New Zealand businesses, particularly small and medium-sized enterprises (SMEs), are grappling with the significant financial burden of training and upskilling their workforce. This challenge is exacerbated by a rapidly evolving technological landscape, a skills shortage in key sectors, and the geographical dispersion of the country, making access to affordable and effective training difficult. The high training expenses are not just a cost; they’re a barrier to growth, innovation, and competitiveness, forcing companies to make tough choices that often compromise long-term development for short-term survival.
The Rising Costs of Training: A Breakdown
The expense of training in New Zealand isn’t a single, easily quantifiable figure. It’s a complex equation involving several factors, each contributing to the overall financial strain. Let’s dissect these components:
- Direct Training Costs: These include course fees, instructor fees, materials, and any software or equipment required for the training program. For specialized skills like IT or engineering, these costs can be particularly steep. For example, a certification course in cloud computing could easily cost upwards of NZD $5,000 per employee.
- Indirect Training Costs: This often-overlooked category encompasses the time employees spend away from their regular duties while attending training. This lost productivity translates directly into reduced output and potential revenue loss. Estimating the actual cost involves calculating the employee’s hourly rate and multiplying it by the number of training hours. For a team of 10 attending a week-long training, the lost productivity cost can quickly reach tens of thousands of dollars.
- Accommodation and Travel: For businesses located outside major cities, or when training requires specialist facilities, accommodation and travel costs add significantly to the financial burden. Flights, accommodation, meals, and transport can quickly accumulate, especially for multi-day training sessions.
- Infrastructure and Technology: Implementing effective training programs often necessitates investments in learning management systems (LMS), software licenses, and appropriate hardware. SMEs may find these initial investments particularly challenging.
- Opportunity Cost: This refers to the potential benefits a company could have realized had it invested the training funds in alternative areas, such as marketing, research and development, or capital expansion.
A recent report by the Ministry of Business, Innovation and Employment (MBIE) on Future Skills identified the cost of relevant training as a major barrier preventing many New Zealand companies from investing in upskilling their staff. The report highlights that businesses frequently perceive the return on investment in training to be unclear, especially given the potential for employees to leave for higher-paying roles after gaining new skills.
Specific Examples of Training Costs
To illustrate the scale of the issue, let’s examine example training scenarios and their associated costs.
Scenario 1: Manufacturing Plant Implementation of Lean Manufacturing Principles.
Imagine a manufacturing plant employing 50 people deciding to implement lean manufacturing to improve efficiency. The training includes process mapping, waste reduction techniques, and continuous improvement methodologies.
- Cost of Lean Manufacturing Consulting and Training: $20,000 – $40,000 for on-site training.
- Employee Time Off: Each employee spends 40 hours in training. With an average hourly wage of $30, the cost is 50 employees x 40 hours x $30 = $60,000.
- Total Estimated Cost for Implementation: $80,000 – $100,000.
Scenario 2: Restaurant chain upskilling staff on customer service skills.
- Customer Service Training Program Licensing for 20 Employees: $5,000 NZD
- Employee Time Off: 20 hours/employee 20 employees $25/hour = $10,000 NZD
- Cost to restaurant= $15,000 NZD
The Impact on Small and Medium-Sized Enterprises (SMEs)
SMEs, the backbone of the New Zealand economy, are disproportionately affected by high training costs. Unlike larger corporations with dedicated training budgets and resources, SMEs often operate on tight margins, making it difficult to justify significant investments in employee development. This can lead to a vicious cycle where a lack of training hinders growth, further limiting the resources available for future training initiatives.
Many small business owners choose to train employees themselves to reduce expenses. This is admirable; however, most employers are not professional trainers; often, the employees are confused or lack the necessary knowledge. In addition, internal training takes time away from business owners.
Limited access to affordable training can exacerbate existing skills gaps, making it difficult for SMEs to compete with larger, better-resourced organizations. Furthermore, the lack of investment in employee development can lead to higher employee turnover, as individuals seek opportunities for growth and advancement elsewhere. Replacing employees can cost up to 50% of the exiting employee’s yearly wages. This includes costs related to reduced productivity, recruitment, and additional training for the new employee.
