Employee Education as an Investment in Sustainable Company Growth

Milan Puvaa, B.Sc., Ph.D. student, Postgraduate doctoral studies Management at the Faculty of Economics in Osijek, Ofir Ltd., Osijek, Croatia Ivica Zdrili, M.Sc., Ph.D. student, Postgraduate doctoral studies Management at the Faculty of Economics in Osijek, Adriatic Security Ltd., Zadar, Croatia Dinko Roso, B.Sc., Ph.D. student, Postgraduate doctoral studies Management at the Faculty of Economics in Osijek, Jet Osijek Ltd., Osijek, Croatia

Summary It has long been clear that an individuals formal education is not sufficient for their continuing competitiveness on the labour market. The ever-important professional experience, together with everyday practice, is linked to informal education, which is (generally) the responsibility of an individual employee. In keeping with this fact and within the life cycle of a company, a continuing development and the highest possible flexibility in relation to the changing environment are of great importance. The current global market and its mechanisms make the existing knowledge less valuable. Moreover, only those knowledge workers prepared for constant knowledge acquisition and learning will subsist as winners. Knowledge has become more available than ever; the question is how and how often we reap the benefits of this accessibility. Individuals, engineers, experts, managers and employees contribute to both a companys competitiveness as well as their own by their development, education and training. Do employees, i.e. their supervisors pay enough attention to staff education? The above mentioned theoretical facts have been generally accepted and are a standard basis in the development of any quality or sustainability system within companies. The term lifelong learning actually encompasses the imperative of permanent educational progress, which is also underlined by the EU club that Croatia will soon be joining. The main topic of this paper is gaining insight into the existing theory and its application in everyday business field. Thus conclusions can be reached on the additional development possibilities that are available in our environment. By conducting interviews in several small and middle-sized companies and by analysing the research conducted in the Republic of Croatia, we will try to find their common features related to employee education, as well as valuable potentials that should be further developed in the years to come. Key words: employee development, sustainable company growth, global market, lifelong learning

1. Contemporary education
The contemporary concept of education has significantly changed in comparison to the previous 50 to 60 years of human history. The former dream of free compulsory primary education has become one of the preconditions for even considering further development. Great Britain assumed the responsibility for primary education until the age of 14 only in 1870 (1). What would the critics of that time have to say about recent protests and demands for free academic education? Formal education for most individuals completes upon passing the state graduation exam or getting a diploma. According to the former understanding of education, success in ones life was defined as having successfully finished school or university. The importance of finishing some of educational programmes cannot be disputed even at the present time. Nevertheless, informal education, which is present in these turbulent times of globalisation, has become more important than ever. Informal education is the aggregate knowledge acquisition outside formal institutions (school, faculty). It includes seminars, workshops, professional experience, gathering information and various other ways of acquiring knowledge. The importance of this type of education primarily stands out against shortcomings or inadequacies of formal educational programmes, which do not provide the future knowledge workers with sufficient skills and training to make them competitive. These two types of education (formal and informal) have been integrated into a term lifelong learning by contemporary literature. This buzzword has been used as a motto both by younger generations and by the workforce in general. Actually, the term has been used so frequently in recent times that its meaning is constantly being changed and upgraded. The European Union states in its documents that it is necessary to instil lifelong learning into individuals consciousness as the basis for further development. Various programmes for adult development have been organized specifically for emphasising that formal education is no longer sufficient enough for both employment and everyday life. Permanent development is no longer a privilege and an opportunity of the chosen. It has become the requirement that has to be met by everyone. Similarly, the EU has stated in the Lisbon Declaration that, by the year 2010, the strongest world economy will be the one that is based on knowledge management. At the same time, the USA has said that the strongest world economy will be based on the use and implementation of technology. The conclusion for the present time is clear: technology management cannot continue to exist without knowledge, and therefore there can be no progress. Globalisation, the fast-paced way of life, the availability of information and knowledge have made lifelong learning a logical step in ones education. Education has become the vital capital of a society, as well as the main driving force of economic development. Modern companies have had to recognize the trend of growing importance of employee education as one of the most efficient ways of gaining competitive advantage. It is often said that in the time of globalisation only one thing is certain change. Knowledge workers will make it possible for companies to flexibly adjust to changes and meet business goals. According to these new trends in education, the labour market has become even more demanding and rigorous. The list of requirements for potential employees has become longer, so that new skills are required. Command of several foreign languages, communication and

teamwork skills are but a few of those requirements. A formal diploma, computer skills or a driving licence are a given. Some of the mentioned skills have been regarded as solely managerial until recently. Nevertheless, in contemporary, flexible companies, employees are expected to perform a wider spectre of tasks and have more responsibilities and duties. It is interesting that some authors foresaw this outcome relating to education some forty years ago. Alvin Toffler emphasizes in his work Future Shock exactly the issue which we have become aware of today: ...the illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn... (3 p. 211).

