Is education an investment?

Financial markets determine the value of companies by their profitability and cash flow expectations. Unfortunately, the measurements used in making these evaluations focus on the past and present performance instead of accurately showing the future potential of the companies.

For example, when the expenses related to the training given to develop the competencies of the company employees are considered as the expense of that period, it has a reducing effect on the profit of that period. However, the development of competencies has a very positive effect on the future value of a company. According to a study conducted on this subject and covering 3000 companies, the share values ​​of companies that invest more in their employees have increased approximately two times compared to average companies in the five years following this investment.

Therefore, when evaluating companies, it is necessary to look not only at financial statements and balance sheets, but also at the competency assessments of human assets. Ensuring that education expenditures are viewed as an investment rather than an expense item helps financial statements better reflect this reality.

Companies often perceive training costs as merely the pay of the trainers. For this reason, they cut down on educational activities in times of crisis! However, the most important cost of a training program is the time cost of those who attend that training. In periods when business slows down, crisis periods are the ideal time to develop competence, as this cost is also minimized due to the decreasing alternative uses.

Another important mistake to be aware of in the evaluation of education investments is measuring only inputs, as is the case with many areas whose outcomes are difficult to measure. In other words, the only criterion followed by the management is training-hours per employee. The decisions to be made as a result of this measurement technique are only to increase or decrease this criterion. However, there is a need to develop measures regarding the benefit obtained from the training received, even if it is difficult. Thus, only “how much training?” not only to the question of "how much benefit" and "from whom, what education?" Data that can answer questions can also be collected.

The benefit of the training is provided by the use of new information after the training. Therefore, the preparation of the business environment provided in the period after the training in accordance with the use of new information and the planning of the timing of the training accordingly are factors that increase the efficiency of training investments. The concept of “just-in-time” increases productivity in education as well as in production. The widespread use of technology in education makes it possible to provide just-in-time education at many points.

Another issue to be considered is that the planning of training activities should not be seen as an activity that is carried out only depending on the job of the human resources department or the demand of the employee. Because education is only part of people management.

When training planning is considered as a part of both performance management and career planning, it can yield more efficient results. Performance management and career planning are among the most important duties of senior management. Therefore, training planning should be considered by senior management as an investment in performance management and career development processes.

In summary, the fact that companies see their training expenditures to develop their employees' competencies as a valuable investment helps to increase company value. In order to make progress in this regard, a change in mentality is as important as changes in legislation.