521 percent return on investment

Nora Akins

U.S. employers spend between $70 and $164 billion annually on training and development according to a number of surveys. The most influential factor in a company’s training budget is the company’s size. Those with 10,000 or more employees average $13 million for training.

"Training Magazine," the Association for Talent Development and many others have conducted studies to evaluate the return on investment (ROI) of training. As a result, we learned instructor-led classroom training is the most used and is the second most effective method despite all the advancements in training technology and the use of social media. Coaching and mentoring are the most effective methods of training. Two lessons learned; it takes people to effectively train people, and face-to-face is best.

Companies spend the most money on technical skills training, then leadership training. Ethics and compliance training is the smallest part of the training budget. It makes sense to fill the skills gap with technical, product and services training. It doesn’t make sense to shortchange ethical and compliance training. As Paul McNulty, former U.S. deputy attorney general said, “If you think compliance is expensive, try non-compliance.”

The General Counsel Roundtable found each dollar spent on compliance saves, on average $5.21 in avoidance of legal liabilities, harm to the company’s reputation and lost productivity. That is 521 percent ROI! Effective compliance training reduces the likelihood of misconduct. Compliance is more than doing the right thing.

When ethics and compliance are the baseline, people within the organization can be self-governed. The organization is purpose driven, and its people understand its core principles and social expectations. These companies enjoy increased market share, business results and customer satisfaction and have the least misconduct and retaliation according to LCN’s 2016 HOW Report.

Federal contractors know the dollars and “sense” of ethics and compliance training. Contractors could have payments withheld and be disciplined up to disbarment for failure to provide effective, periodic training. All businesses are protected from damages and fines when they periodically train managers and employees.

The U.S. Supreme Court decisions in Faragher and Ellerth (1998) and Kolstad (1999) reward employers for effective, documented compliance training. The outcome of Farragher and Ellerth permit employers to avoid some or all potential liability in harassment cases when they periodically train managers and employees in their legal rights and obligations and related policies. Having, using and training employees about the company’s anti-discrimination policy demonstrates good-faith which eliminates punitive damage in discrimination claims.

Likewise, employers may avoid up to 66 percent of potential liability for wage and hour violations when able to demonstrate good-faith by training managers and employees about wage and hour obligations. Under the Federal Sentencing Guidelines, companies can avoid up to 95 percent of potential fines and penalties for violation of several federal laws if they show an effective ethics and compliance program is in place.

Respectful companies build the capacity of their workforce who learn and believe in the company’s purpose, principles and expectations.

Nora T. Akins, of Strategic Management provides management training and refines human resource systems to help employers build respectful workplaces. Reach Nora at 219 873-1735 or nora@managepeopleright.com

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