2. From interns to knowledge workers

The role of contemporary managers has extended to include the responsibility for employee education. Various literature sources discuss a whole process that is considered essential for getting to know employees, so that they can be further educated in the right direction. This ensures that their full work potential can be exploited. Nevertheless, it is necessary to distinguish among several additional terms relating to education that are often interchangeably used and are important when deciding on the approach to our employee. It can be agreed that an employee in a new company is exposed to learning from the first day of employment (if not even earlier). Learning can be defined as skills and knowledge acquisition that results in a relatively permanent behavioural change (4 p. 721). According to this, it has become a trend that each employee continually learns when communicating with the superiors or colleagues and with customers, i.e. in daily business routine. Nonetheless, a responsible company strives to offer a wider spectre of knowledge to its employees, which is often called training. Training in general refers to every more or less organized programme of learning certain physical or intellectual activities... (4 p. 721). It usually refers to the acquisition of skills or specific competencies related to products or procedures. It focuses more on the how of a topic (5 p. 6-7). An example of training may be a workshop on new approaches to servicing a car of a certain brand. A more formalized approach that is often presented in a classroom format is called education. It provides students with the theoretical and conceptual aspects of a certain topic and relates heavily to the why of a topic. The improvement of sales in a marketing department may fall into the category of education. Development includes both training and education and gives an overview of how and why of a certain topic. Development provides new knowledge, skills and abilities that enable individuals to perform a broader variety of assignments and positions and prepares them for the future and the demands yet to come (4 p. 722). The difference between training and development can be seen in table 1.

Table 1. Training versus development

Training Short timeframes. Employees learn distinct ways to do things and to act through demonstration. Assessing the disadvantages of present skills. Achievement on tests, award of certificates, appraisal ratings and material improvement to cost of work performed.

Differences Duration Concentration

Objective Measured by

Development Long timeframes. Broadening assignment capabilities. Gaining understanding of meanings and concepts. Developing judgment. Preparing for future demands of their jobs. Better qualified employees, advancement inside company and deeper and broader ability.

Source: (1 p. 722) and (2 p. 7-2)

It is understandable that those responsible in an organisation should use combinations of training and education to influence the development of each individual employee in order to utilise their full potentials, thus developing the whole company. A learning organisation could be used as an example to summarize all of the above mentioned terms, i.e. to provide an overall picture of a company that understands the importance of continuing learning. A learning organization is an organization that has come to a conclusion that learning and acquiring new knowledge are the key to success, and education is valued as crucial for future prosperity. (6) Such an organization is not just a mere sum of all knowledge possessed by its employees. Managers, i.e. the leadership of a company have a task to set an example themselves of the importance of education with a clear positive vision of where the company is going. This initial step ensures that the employees will also accept the development plan, which undoubtedly includes their own personal (educational) progress. Getting to know your employee is recommended as the first step in professional development of a new employee. This can be underlined by a quote from a book that is considered to be a relevant source for contemporary management: People do not change that much. Dont waste time trying to fix the shortcomings. Try to exploit what they have to offer. This is hard enough. (7) The earlier management sought after employees shortcomings and ways to fix or supplement them. It became obvious that a person was gradually developing in other fields, but never fully exploited their potentials. More often than not, this meant that employees exhibited average qualities in various tasks. The contemporary way, as described above, demands from employees to be above average or the best in their jobs, i.e. to fully use and develop the aptitudes and talents that they possess. It is important to familiarise new employees with their tasks, rights and obligations so that they can get a bigger picture of their new job, working environment and organisation as a whole. Some of the activities necessary for new employee orientation and their general divisions between those responsible for human resource management matters and the managers and supervisors for whom the new employee works are shown in Table 2.

Table 2. New employee orientation

Responsibilities tasks Human resources department Management Developing, monitoring and evaluating the orientation Evaluating new employee performance program Explaining employee rights, responsibilities, pay, Introducing the new employee to other employees possibilities... Installing the employee in the payroll system and Preparing co-workers to welcome and assist the new enabling access to other IT solutions of the company employee Presenting the job overview and work rules
Source: (2)

Upon completing the initial evaluation, a personalized development plan for each employee should be developed. It is of utmost importance to include employees themselves in the development of this plan, so that they can understand the importance of this process for the company, as well as the importance of their personal development for enhancing the results of the whole team/department. When developing the plan, each individual should be informed about their observed characteristics during the first period. Based on all collected parameters, job description and individual aspirations for development, the plan will suit our employee in its entirety, thus meeting both the employees and the managements needs in the long run. It is understandable that the development plan should be changed and readjusted depending on the course of employee development. The best results can be ensured only by constantly monitoring the plan.