The Availability of Government Subsidies and Grants
The New Zealand government offers several subsidies and grants aimed at alleviating the financial burden of training, particularly for SMEs. These initiatives are designed to encourage businesses to invest in employee development and address skills shortages in key sectors.
One notable program is the Mana in Mahi – Strength in Work initiative, administered by the Ministry of Social Development (MSD). This program provides financial support to employers who take on job seekers and support them into sustainable employment through on-the-job training. Employers receive wage subsidies and funding for training costs for eligible employees. However, navigating the application process can sometimes be challenging, and the eligibility criteria may not suit all businesses.
Another avenue for financial assistance is the Apprenticeship Boost initiative, designed to support employers taking on new apprentices. This program provides a monthly payment to employers during the first two years of an apprenticeship, helping to offset the costs associated with training and mentoring.
Additionally, regional economic development agencies often offer grants and funding opportunities for businesses to upskill their workforce. These initiatives are often tailored to the specific needs of the local economy and may focus on particular industries or skills.
Here are steps to take when searching for government-based training assistance:
- Research: Dedicate time to thoroughly investigate the training subsidies and grants available from government organizations. The starting point to find the best programs and eligibility information is at the official government websites.
- Prepare Application Material: Prepare all the necessary paperwork well ahead of the deadlines.
The Impact of Technology and Automation on Training Needs
The rapid pace of technological advancement and the increasing adoption of automation technologies are transforming the skills landscape in New Zealand. Businesses need workers to be digitally proficient in order to keep businesses running with minimal disruption. As technology continues to advance, upskilling and retraining workers remain an issue. This can be overwhelming to some small business owners who are technologically challenged.
As technology becomes more sophisticated, simple knowledge is becoming less valuable, while soft skills such as communication, collaboration, and problem-solving are becoming increasingly important. Training programs need to evolve to reflect this shift, focusing not only on technical skills but also on developing these essential soft skills. This often requires a blended learning approach, combining online modules with face-to-face workshops and practical exercises.
Alternative Training Models and Solutions
Given the challenges associated with traditional training methods, businesses are increasingly exploring alternative models and solutions to reduce costs and improve training effectiveness.
Online Learning Platforms: Online learning platforms offer a cost-effective and flexible way to deliver training to employees. These platforms provide access to a wide range of courses and resources, allowing employees to learn at their own pace and on their own schedule. Many online courses are significantly cheaper than traditional classroom-based training, and they eliminate the need for travel and accommodation costs. Some popular platforms include Coursera, Udemy, and LinkedIn Learning.
Microlearning: Microlearning involves delivering training content in small, digestible chunks, typically lasting just a few minutes. This approach is particularly effective for busy employees who have limited time for training. Microlearning modules can be delivered via mobile devices, allowing employees to access training content anytime, anywhere.
Internal Mentoring Programs: Establishing internal mentoring programs can be a cost-effective way to transfer knowledge and skills within an organization. Experienced employees can mentor less experienced colleagues, providing guidance and support. This approach can also foster a culture of learning and development within the workplace.
Industry Collaboration: Businesses can collaborate with other organizations in their industry to develop and deliver training programs. By pooling resources and expertise, companies can share the costs and benefits of training, making it more accessible and affordable for all participants.
For example, smaller bakeries in Auckland could collaborate to create a combined training program for young bakers. They could save money and create a skilled pool of employees for each bakery.
Case Studies of Successful Training Initiatives
Several New Zealand businesses have successfully implemented innovative training initiatives to improve employee skills and boost competitiveness. These case studies provide valuable insights into how companies can overcome the challenges of high training costs and achieve tangible results.
Case Study 1 – Fisher & Paykel Healthcare:.
Fisher & Paykel Healthcare, a leading manufacturer of respiratory care products, has invested heavily in employee training and development to support its growth and innovation. The company operates a dedicated training academy that provides employees with access to a wide range of technical and professional development programs. Fisher & Paykel works closely with local universities and polytechnics to develop customized training programs that meet the specific needs of its workforce. This investment in training has contributed to the company’s strong performance, allowing it to attract and retain top talent and maintain a competitive edge in the global market.
Case Study 2 – Z Energy Service Station Training Programs:
Z Energy is known for its high-quality customer service, partly due to their robust employee training programs. Z teaches employees how to engage with customers, handle complaints, and perform service tasks well. This attention to detail in training has contributed to positive customer reviews and improved brand reputation.
