Economic utility of training programs

In economic terms, training projects represent a major outlay for many corporations. In spite of the growing need to evaluate the cost-effectiveness of training programs in organizations, such cost-benefit analyses are rarely conducted. Moreover, the extant conceptual approaches and mathematical formulas typically used for this purpose produce inaccurate estimates of the economic utility of training programs for organizations. An amended approach to this procedure is elaborated and its benefits demonstrated. The proposed model regards any potential plan as an investment project that should be evaluated in a similar way to the assessment of other investment options. Thus, it is recommended that a training project be considered only if its potential real, post-tax rate of return exceeds the real, post-tax cost of capital to the firm, subject to the unique features of investment in human capital. This process could improve the potential financial benefits to the firm, from investment in training.