3. Levels, types and techniques of education

While the level of educational requirements indicates the depth and the intensity of the required education, the types of requirements indicate its content, i.e. which skills and knowledge should be taken into consideration. (4 p. 742)
Figure 1. Levels of education in combination with the types of educational requirements 4. level Education and preparation for future changes and tasks. Education for the future and flexibility.

2. level Broadening and deepening knowledge and skills for adapting to changes in a job and technology 1. level Preparing for the actual job

3. level Career development and preparing for promotion and taking over more complex and responsible tasks

Levels of education

Types of educational requirements

1. Basic knowledge and skills

2. Technical, i.e. professional skills

3. Interpersonal skills

4. Conceptual, i.e. strategic skills

Source: (1)

The above definition and Figure 1 best categorise the levels, i.e. types of educational requirements managers might encounter. It is completely understandable that one cannot expect that all employees will reach level 4 or study the most complex conceptual skills. Determining neither over- nor underestimating) the abilities of employees is necessary due to possible mistakes when filling positions or transferring employees to other positions. Furthermore, there is a frequent challenge in practice when top employees are transferred to managerial positions. The loss for a company may be multiple: not only is the top position filled by a person who does not possess managerial skills (approach, vision, eloquence, dealing with crisis, etc.), but also the former position now lacks an outstanding worker. It is true that some of the mentioned skills can be learned in time, but in the long run, such a move can mean more damage than benefits for a company. The manager responsible for the development process of employees should take into consideration the fact that all people learn in a different way. Different approaches to acquiring new contents cannot be exclusive, i.e. one way is not better or more successful than the other one. Depending on individuals, each way is the correct one. It is a fact that by developing various learning techniques one has more possibilities of adjustment and choice for finding the most adequate method. Nevertheless, the manager should try to decide which method would be optimal for achieving the best possible results, with least resistance and to the satisfaction of both parties. Scheduling a training/education is an important aspect that should be taken into consideration, too. Depending on the type and requirements, education can be mandatory and optional. Regardless of the type, it is important that they are habit-forming, thus encouraging learning. As a result, mandatory education will be less of a problem and each non-attendance at

optional workshops will be seen as a possibility for adverse effects. Precisely because of this, many companies provide combinations of education and employees free time. For instance, an employee has to attend a training session before or after a normal workday and this time must be considered as hour(s) worked. This is a compromise between education sessions that are fully organised in the workplace and those that take place in employees free time. Furthermore, in order to ensure better knowledge acquisition and attendance at education sessions, managers can (have to): count free time spent attending an education session as hours worked; record employee attendance and give certificates of completion; limit the training groups to 20 members, not allow lectures longer than one hour; plan shorter breaks during longer discussions; organise as many trainings where theory is complemented by practice (especially in concrete business situations). One seemingly minor detail is also deciding on the lecturer. Should it be someone from the supervisors, board members, or perhaps someone who is of the same rank as those who will be attending the lecture? The third, and possibly the best solution, is hiring someone from the outside to hold the lecture. The overall impression of a lecture or training can be unfavourable if it has been delivered by a wrong person. From the aspect of a lecturer or a presenter of a workshop (training), the content should be suitable for employees depending on their education, job description, experience, etc. Since lectures differ from those in secondary schools, the fact that adults are those who participate in these lectures should always be kept in mind. Practicality should be the main guideline to be followed. Researches have shown that real-life examples are the best way for employees (especially those with more experience) to learn. Furthermore, it is important to create a positive and friendly atmosphere for education. The methods and tools for development are wide-ranging and have been described numerous times in various works of literature. Many are still being discovered or perfected, since information and communication technologies are being developed. The presenter has a difficult task to choose the most suitable tool. Table 3 shows the comparative analysis of education on the job and in the classroom.
Table 3. Education methods and techniques in relation to the place where it is conducted

Education methods and techniques Development on the job Development in classrooms Coaching Lectures Apprenticeship Audiovisual techniques Internship Computer aided learning Mentoring Interactive videos Student employees Conferences and discussions Simulations Case studies Role-playing Business games Sensitivity training
Source: (1 pp. 744-753) and (2 p. 7-3)

