What is employee development and how important it is to employers

December 01, 2020

Employee development

Francie Jain, the Founder of Terawatt, explains what is employee development and why should employers pay more attention to it.

“Professional & Career Development” are terms used more and more frequently in business today. But, even with their rise in prevalence, the terms are usually not defined, leading to confusion and a lack of appreciation for their value. This is especially the case when speaking to those not steeped in Humans Resources-related research. Most people! 

As an entrepreneur within the human resources space, where my company Terawatt offers workshops within Professional Development, I am often asked to define the terms and opine on their value. Let me explain their differences and give you my take on the evolution of their value.

What is Employee Development i.e. Career Development & Professional Development?

Professional & Career Development both speak to the ongoing process of attaining knowledge and skills related to an individual’s career path. However, while the terms are regularly used interchangeably, “Professional Development” and “Career Development” have distinct meanings.

Career Development

Career Development relates to skills and knowledge directly related to a professional’s execution of day-to-day responsibilities. An example would be an auto-mechanic learning about solar-powered engine repair, expanding her base knowledge of gasoline-powered engine repair. Or perhaps the professional learns about German-made engines, adding to a knowledge base primarily focused on American-made engines.

Professional Development

Similar, but in contrast, Professional Development relates to skills and knowledge indirectly related to executing a professional’s key responsibilities. 

An example could be an auto-mechanic learning how to use Microsoft Excel. Learning a skill not directly tied to a profession can be valuable to the employee as it brings more skills to bear on her expertise and ultimately makes her more valuable in the market. But, at first, the idea of a technician learning an analytic tool doesn’t seem related to employer benefits. What if you consider that her use of Excel can be employed at her workplace to track repair time, repair cost and other data points? 

The importance of Employee Development

To fully understand why employee development is valuable to both employee and employer, let’s play it out: 

The mechanic is now better able to track hours, parts’ cost and to share data in a way that lends itself to further analysis. If the repair shop is better at tracking its operations, time and costs, the front desk can more reliably predict pricing and turnaround time for customers. More reliable information for customers increases trust and customer loyalty. In addition, more data on shop operations gives management the ability to model out seasonality in the business, to name just one benefit, ultimately supporting better long-term planning and cash management

(For more information on these concepts, The University of California at Berkeley has a thorough discussion on its website.)

Twentieth Century and Early Twenty-First Century employers rarely reimbursed or gave paid time for employees to attain indirect skills aka Professional Development as part of employee development. The conventional wisdom was that leaders didn’t see a Return on Investment (ROI) because the knowledge benefit primarily accrued to the employee. We can summarize this perspective as, “What if I pay for classes and the employee leaves?” 

Today’s conventional wisdom, however, is a 180 degree turn, as more and more companies offer and reimburse employee professional and career development. Research by ChiefLearningOfficer.com shows that in 2020 68% of companies reimburse more than $1,000 of executive education per year, with 35% of companies, the largest cohort, reimbursing between $1,000 and $3,999.

How employee development became valuable to employers

How did employers finally understand the power and need of employee development? My research points to three key reasons:

Millennials

The Millennial Generation, those born between the years of 1980 and 1996, is now, according to Pew Research, the largest generational group in the workforce, while Baby Boomers, the next largest workforce cohort, peaked in 2018. As a result, generational preferences matter to employers, as any shift from how Baby Boomers see the employee-employer contract affects company costs, growth and profitability.   

One of the key generational distinctions among Millennials is an expectation that employers support their professional i.e. employee development. And more, if their expectations are not met, they will move to a company that does support it. The 2020 Work Institute Report quantified this trend: 20% of people who leave their jobs voluntarily cite a lack of career development is the #1 reason. 

Within this category, the specific issues are:

1) No advancement 

2) Lack of growth

3) Type of work

This finding is echoed by Gallup’s Millennials Report. The Report notes that 59% of Millennial job seekers report that “opportunities to learn and grow” are “extremely important” to them in prospective employers. 

But it is not just that Millennials represent a large group, they also are native to the internet, social media, cellular technology and coding, etc. They bring with them their power in numbers tremendously relevant insights and skills that drive businesses’ future growth.

Quantifiable research on company growth drivers

Secondly, it turns out that some of the most powerful Human Resource research supports the value of Employee Development. 

Bersin, Deloitte Consulting, the highly regarded team within Deloitte Consulting that researches and advises corporations on Human Resources best practices, reported in 2019 that, “The top 13% of companies in the study were 5x as likely to develop and promote insiders in a systematic way, and 3x as likely to retain top talent, than the lowest-performing companies.” Bersin shows a direct line to company profits from professional development. For any manager who had concerns about ROI, this is a pretty direct repudiation. 

In addition, Google’s Project Aristotle proved that the highest revenue-producing groups were those with members who felt psychologically safe. The project answered the age-old question: what defines groups that generate the most revenue? 

How does a group enjoy psychological safety? By having a good manager. How do people come to be good managers? Through good and on-going training. In addition, the more that direct reports are taught to present their ideas using elements of critical thinking, the more these non-consensus views can come to the surface. These are two Professional Development skills. 

Finally, we always knew it was true, but did we know the number? Bad managers impact voluntary departures. According to the same The Work Institute above, 12% of employees quit voluntarily because of their manager’s behavior. How to be a good manager is also a Professional Development tool! 

Given all of the quitting out there, you may wonder about the actual dollar cost to quitting or firing. The Work Institute has that too! For companies that don’t live up to Millennials’ expectations, they can assume the cost to replace each quitter is $15,000. You can imagine management asking themselves, what would a company have to spend to avoid voluntary departures? A number lower than $15,000 but higher than zero.  It turns out that the average annual stipend or reimbursement for professional development $1-5,000 a year, as mentioned above.

Needed skills

But while Millennials know tech and their preferences move the needle, they are not perfect. Importantly, they lack years of practicing leadership skills. They have the hard skills, but not the soft skills like strategic planning, emotional intelligence, and leadership skills. A few research organizations have touched on this concern within companies. 

In PWC’s 2020 Global CEO survey, among the top 15 threats to a company’s growth are “Availability of Top Skills” just behind “Cyber Threats” and “Policy Uncertainty.”  

In ATD’s “Bridging the Skills Gap,”83% of respondents report a current skills gap in their employee base…The biggest current and future gaps noted are in communication, critical thinking, and managerial and supervisory skills, showing that organizations need to focus on soft skills development programs.” 

But here is the thing: human skills are a lot easier to control than cyber threats. Guess what? Managerial skills, critical thinking and communication are all part of Employee Development! Once companies start to realize that many of their biggest concerns have a solution, the conversation went from  “What if I pay for additional learning and the employee LEAVES?” to, “What if I pay for additional learning and the employee STAYS?” 

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