Effective Strategies for Managing Training Costs
To effectively manage training costs, businesses need to adopt a strategic approach that focuses on identifying training needs, selecting appropriate training methods, and measuring the return on investment.
Conduct a Skills Needs Analysis:
Start by identifying the specific skills gaps within your organization. This can be done through employee surveys, performance reviews, and consultations with managers. This helps to prevent wasted resources in areas that are not needed for the business.
Develop a Training Plan:
Based on the skills needs analysis, develop a comprehensive training plan that outlines the training objectives, target audience, training methods, and evaluation criteria. A well-defined plan helps to ensure that training efforts are aligned with the organization’s strategic goals.
Prioritize Training Needs: Given limited resources, prioritize training initiatives based on their potential impact on the organization’s performance. Focus on areas where training can deliver the greatest return on investment.
Negotiate with Training Providers: Don’t be afraid to negotiate with training providers to secure the best possible price. Ask about discounts for group bookings or customized training programs. Consider requesting quotes from multiple providers to compare pricing and services. It also pays to build valuable relationships with training providers to have flexible payment plans.
Measure Return on Investment (ROI): Track the impact of training on key performance indicators (KPIs), such as productivity, sales, customer satisfaction, and employee retention. This data will help you to assess the effectiveness of your training programs and identify areas for improvement. For example, if implementing lean manufacturing saved the company 20% of the manufacturing expenses with $80,000 initial training fees, in theory, after five months, the training costs would be recovered.
The Road Ahead: Building a Skilled Workforce for the Future
Addressing the challenges of high training expenses is crucial for New Zealand to build a skilled workforce that can drive economic growth and innovation. The government, businesses, and educational institutions need to work together to create a more accessible and affordable training ecosystem.
This includes increasing funding for training subsidies and grants, streamlining the application process for these programs, and promoting the adoption of alternative training models, such as online learning and microlearning. It also requires fostering closer collaboration between businesses and educational institutions to develop training programs that meet the specific needs of industry.
By investing in employee development and addressing the skills gaps in key sectors, New Zealand can unlock its full economic potential and create a more prosperous future for all.
FAQ Section
What are the main challenges New Zealand businesses face regarding training expenses?
The main challenges include high direct training costs (course fees, materials), indirect costs (lost productivity), accommodation and travel expenses, investment in infrastructure and technology for training, and the opportunity cost of investing in training instead of other business areas.
How do high training expenses impact SMEs in New Zealand differently than larger corporations?
SMEs often operate on tighter margins, making it more difficult to justify significant training investments. They may also lack the resources and dedicated training budgets that larger corporations have, leading to a cycle of limited growth and difficulty competing for talent. Limited training can also lead to higher employee turnover.
What government subsidies and grants are available to help businesses with training costs in New Zealand?
Notable programs include the Mana in Mahi – Strength in Work initiative and the Apprenticeship Boost initiative. Regional economic development agencies may also offer grants and funding opportunities. Be sure to do your research and accurately fill out appropriate paperwork.
What are some alternative training models that businesses can use to reduce costs?
Alternative models include online learning platforms, microlearning, internal mentoring programs, and industry collaboration to share training resources and expenses.
How can businesses measure the return on investment (ROI) of their training programs?
Businesses can track the impact of training on key performance indicators (KPIs) such as productivity, sales, customer satisfaction, and employee retention. They can then compare these metrics before and after training to assess its effectiveness and identify areas for improvement. It is important to keep accurate records to have reliable statistics.
Call to Action
Don’t let high training costs hold your business back. Take control of your future by actively seeking government assistance, embrace innovative training models like online learning, and build a culture of continuous learning within your organization. Your most valuable asset is your people – invest in their development, and you’ll unlock the potential for sustained growth and success. Contact a training provider today to discuss your needs and start building a more skilled and competitive workforce.
Disclaimer:
This document aims to provide general information regarding training-related matters. It is not intended to provide any type of professional advice and should not be relied upon as such. For specific advice, consult qualified professionals.
References
- Ministry of Business, Innovation & Employment. (Date Varies). Various reports on Skills and Labour Market Needs.
- Z Energy Training Program Documents. (Internal company publication).
- Fisher & Paykel Healthcare – Annual Reports
