Human Resource Management and Economic Downturn Essay

“Training is a waste of time and money because it does not impact organizational bottom line and employees do not retain training material. Thus, when the economy is weak organizations should not spend money and other resources on employees training and development. Outline your arguments for or against this point of view. ” Introduction Training is one of the business activities that take place in nearly all organizations regardless of their industries.

One of the incentives for them to launch a series of training activities is the fact that training can improve individual’s current skills and enable them to learn new skills (Mathieu, Attainment ; Salsas 1992, p. 828). According to Www, Yeah ; Hung (Www, Yeah ; Hung 2012, up. 1117-1119), business performance is greatly improved if knowledge is transferred and shared effectively. Therefore, this essay argues that organization should spend resources on training and development regardless of the poor economic condition, yet in a different approach.

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This essay reckons that employees do retain training materials and training does impacts on the organizational bottom line. Training helps organization to survive at the critical stage instead of increasing the burden of organization by improving the organizational performance in different aspects This essay will first discuss how training help improving organization’s profit. Secondly, it focuses on how training can help retaining employees. Thirdly, it tells how training serves as the source of competitive advantages. The last part of the essay will suggest how training should be adopted to help employees retain the training materials.

Improvement on organizational profit Profit is always the ultimate target of an organization; nearly all business sections taken by management are meant to make more profit. Organizations used to make use of both internal and external factors to create values, as well as profit. According to Allyson (Allyson 2007, p. 73), profitability is varied by controllable (internal factors) and uncontrollable factors (economic and political condition). During the economic downturn, organization’s profitability will become lower since consumers are not willing to consume (Hoist ; Chem. 2013, p. 61).

With this background, the only way to increase profit would be the improvement of internal controllable actors; employees’ productivity. Training is obviously the most direct way to improve employees’ performance and it can be utilized as a tool to raise profit in the dilemma. Studies found that training is one of the HRS practices that enhance employees’ productivity and profitability across all type of organization (Possible, Pawpaw & Jansen 201 0, p. 1 108). The case of the Korean electricity industry also shows that, profitability will be improved when the productivity is rising (Hang & Lee 2013, up. 31-539). As training influence productivity not only at the level of individual worker but on an organizational level as well (Barter 1994, up. 417-424), a greater profit can be earned with training. A risk regarding training most people concern is the costs incurred excess the increased profit, I. E. Failure of investment. Mostly, organization used to prevent the occurrence of deficits by cutting costs during economic downturn (Benedict & I-www 2013, p. 407). Due to the upfront costs of training (Clement & Osama 1995, p. 0) and the high turnover rate is high in a poor economy (Glance, Hog & Huber 2013, p. 84), the costs of training are very likely to be cut in economic downturn. However, training can actually put positive impacts on profit. Not only the above discussions show the benefits from training in terms of profitability, there are some more evidences show how it impacts On the profit directly. According to Eagleburger & Moody (Eagleburger & Moody 1994, p. 958), training does enhances different dimensions of performance in organization, for examples, market share and growth sales.

Also, it helps improve organizational bottom line by improving its performance, including gross profit margin, return on assets, and the ratio of price to book value (Basis et al. 2002, up. 7-71). It is concluded that training impacts on the organization bottom line by influencing its productivity and it plays an important role on profit rising in the uncontrollable situation, I. E. The poor economy. Retention of employees Reduction of costs is the main focus of organization during economic downturn; it explains the phenomenon that the turnover rate remains at the high level in the downturn.

