Training = Profit!

BCITO research proves that training apprentices generates profit.  We recently conducted an in-depth research project that shows that for every $1.00 spent on training a painter & decorator, a business will benefit by $2.85 in increased profit up to a 10 year period.

This is the first time that this exercise has ever been undertaken in New Zealand and BCITO is delighted to be able to share these findings with the construction industry.

There’s a misconception held by some that training an apprentice costs a business money with little or no return. This research proves that in the long run, that’s wrong. Investing in industry training is not just a cost to be minimised; it’s an investment that can grow your business.

Obviously the return on investment doesn’t kick-in immediately. The break-even point is 3-4 years – about the same time as completion of an apprenticeship – this is when the cost of training is offset by the extra profit generated by training. This extra profit keeps increasing the longer the trained person remains with the firm. So, yes, staff retention is a factor in this equation – the longer an employer keeps trained staff, the more profitable they become.

“During the past two years, BCITO has experienced unprecedented growth in new apprenticeships, but the construction industry still remains woefully short on skilled tradespeople. We need more businesses to come onboard and train our young people. With this research completed we can clearly prove that training an apprentice is a positive investment for employers,” Greg Durkin, Group Manager, Stakeholder Engagement, BCITO.

As part of the project painting & decorating business owners were asked about their firms’ structure, in terms of the number of people working there and what roles they were in. From this information, a model of an average firm in the industry was developed.

While the payback period for both trained and untrained workers appear similar, the positive return from training is sustained well into the future, increasing the cumulative benefit each year.

Other findings of the project show that when compared with a business that doesn’t invest in industry training, a painting & decorating firm that trains all staff will:

  • Grow 5% faster
  • Charge $0.42 more per hour per person
  • Estimate work 2% more accurately
  • Do 2% less hours to complete the same task or project

“It is such a worthwhile expense for every business to invest in training apprentices. Not only does having skilled workers improve your reputation and benefit your business overall, but this research now shows that over time your business’s bottom line is significantly improved. It’s fantastic news for industry training as a whole,” says Ruma Karaitiana, Chief Executive, BCITO.

The methodology used in this project works back from a measure of economic return such as cumulative firm profits over time. The drivers of profitability were broken down to identify individual attributes of a firm’s performance and evaluate the relative importance of these. The impact of a team’s trade and management proficencies on these attributes was then considered. Finally the contribution of training to an individual's proficiency was weighted relative to the contribution from experience.

Most business owners involved in the research project agreed that on average, trained workers become fully proficient between 6 and 10 years after starting work in the industry. On average untrained workers take a much longer time to be fully proficient and will only ever be 60-70% proficient, whereas trained workers become “fully billable” in a much shorter period of time.

In terms of the cost of training an apprentice, the research has taken into account BCITO fees, Government’s subsidy for industry training, apprentice salary and the cost of supervising and training an apprentice.

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