Performance Management

The Value of Training and Selection

Human capital is the combined knowledge, skills, and other abilities of an organization’s workforce. Organizations that pay in to human resource development up front will reap the benefits of a more productive and knowledgeable workforce, as well as cost savings over time. Human capital can be broken down into two forms:
  • Generic Human Capital – general skills or abilities of employees such as writing skills and cognitive ability. These can be either inherent to the employee or learned through previous jobs or education. These skills can be selected for during the hiring process.
  • Firm-Specific Human Capital – knowledge and skills that are specific to a particular job or organization. For example, a specific protocol that employees are required to follow.  These skills must be trained by the organization.
Human capital is a valuable asset, especially as today’s jobs are becoming increasingly unstructured.   Organizations need employees who are able to fill a variety of roles and complete a large variety of tasks. These employees can be acquired and developed through selection and training.

Shifting Focus

Traditionally, HR researchers have tended to assess the value of HR practices such as training and selection as ways to improve “micro” level outcomes, such as individual-level job performance and transfer of training. This type of research tells us little about the benefits of training and selection on a “macro” level – focusing on broad-level outcomes such as team and organization performance. Unfortunately, managers and HR professionals are typically held accountable for these broad level outcomes, rather than individually-focused results.

New Findings

New research has recently shown that selection and training do in fact lead to “macro”-level organizational outcomes. These include:
  • Customer Service Performance is influenced by selection and training. High quality customer service leads to a number of positive outcomes for organizations including customer satisfaction and retention.
  • Unit-level Retention is related to training. Employees who receive adequate training will be equipped with the skills necessary to perform their jobs effectively. Well-trained employees will be more likely to remain on the job.
  • Financial Performance is related to both selection and training. Customer satisfaction can lead to increased financial outcomes as a result of repeat business and word of mouth promotion. Increased retention will save the organization money because the valuable human capital obtained through training will remain with the organization for longer periods of time, thus reducing costs associated with hiring, training, and related administrative activities.

Changes over time

In addition to the macro level impact that selection and training have on organization-level outcomes, research has also revealed that changes in selection and training practices over time also result in changes in overall human capital quality. In essence:
  • When business units increase investment in selection and training, overall quality of human capital will increase.
  • When units decrease investment in selection and training, overall quality of human capital will decrease.

Practical Implications

The study’s authors offer practical implications that can be taken from this research:
  • Investment in human capital, through training and selection, can result in substantial payoffs for organizations in terms of increased customer service, increased retention within work units, and increased profits.
  • Because HR processes are often evaluated in terms of broad level outcomes such as financial performance, it’s important to emphasize to senior-level management other, non-financial benefits, such as improved performance, that investing in selection and training can have for the organization.

Interpretation by:

Michelle Toelle

DeGarmo Group

This was a summary of the research and practice implications from: Iddekinge, C.H., Ferris, G.R., Perrewe, P.L., Perryman, A.A., Blass, F.R., Heetderks, T.D. (2009). Effects of selection and training on unit-level performance over time: A latent growth modeling approach. Journal of Applied Psychology, 94, 929-843.