But, as a matter of fact, people are the most valuable assets to an organization (Jackson 2007, p. 399), so organization ought to undertake some actions to maintain a low turnover rate in this radical period. Normally, organization merely focuses on the skill enhancement and monetary return result from training. They often overlook the negative correlation between training and turnover . The fact that organizations with high net training costs have longer employment period has been discovered many years in organizations (Franz & Zimmermann 2002, p. 24), including Marriott Corporation, Florida Power Corporation and Target (Glance, Hog & Huber 2013, p. 85). To understand why training and turnover is correlated, investigation on employees’ commitment and job attestation has conducted. According to Arthur (Arthur 1994, p. 670), the more investment on commitment system, such as training, the lower turnover rate as a result. Through training activities, relationship between organization and employees can be developed and it eventually improves their job performance and turnover rate (Thus, Pearce, Porter and Tripoli 1 997, p. 095). Taking apprenticeship as an example, it is an on-job training activity that associates with long term commitment (Clinton, McCollum ; Wang 2007, p. 477). An experienced employee will play the role of mentor and apprentice an inexperienced employee to work. In the apprenticeship processes, the strong commitment to the organization and relationship between the mentor and apprentice will be developed that makes the employees less likely to leave their organization. Besides, negative relationship is also found between job satisfaction and turnover (Y;cell 2012, p. 55).

When employees are lack of a particular skill to complete a task, they will feel anxious, which indicates job dissatisfaction and they are more likely to leave the organization. With training, employees’ ability will be enhanced and became more competent, which give them a higher job satisfaction (Bourns & Shindigs 2008, p. 65). The low turnover rate in the government organizations is a good example. Public officers enjoy a variety of benefits and security from their employers, I. E. The government, which provide them a favorable employment (Thus, Pearce, Porter and Tripoli 1997, p. 1 095).

So, the employees are willing to stay in the organization. Of course, the reality tells us that most organizations are tending to dismiss employees to maintain a low labor costs during the downturn. But, it is actually an unwise decision. Research finds that the resignation of employees cause the low motivation and productivity of the workforce that stay behind (Anonymous 2002, p. 98). A working team with low motivation and productivity is a negative equity to organization. Also, resignation indicates the loss of organizational assets; the resources put on the training of those employees are wasted.

Thus, the retention of employees is more realistic than the dismissal of employees in this difficult time. In short, retention of employees is vital when the turnover is high during economic downturn. This risk can be solved by providing training to employees to improve their commitment and job satisfaction. Source of competitive advantages In recent years, the term “competitive advantages” has become more and more popular in business. People value competitive advantages very much because its attainment allows organizations to win in the game of business by achieving a persistent superior performance (Ma 1999, up. 48-355). During the economic downturn, organizations’ profit will decrease while the level of competition will remain unchanged (Hartman, Yore, Jar 1998, p. 1 10). That is the reason why many organizations close down in this period. Thus, organization as to keep the high competitiveness to avoid being eliminated from the competition. To achieve this goal, competitive advantage is one of the best ways. In general, there are four characteristics of competitive advantages: valuable, rare, inimitable and non-substitutable (Kandahar ; Sahara 2005, p. 633).

These characteristics make competitive advantages a tool for organization to differentiate itself from com petitions. According to Keith (Keith 2003, up. 36-39), organization’s profitability will remain low unless customers’ perception on the quality of organization’s offering is improved during official economic times. An improved customer perception is actually referring to the superior position of an organization in customers’ mind, which is exactly the benefit of competitive advantages mentioned above. It tells the necessity of developing competitive advantages when the economy is poor.

Three criteria have to be attained to gain the competitive advantages, in which one criteria is the capability gap between an organization and its competitors (Cone 986, up. 54-61 Competency of individuals in an organization determines organization’s capability. According to Prefer Prefer 1994, p. 18), skills of people are critical since competitive success achieve through people. Training is an undoubted implement to achieve this objective. It is a planned, instructional activity intended to facilitate the acquisition of knowledge, skills, and attitudes in order to enhance individuals’ performance (Wanders, Chine ; Katz 2012, p. 49). It also explains why study suggests that training is the source of competitive advantage instead of a cost to be minimized (Becker ; Hustled 1 998, p. 540). People often argue against the investment on developing competitive advantage through training in the poor economy because they believe that resources should be reserved to tide the organization over the threats from the critical time. Therefore, organizations rarely adopt an aggressive approach in the downturn. Yet successful leaders tell us a fact that, an opportunity to generate innovation will emerge during economic adversity (Unwisely 2010, p. ). It indicates that a poor economic condition is not merely causing troubles to organization, but an opportunity too. Study found that innovation helps the company to deal with the unrest of external environment and, therefore, is one of the key drivers of long-term success in business, particularly in dynamic markets (JimNZ ; Vale 201 1, p. 409). Given that innovation is an example of competitive advantages, which means organizations can actually gain from the economic downturn if they can develop competitive advantage.

