MEDIA RELEASE: $4.70 REVENUE GAIN PER EMPLOYEE FOR EVERY $1 INVESTED IN L&D

Key findings:

• Every $1 invested in Learning & Development (L&D) per employee is associated with an additional $4.70 in business revenue per employee on average
• Leading L&D organisations reported an average attrition rate of 14%, compared to almost 25% for organisations at the other end of the spectrum –1.8 times greater
• 87% of businesses in Australia could do more to improve their L&D, with just 13% of businesses found to be leaders in the space
• 74% of businesses agree L&D became more of an organisational priority due to COVID-19
• Investment in L&D is growing, with businesses expecting the amount of training to increase by 19% on average this year compared to pre-COVID levels

A new research report by DeakinCo. in partnership with Deloitte Access Economics, has revealed why L&D should be a strategic priority for every Australian business and the significant revenue gains associated with investing in L&D. The business case for investing in L&D is incredibly strong, with a 1% increase in L&D expenditure per employee associated with a 0.2% increase in business revenue in the same year. In dollar terms, every $1 invested in L&D per employee generates an additional $4.70 in business revenue.

Beyond the significant financial benefits, L&D is also proven to drive productivity, increase loyalty, staff retention, and help businesses tackle major challenges like rapid digitalisation and skill gaps.

Despite this strong case for L&D, the report found that 87% of businesses in Australia could do more to enhance it; with only 13% classified as Advanced Learning Organisations—those at the forefront of investing skills and knowledge in their people.

While most businesses recognise the benefits of L&D, over half (51%) want better evidence of the benefits of training for organisational performance— revealing a significant lack of understanding into the quantifiable benefits of L&D activities.

Of the 68% of businesses who report they track L&D-related outcomes, the majority (56%) measure their ROI through employee satisfaction surveys or changes in productivity (50%). Meanwhile, only one third (33%) of businesses report tracking returns to L&D through financial metrics. This suggests most businesses lack the necessary information about their programs’ efficacy to properly capitalise on the benefits of L&D.

Download the report

Key insights include:

Rapid digitalisation and labour shortages increase urgency for L&D

The onset of COVID-19 accelerated the rapid digitalisation that Australian businesses were already grappling with, and this challenge has been compounded by skilled labour shortages. In fact, Australia’s Digital Economy Strategy 2030 notes the country vaulted five years forward in both consumer and business digital adoption in just two months of the pandemic.

As digitalisation increases, Australian digital skills will have to keep up. Research in 2021 indicates that 64% of Australian workers apply digital skills in their jobs today. And though most businesses may have some level of digital literacy, 26% of all businesses surveyed reported digital literacy as a key skills gap.

In this context, L&D plays a crucial role in helping businesses to upskill and reskill employees so they can deliver the specific digital skills businesses will require to survive in the rapidly changing business landscape.

Investing in L&D also greatly improves staff retention; ensuring businesses have the necessary manpower to continue delivering goods and services and to fill skill shortages through reskilling and upskilling. Advanced learning organisations report an average attrition rate of 14%, compared to almost 25% for Laggard organisations showing those who invest most heavily in their people will stand a much greater chance of retaining talent.

Businesses divided between hiring and upskilling existing staff

When asked how they planned to fill skills gaps within their organisation, most businesses were split between hiring new people, and upskilling existing staff.

Across the top five skills gaps—adaptability and flexibility, customer service, critical thinking and problem-solving, data analysis and digital literacy—39% of organisations plan to upskill staff, while 27% intend to hire new people to fill these gaps.

Given the immense skills shortages currently impacting Australian businesses, it’s unclear whether hiring will be a viable solution. With so many businesses pursuing this as a strategy, they risk not being able to find the right people, with the right skills, indefinitely.

There are also significant risks and costs associated with hiring; with research suggesting the cost of replacing a bad hire can be 2.5 times that person’s salary. Hiring externally also typically attracts higher wages, means relationships may need to be built from scratch, and reduces productivity when hires first join.

A big perception gap exists

Only 13% of businesses in Australia can be classified as Advanced learning organisations — those at the forefront of investing skills and knowledge in their people. Of the 87% who were not Advanced, 9% were classified as Laggards, 36% as Beginners, and 42% as Intermediate.
However, strikingly when asked to self-identify their L&D status, over 90% of businesses believe they are learning organisations; indicating a significant disconnect between businesses perception of their L&D activity and reality.

