TRAINING INVESTMENT CAN MEAN FINANCIAL PERFORMANCE

Organizations now view their employees as financial capital and, yet, there are still few standards to measure such assets. The article pres ents preliminary evidence that companies that spend money on training employees see a difference in their profits. To gather the evidence, t he American Society for Training & Development sampled 40 publicly tra ded firms to compare two groups-those in the top half of distribution when ranked according to their average 1996 training expenditure per e mployee ($900) versus those in the bottom half of distribution regardi ng training expenditure ($275 per employee). In 1997, companies in the top half also averaged an annualized gross profit of more than $168,0 00 per employee compared with companies in the bottom half with gross profits of $121,000 per employee. Wall Street also measures, in a way, companies that spend a little or a lot on training. For example, comp anies in the top half of the sample distribution (those that spent mor e money on employee training) had a higher market-to-book ratio-a comp arison of the market assessment of a firm's total value, including int ellectual capital and all other intangibles (measured as the market va lue of all outstanding shares of stock) versus the book value (measure d as a firm's net assets minus liabilities). More work has to be done, but there's growing evidence that companies should treat training as an invest ment, not just a budget expense.