How Much Is Your Company Really Spending On Unstructured OJT?

TeamOJT Tip of the Month for March, 2004

William Rothwell and H.C. Kazanas, in their book, Improving On-the-Job Training (1994), cite a U.S. Department of Labor study by A.P. Carnevale and L.J. Gainer that estimates U.S. employers spend between three and six times more for unplanned on-the-job training than for all other training (including classroom), even if there is no designated budget item for OJT. They also say that up to one-third of an employee's first-year salary is devoted to OJT costs. According to "The Economic and Demographic Roots of Education and Training," a paper by A.P. Carnevale and R.A. Fry*, employers will need to spend $96 billion on training in 2005 just to maintain their current training commitments to their most highly educated employees. They say that, assuming employers wish to expand the number of employees being trained to make up for current training shortcomings, the employer totals could be as high as $175 billion.

If the estimate by the Department of Labor study is correct, and three to six times more is spent for unplanned - and probably unbudgeted - OJT than all other training (and most current OJT is unplanned), the cost of that unplanned OJT to U.S. companies by 2005 could be between 288 billion and 1 trillion!

Approximately 90 percent of an employee's workplace skills and knowledge are learned through on-the-job training (Carnevale and Gainer). Assuming the above estimates are correct, companies are wasting vast amounts of money! Instead of pouring everything into classroom and technology-based training, perhaps they should consider investing a portion of their expenditures on structured OJT programs.

So why aren't more companies investing in structured OJT? In their book, Rothwell and Kazanas, say that,

"Training professionals and line supervisors would scarcely recognize [the above facts] from what has been published about training in today's organizations, because most current books and articles emphasize classroom delivery. As a consequence, OJT is typically ignored by professional trainers and is left to the devices of well-intentioned co-workers, supervisors, managers, and executives, who recognize its importance but often lack the necessary skills to plan and execute it successfully."

Perhaps, the training industry should re-think its almost total emphasis on flashy, gosh-gee-whiz, technology-based training, and begin to give structured OJT the attention it needs. After all, the vast majority of training occurs on the job - not in training courses, whether in the classroom or via e-learning.

*A paper commissioned by the Center for Workforce Success of The Manufacturing Institute (the educational and research affiliate of the National Association of Manufacturers) and the National Center on Education and the Economy.

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