The Importance of Professional Development: Return on Investment

The Importance of Professional Development: Return on Investment

"You must spend money to make money," is a famous quote from Plautus which has been cited and repeated throughout history. Nothing truer has ever been said. People invest in real estate, stocks, antiques, and more, all in the hopes of getting a better return on their initial investments. However, when it comes to most business owners they fail to invest in their most important asset: their people. When a company is growing, they must invest in the right people to help the company thrive. Just like investing in the right equipment, buildings, and software, professional development is an investment into your business.

In this series we will discuss the Top 3 Reasons professional development is important to your company. Follow us on this journey as we break down each reason with its own personalized blog; Up first, is reason #1, Return on Investment (ROI).

What is Professional Development?

First, let's address the elephant in the room! What is Professional Development? Technically speaking, learning and development is a systematic process to enhance an employee's skills, knowledge, and competency, resulting in better performance in a work setting. Think of it like this - when you were taught to read, you practiced it and your teachers coached you. In order to get your driver's license, you probably attended some form of driver's education to practice and learn the rules of the road. The same is true for any type of software or policies you introduce to your company. Teams need training on new software platforms in order to fully utilize them, whether it be end-user or technical personnel. An organization will only realize a high return on their software investment if its team members are adequately trained. Any software investment needs to take into account the training component to ensure a maximum return. Investing only in software, and hoping for the best, is not the answer.

The Facts

We know investing in your employees is a huge part of helping your business grow, but what specifically does it do for your company? Offering professional development options for employees provides you with a higher return of investment. Companies that offer comprehensive training have 218% higher income per employee and a 24% higher profit margin than companies that don’t provide training. To put that number into context, the average profit margin is 10% and a 20% profit margin is considered high.

How Does Profit Margin Increase?

Seeing a 24% increase in profit margin sounds really nice, but HOW does professional development do that for your company? There are two major reasons which result in higher revenue generation. The first is that companies that are dedicated to professionally developing their staff see an increase in revenues from the stock market due to increased credibility. Companies such as Microsoft and General Electric are two examples of revenue growth through stock price increases resulting from professional development programs. The second reason is an increase in efficiency. Once trained properly, Sales and Operations team members are able to perform more efficiently on the job. Well trained employees = more revenue gains.

Takeaways

Professionally developing your employee's matters to your bottom line, the proof is in the numbers. If your organization needs help in creating a professional development program, please use the Contact Us form below - we would be happy to assist.

Want more information on training your entire team? Head to our Leadership and Development page to determine what type of training would be the best fit for your team and company.