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A Publication of WTVP

What’s an employer to do?

The Problem
A number of years ago, I worked for a large healthcare company in California implementing information systems in hospitals. When this company decided to purchase a new electronic medical record system, it shipped me and the rest of our department to Wisconsin (where the vendor was based) to become certified to implement the software package. Upon returning home, we were surprised to find that people with the certification we had just received were in high demand and could make more money than we were making. A lot more money.

And so, a handful of my co-workers left the company to become consultants, some of whom were immediately retained by the very company from which they had just resigned, but at substantially increased salaries. Those who stayed grumbled about how they weren’t getting paid what they were worth. And me? I took the high road and decided to go to law school instead, since everyone agrees that attorneys are worth every penny they’re paid, right? Right?

My former employer seemed to be between a rock and a hard place. They needed workers with certain skills, but once they gave their employees those skills—at considerable cost to the employer—the employees could demand higher salaries in the marketplace. What’s an employer to do in the face of such a dilemma? Here are three strategies to consider when developing your company’s training and education plans for your employees.

The Solutions

1. Don’t train your workers. This doesn’t necessarily mean you’ll be stuck with unskilled employees. Rather, it simply means that if you need someone with a specific skill, you’re not the one to pay for the employee to acquire that skill. The upside of this strategy is that it’s exceptionally easy to implement. You need an employee who is a Cisco Certified Network Professional? Place an ad and hire someone who’s already certified. Simple.

But there are several downsides to this strategy. First, your current employees probably aren’t going to be thrilled with it. If you don’t pay for them to acquire new skills, and new skills are required for their jobs, then they must either foot the bill for the training or start looking for new jobs. Secondly, you’ll have to accept that your new hires will command higher salaries than your current employees because they are more skilled.

2. Train your workers but prevent them from leaving. Recognizing the costs associated with training employees and the risks of their taking their skills elsewhere, many employers attempt to prevent such a situation by entering into one of several types of contracts with their workers. Perhaps the most well-known is the covenant not to compete, or non-compete agreement. Essentially, non-compete agreements prohibit the employee from working for a competing business in a certain geographical area for a certain period of time after severing employment with your company. The upside of the non-compete agreement is that, when drafted properly, they are enforceable to a significant extent, and employees very rarely want to spend the time and money fighting to get out of them. The downside is that public policy in Illinois actually disfavors such restraints, litigating one of these cases in court can be expensive, and the results are rarely predictable.

In addition to a traditional non-compete agreement, an employer can use a simple employment agreement to protect its investment in its employees. If the employer agrees to train the employee, then the employee will agree to remain with the company for a certain length of time so that the employer can recoup its investment. Then, if the employee leaves before the term is up, he or she owes the company damages for breaching the contract.

3. Train your employees and allow them to leave freely. Ideally, your employees will love your company so much that, even if you give them highly marketable skills, they will stick around. This kind of environment is obviously challenging to foster, but even for companies not listed in Fortune’s Best Companies to Work For, it is often advantageous to invest in employees, even when there is no guarantee they will remain with your company.

While it can be costly to replace an employee, one must keep in mind that there are also costs for the employee when he or she leaps to a new job. If you provide an employee with new skills, but are paying 10 percent less than what he or she could get on the open market, will the employee necessarily try his or her luck elsewhere for more money? Is a 10-percent raise worth the risk of joining an unknown company, when you are already settled and comfortable with your current employer?

As with many human resource issues, the trick is to find ways to keep your employees happy. If you can afford to pay them market rates to keep them, then do that. If not, it might be time to get creative and try some new strategies for building morale among your employees, even if they could jump ship and make more money elsewhere.

Conclusion
Any company that deals with this problem on a regular basis will likely use some combination of the three methods described here. For some job functions that require major investments in training, a formal written contract with the employee might be the right move. For others, you might have faith in your employees not to quit even if you invest in their training. Other times, your business might dictate that you forgo training altogether and just hire someone with the skill set you require. Whichever strategy you choose, it is important that an employer think through these issues to avoid losing a significant investment when an employee resigns. iBi

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