Employee training

Is it worth it to train new employees?

May 20, 2013: 1:29 PM ET

Young people have many romantic notions about their first jobs. Perhaps the most poignant misconception is that employers will invest time in developing their skills.

By Laura Vanderkam

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FORTUNE -- Young people have many romantic notions about their first jobs -- what they'll be paid, what they'll do. But perhaps the most poignant misconception is that employers will invest time in developing their skills.

A recent Accenture survey found that 77% of those set to graduate from college in 2013 expected to receive formal training in their first jobs. But only 48% of those in the classes of 2011 and 2012 reported being trained.

"There's a disconnect between employers' expectations of grads entering with relevant skills and the reality," says Katherine LaVelle, a managing director in Accenture's talent and organization practice -- which is that few college grads have job-specific skills on day one. Adding to the problem? "Given economic constraints, lots of employers have looked to cut back." Training is an easy budget line to trim.

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But some companies that hire young people train extensively and claim that if you focus on skills, it's worth the cash. That's true not only in the long run -- LaVelle notes that trained employees "don't quit as quickly" -- but sometimes even in a new hire's first weeks.

Most major investment banks outsource a chunk of their new employee training to a company called Training The Street, which runs two- to two-and-a-half-week programs emphasizing financial skills. Founder and CEO Scott Rostan describes his program as "very real time, very hands on, and very practical." One popular exercise? Would-be bankers get a spreadsheet full of financial data "that is basically ugly," Rostan says, and needs to be formatted. Instructors "explain how to do it, step by step, methodically, all the keystrokes to make it better." This usually takes about 15 minutes. Then, during the course of the program, students keep coming back to the spreadsheet to try again. By the end of the program, "most of them can do it in two, three, four, five minutes or less."

Such drills have a parallel in sports, Rostan says. "We're training these people to be world-class athletes, so it's about going to the gym and getting the reps down and getting your muscle memory in tune."

The upside for a bank is that by paying for financial skills training, the bank can hire smart liberal arts grads who haven't taken accounting or business courses. This expands the pool of potential hires, but keeps these new staffers from draining the expensive time of senior people on their first projects with questions about what EBITDA means and how to line up numbers on Excel.

To be sure, many companies that do train have been trying to find ways to compress training into less time. With young people likely to switch jobs frequently, "there is a fine line between what is effective training and what is overkill," says LaVelle.

But others are holding the line. Enterprise, the rental car company, has become a top employer for new college grads because of its extensive training. After a few weeks in the classroom, new hires spend 8-12 months in a structured program learning to manage an Enterprise location. "It's very transparent," says Marie Artim, vice president for talent acquisition at Enterprise. "They're seeing P&L statements, and learning what it takes to make an impact on them." Management trainees study and practice scheduling, customer service, and accounting. "It's business as a whole."

Such a long -- and expensive -- training process comes with its risks. There's nothing stopping a rival car rental company from trying to poach Enterprise's new managers after their first year. This "free rider" problem -- when rival companies can capitalize on one company's outsize investment in training -- discourages training in general as the average length of tenure at a company declines.

But Enterprise claims that its return on investment is still positive because of its internal promotion policy. "We do have a lot of people … who have completely changed careers without changing companies," says Artim. Money spent on training is money not spent on recruiting higher up the ladder. And not everyone who leaves goes to other car rental companies. They go into other industries where "hopefully they'll be great ambassadors for our brand" -- or at least more likely to rent from Enterprise when they're on vacation.

Restaurant chain Le Pain Quotidien also trains new hires extensively. Leah Rucinski, training and development manager for Le Pain Quotidien California, started as a server in New York. She reports that someone hired as a server will spend five days with a certified trainer, learning every aspect of the restaurant and -- a tough part of the job, to be sure -- tasting everything on the menu.

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In orientation, "we teach you to notice what a good cup of espresso and a good cup of coffee tastes like," Rucinski says, and exactly how to make an equally stunning brew. New kitchen staff drill on knife skills, and "one of the really cool things we're working on right now is figuring out a career path for every single position, down to the dishwasher in the kitchen."

That means that training doesn't stop after those first five days. LPQ offers all kinds of classes, such as bread-baking courses at regional bakeries, or catering classes featuring relay races to see who can fill a tray quickest. "We never want you to get bored," Rucinski says. "We feel if we put time and money into developing our people, they'll last with us and grow with us."

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