Training pays off

BCITO research shows that training apprentices generates profit

BCITO research shows that for every $1.00 spent on training a carpenter, a business will benefit by up to $4.70 over a ten-year period.

This is the first time that in-depth research of this nature has been undertaken in New Zealand.

There’s a misconception, held by some, that training an apprentice costs a business money – with little or no return. This research proves that, in the long run, that’s not true. Investing in industry training is not just a cost to be minimised, it’s an investment that can grow your business.

Obviously the return on investment doesn’t kick in immediately. The break-even point – which is when the cost of training is offset by the extra profit generated by training – is three to four years: about the same time as completion of an apprenticeship. Profit keeps increasing the longer the trained person remains with the firm, making staff retention a factor; the longer an employer keeps trained staff, the more profitable they become.

“During the past two years, BCITO has experienced unprecedented growth in new apprenticeships but the construction industry remains woefully short of skilled tradespeople,” says Greg Durkin, group manager of stakeholder engagement for BCITO. “We need more businesses to come on board and train our young people. With this research, we can clearly prove that training an apprentice is a positive investment for employers.”

As part of the project, carpentry business owners were asked about their firms’ structure, including the number of people working there and what roles they were in. From this information, a model of an average firm in the industry was developed.

While the payback period for both trained and untrained workers appear similar, the positive return from training is sustained well into the future, increasing the cumulative benefit each year.

Other findings show that, when compared with a business that doesn’t invest in industry training, a carpentry firm that trains all staff will:

• Grow 6% faster.
• Charge $0.44 more per hour per person.
• Estimate work 3% more accurately.
• Do 2% fewer hours to complete the same task or project.

“It is such a worthwhile expense for every business to invest in training apprentices,” says BCITO chief executive Ruma Karaitiana. “Not only does having skilled workers improve your reputation and benefit your business overall, this research shows that, over time, a business’ bottom line is significantly improved.”

The methodology used in this project works back from a measure of economic return, such as cumulative profits over time. The drivers of profitability were broken down to identify individual attributes of a firm’s performance and evaluate the relative importance of these. The impact of a team’s trade and management proficiencies on these attributes was then considered. Finally, the contribution of training to an individual’s proficiency was weighted relative to the contribution from experience.