As discussed last paragraph, training helps developing competitive advantages; so it is worth to put resources on training in the difficult economic time. In summary, training helps create competitive advantages that are critical to organizations. The generation Of innovation shows how competitive advantage gives organization a chance to turn the tide during the economic downturn with a higher competitiveness. Adoption of training in poor economy Although the benefits of training give organization a strong reason to keep investing on it during economic downturn, the costs of training is really high.

Taking the US as an example, organizations there spend more than $1 25 billion a year on employees training and development (Blue et al. 2010, p. 1066). Therefore, this essay suggests a different training approach for organization to follow in poor economy. According to Fingernail camp; Shaw (Fingernail ; Shaw 2011 p. 25), the training model has to be redesign in the economic downturn. A proper training model for economic downturn is to reduce external training, and put the resources on internal management training and mentoring.

It is because external training are usually provided by private profit-making organization, a high costs is involved. 50% of the training costs can be saved after cutting the external training (Fingernail ; Shaw 2011 , up. 26-27). Under this situation, one of the suggested ways of training is mentoring. The development of legislation is highly involved in mentoring; mentors are selected within organization and responsible to provide menthes both competency and psychological supports (Gibson ; Haziest 2005, up. 448-449).

Research finds that it creates a substantial improvement on organization’s competitive capability (Dolores, Eulogies camp; Vera 2012, up. 423-433). Both mentors and menthes can benefit from each others in the training process, which is a program that benefits lots of employees but incurs the minimized costs. This effectiveness of this approach of training might be questioned due to he absence of external training. However, internal training itself has many advantages. For examples, an opportunity for relationship development between employees and a better understanding of organization’s cultural.

Among number Of advantages, one advantage that internal training over external training is the consistency of organizational culture and the training materials. A case of a mining company found that, the effectiveness of training programs is enhanced if its content is consistent with the organizational culture (Culled 2011, up. 40-47). By considering the training terrestrial are produced by management, it is following the organizational culture as a matter of course. All in all, training itself benefits organizations in number of aspects as some have them have been investigated.

But, the design of training programs has to be adjusted to fit the external setting, I. E. The poor economy. Conclusion In conclusion, employees’ retention of training materials can be proved by the positive results of training discussed in the essay. During the poor economic condition, risks and threats are arising, including the standstill Of profit growth, high turnover rate and reducing competitiveness. This essay concluded that all these problems can be addressed by the implantation of training. Firstly, training increases both individual and organizational productivity and eventually leads to the improvement on organization bottom-line.

Secondly, training helps retain employees through its influence on employees’ commitment and job satisfaction. Thirdly, training enables organizations to attain the competitive advantages, such as innovation, which help organization to stand out in the competition with a higher competitiveness. With training, the risks arising in a poor economic condition come opportunity for organization to grow or at least maintain its position in the market. Taking the costly training expenses and poor economy into account, this essay suggests a different approach of training in the difficult time.

The main idea is to reduce external training and focus merely on the internal training. As a result, organization can still enjoy the benefits of training with a lower risk. Despite the fact that there are only a little academic reports to prove employees’ retention of training materials, the previous discussion on the effectiveness of training in different dimensions are evidence. Assume that the employees retain nothing from training, the productivity, organizational profit and competitive advantages cannot be improved and generated.