Interestingly, when asked if more could be done within their organisations to drive learning and development, only 60% of businesses within the Laggard and Beginner categories believe that more could be done, compared to over 80% and 90% for Intermediate and Advanced learning organisations, respectively.

This is also reflected in a significantly lower training spend per employee among Laggard businesses ($1,100 per employee on average), compared to the spend per employee of more advanced learning organisations ($3,000 per employee).

This clearly demonstrates that many businesses in Australia do not understand the complexities or depth of learning that is possible, nor the value of L&D to their business performance.

Investment in L&D is growing

Despite this widespread perception and knowledge gap, the future is looking brighter for L&D; with businesses expecting the amount of training they will deliver to increase by 19% on average this year compared to pre-COVID levels. And when it comes to the industries that plan to invest the most, retail and aged care come out on top.

During the pandemic business investment in L&D per employee has remained stable — falling by just 1% in 2020-21 compared to the year prior. While investment in L&D did not grow as would have been expected in pre-pandemic times, the fact that it did not fall is a significant sign that for many organisations L&D remained a priority during COVID-19 — despite the challenges of implementing it during this time.

Incentives and barriers for L&D

Given the demonstrated advantages of L&D, it is interesting to consider the factors which would incentivise businesses to undertake more training. Indeed, only 3% of surveyed businesses cited that nothing would incentivise them to conduct further training.

The largest incentive identified was training being relevant to current and emerging Technologies (54%) with increasing digitalisation and automation likely the propellant for this incentive.

Many businesses were able to recognise the value of training for employee productivity (47%), upskilling (44%), and retaining current employees (38%).

While the pandemic highlighted the importance of L&D for reskilling employees, it also emerged as one of the largest barriers to implementing L&D. In fact, close to half (47%) of businesses in Australia identified COVID-19 as one of top three barriers preventing them from investing in L&D.

Better evidence of the benefits of training for organisational performance was also identified as a major factor by many (51%). Indeed, measuring economic and business performance outcomes of L&D long been one of the most notoriously difficult parts of L&D.

Glenn Campbell, DeakinCo. CEO, said, “Until now, measuring L&D performance has been a guessing game for too many businesses. Our research very clearly demonstrates the financial benefits of L&D and we hope businesses can now feel more confident investing in their people knowing that every $1 invested translates to an additional $4.70 in business revenue per employee.

“What’s more, investing in L&D leads to better staff retention. Advanced learning organisations report an average attrition rate of 14%, compared to almost 25% for Laggard organisations. And in the context of the major skills shortages Australia is currently experiencing, this is an obvious opportunity for businesses who are wanting to retain talent and tackle skills gaps.

“Skills shortages are here to stay, and Australian businesses need to take action. L&D will help to counteract this challenge — not only by improving employee innovation and productivity, but also by preparing businesses for the future state of work.”

David Rumbens, Partner Deloitte Access Economics, said, “In 2022, Australian businesses rate ‘securing and retaining talent’ as their number one business risk. What better time therefore to invest in L&D for their own staff. As well as the productivity payoff, it’s a very visible signal of giving back to employees. We know that L&D strengthens employee engagement with a business—organisations who don’t focus on L&D have an attrition rate of nearly double that of advanced learning organisations.”

Download the report

About the survey

Data for this report draws on a survey of 206 business leaders and HR professionals across Australia with 200 or more employees. The survey covered a range of topics including expenditure on training and types of training offered, impacts of COVID-19 on training (e.g., on the mode of delivery of training and training effectiveness), as well as business perceptions of key barriers and benefits of L&D more broadly. The survey includes businesses from a range of different industries and regions across Australia.

About DeakinCo.

DeakinCo., is a division of Deakin University focused on workplace education and skills recognition. At DeakinCo. our practical, modular workplace education solutions build the capabilities organisations and individuals need to drive organisational performance tomorrow, today. We do this by helping our clients evaluate and recognise current skills and capability, identity and rectify gaps and build new skills, and provide pathways to higher level qualifications that further strengthen employment skills and career options.

About Deloitte Access Economics

Deloitte Access Economics is Australia’s pre-eminent economics advisory practice and a member of Deloitte’s global economics group. For more information, please visit our website: www.deloitte.com/au/deloitte-access-economics. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our network of member firms in more than 150 countries and territories serves four out of five Fortune Global 500®companies. Learn how Deloitte’s approximately 286,000 people make an impact that matters at www.deloitte.com.

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