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Why Failing to Train Your Employees Costs a lot More Than You Think

Let me start this article by quoting a conversation between a CEO and a head of training.

The CEO says, “What if we spend all this money training our staff and they leave us?” And the head of training replies, “What if we don’t train them and they stay?”

The point of this adage is that if you spend a lot of money and they leave that is not great. But if you don’t train them and they stay, it costs you a lot of money.

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Early in my career when I worked for CCA Global Partners, I supervised operations at a number of flooring stores that practiced a philosophy hiring philosophy that seemed logical. The company routinely hired salespeople who had worked at other flooring retailers, and then didn’t train them. The assumption was that experienced salespeople were “pretrained.” Training them would be costly and superfluous.

That assumption might have made sense, but it was flawed. The fact that those salespeople had experience didn’t mean that they came armed with the best selling skills. So, my team and I developed a blended program of live and eLearning that taught the comprehensive selling skills that our company needed. We trained salespeople on the products they were selling, on how to increase the size of the average order, on how to explain to customers what to expect when their new flooring was installed, and more.

The performance of the experienced people we trained was dramatically better than the performance of experienced people who were allowed to “learn on their own.” For every $750,00 in sales made by salespeople we trained, the “learn on their own” salespeople generated only $400,00 in sales, or only about 60% of what trained employees did. Another way of looking at it? Untrained employees contributed about 60% of what the trained employees did against margin (the amount of money they generated after subtracting the cost of commissions, the cost of goods sold, the cost of processing credit cards and other expenses).

And the advantage becomes even greater when you consider the additional cost of employment that include benefits, social security taxes, the cost of a desk and a phone, and other expenses.

In my years of analyzing training results, I have seen time and time again that the ROI on training is dramatically greater than most company executives believe it will be. In simple terms, if a trained worker becomes 100% productive and an untrained worker is only 60% productive, you are losing $40,000 in value on every $100,000 of business you conduct.

And here’s another statistic that should catch your attention. When you look at the amount of money that each employee contributes after commissions (the “contribution margin”), properly trained salespeople generate something on the order of $122,000 more for of $1 million in sales that your company makes. And when you tally those gains across a salesforce of five, 10, or more employees, you easily see that the gains are significant.

Why Trained Employees Generate More Income

There are many reasons. Trained salespeople . . .

  • Close more sales
  • Generate larger average sales
  • Sell fewer products at discounted prices, and more products at list price
  • Make fewer mistakes
  • Sell the right products, reducing the cost of returns and product replacements
  • Build customer relationships that result in more repeat business
  • Generate more positive reviews online
  • Increase your net promoter scores
  • Help keep morale and productivity high among all your employees, because people don’t like to work with untrained people who don’t know what they are doing

There are many more reasons why trained employees contribute more to the bottom line. Even if you have a company that attracts a small volume of walk-in traffic and only a small number of customers come through your door, for example, trained salespeople will increase profits for you, even if you do not increase the number of customers you attract, your business will still be up if you train them to sell each customer just a little bit more, to make higher margins.

Training Is Not Just for Salespeople

To cite another example from my years in the flooring industry, I was once responsible for creating a program that trained flooring installers the basics of customer service, such as explaining to customers exactly what to expect during the installation process. Thanks to that program, we took the percentage of customers who said they would not buy from us again from 13% down to less than half a percent.  We dramatically increased the likelihood of doing referral business by word of mouth advertising.

In Closing . . .

Not training is hugely expensive . . . far more expensive than training. In your company, I urge you to look for all the opportunities where proper training can dramatically increase profits, reduce waste and provide an outsized ROI for every training dollar you spend. If you start to look, I am willing to wager you will find many more opportunities than you expect.

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