to get employers to buy in. Before they will commit, most employers also need to answer at least one of the following questions in the affirmative: First, have they tried, and failed, to crack this nut before? Desperation is, frankly, useful. Second, is the company leadership committed to the communities in which they operate? Those who see skilling and re-skilling as an issue larger than their own company are more willing to experiment. And last, are they willing to embed a new program inside their own recruitment and training programs? This gives companies a sense of control and ownership.
2. Industry Context Shapes Employers’ Willingness to Experiment with Training, Re-Skilling, and Hiring
In our work with some 2,400 employers, we have found that companies facing worker scarcity—such as technology or high-end manufacturers—are quicker to sign up for our program than companies dealing with high turnover.
In Spain, employers in robotics process automation were desperate for talent and engaged Generation to help create supply. While conventional wisdom dictated that workers in the robotics field need technical backgrounds, we found that with the right training, liberal arts graduates can succeed—in fact, they comprise 70 percent of our robotics graduates. Because the company’s need was urgent, it was more willing to try a nontraditional approach, especially given its limited risk—a significant proportion of Generation’s fee is based on workplace performance.
Companies in sectors where the major problem is not scarcity, but turnover, generally take more convincing. Though we do our best to demonstrate the economic benefits of higher retention, companies have to see our graduates at three months, and then at six months and beyond, to believe that recruiting and training differently can bring superior outcomes.
It’s worth noting that in either case—high scarcity or high turnover—making costs visible and establishing the right performance metrics takes work. Employers have to share 15 different data points, and then Generation has to follow graduates on the job to establish a track record. But it is worth the effort—these measurements make the case for training and placement clear.
3. Measure Value, Not Just Cost
Many programs and funders focus on inputs, such as spending, rather than outputs, such as students’ long-term outcomes. As a result, they don’t know if they are delivering value for money.
To fill this gap, we created a new metric called cost per employed day (CPED), which clarifies outcomes in the form of long-term results. Here’s an example. Program X serves 1,000 students at a cost of $1,000 each, or $1 million total. Five hundred are placed into work, and they stay employed for an average of 60 days in the first six months. That adds up to 30,000 days on the job, or $33 per employed day. Program Y, on the other hand, has an up-front cost of $2,000 per student, but a placement rate of 80 percent, and graduates stay on the job for an average of 120 days within the first six months. That comes out to 96,000 working days, or $21 per employed day. Clearly, Program Y provides more value, even though it is more expensive. At Generation, the CPED figure varies depending on the market and profession, ranging from about $3 in Kenya to $31 in Spain—much less than comparable programs.
Read the final 3 tactics here.
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