4. Employee education in practice

When choosing an educational technique, a lecturer should opt for the one which offers the broadest range of possibilities depending on learning objectives (what is being taught?), targeted audience or the topic of the lecture. Combinations of several techniques are a possibility, thus ensuring that objectives are completely accomplished. Figure 2 shows the most frequently used education methods in various companies in the Republic of Croatia according to the research carried out in 2007.
Figure 2. Methods of employee education in companies in the Republic of Croatia
Lectures Conferences Internship Individual coaching Apprenticeship Mentoring Student employees Case studies Job rotation Computer aided learning Role playing and business games Audiovisual techniques Simulations

Source: (3)

Traditional lectures are still the most represented kind of knowledge transfer to employees. Conferences, a massive type of education, occupy the second place. As communication technology is becoming more and more available, this percentage will most likely increase in time. Tools (even those free of charge, for instance Skype for voice calls over the Internet and conference calls) have become a part of standard software packages within companies, which means that one of the most important preconditions for implementing new methods into business practice has been met. It is interesting that computer-aided learning is one of the least used educational techniques.

Figure 3. Graphical representation of the answers to the question: What do you think of e-learning method?
It is attractive, but less attractive than traditional learning. It is more attractive than traditional learning. It is as attractive as traditional learning. I dont know enough about e-learning to be able to answer the question.)
Employers Employees

Source: (4)

Figure 3 proves that more than half of interviewed employers think that traditional learning is still more attractive. However, around 20% of interviewees (both employers and employees) state that they do not know enough about this method to form an opinion. A certain time period necessary to prepare materials and the lack of direct presentation (human contact) can

be singled out as some of disadvantages of this method. Nevertheless, time and location independence, as well as many possibilities offered by computer multimedia should be the key, indisputable advantages of this type of learning. Around 60 percent of companies use internship, individual coaching, apprenticeship and mentoring. It is interesting to observe that the basis for choosing these methods is interpersonal live contact, which is evidently preferred and practiced by Croatian employers. The interview (10) developed for the purposes of this paper included several companies in the Osijek-Baranja County. Interviews were used to gather information that could help reach conclusions on the use of the mentioned theory in practice, in our environment. It is important to say that each company (i.e. their managers or responsible persons) confirmed that they educate their employees. In some companies, continuing education is a precondition for keeping the licence as an authorised outlet (for instance, one car showroom with 45 employees). Such organisations develop a monthly education plan for employees based on a specific workplace. For instance, employees in the marketing department have to attend courses on new promotional activities, so that they can follow new plans, commercials and advertising. Furthermore, each salesperson has to at least once a month attend training sessions on new car models and their features, as well as financial options that can be offered to a client. Car mechanics have special courses (trainings), which are actually most frequently organised. Since technology is constantly advancing, resulting in new knowledge, i.e. technical solutions, employees in service departments have to take additional courses every two weeks. The majority of education is done over the Internet. This means that supervisors (managers and the board) have complete overview of the education course. Advanced multimedia animations, combinations of questions and answers and expressing opinion are used to both educate and evaluate. Nevertheless, the best way to evaluate is in daily activities, when dealing with potential customers or communicating with the existing clients. Only occasionally, the employees of this company (mostly high-ranking ones) are obliged to personally attend joint presentation or education that is conducted in a traditional way, a lecture in a classroom. Another example company importing lighting equipment) shows that there is a tendency in some companies to get to know their employees personally. Only a small fraction of education is done over the Internet (new catalogues), and the remaining required education is provided in the companys headquarters, which the local branch represents, every two months. Furthermore, this relatively smaller company (around 20 employees) additionally invests in developing computer skills, learning foreign languages, as well as in continuing formal education postgraduate doctoral studies. After conducting the interview with the representatives of a large company in the OsijekBaranja County, whose activities are manufacturing, distribution and trade, with more than 900 employees, it was noticed that education is continually invested in, but exclusively that of the management, i.e. higher management and representatives of certain departments. Based on the waterfall principle, those educated employees are then responsible for transferring the acquired knowledge to the lowest level, depending on the needs and requirements. Similarly to the previous examples, lectures as a learning method are mostly used, especially formal types (private schools, additional professional training at faculties or specialized studies).

Figure 4. Graphical representation of the answers to the question: How much do you spend monthly on employee education? (1 kn = 0,14 )
Up to 500 kn kn 501 1,000 kn 1,001 2,000 kn 2,001 5,000 kn 5,001 10,000 kn 10,001 kn and more

Source: (4)

According to Figure 4, most employers (31% of 80 interviewees) in the Republic of Croatia spend up to 500.00 kuna monthly on employee education. This figure should be correlated with the size of the company, since the interview showed that several smaller companies (various activities) invest significantly more in employee education, while larger companies invest more in specific education, of only certain employees (or distinct hierarchical level). It can be roughly estimated that 60,000 80,000 kuna is invested annually by smaller companies, while bigger companies invest around 100,000 up to 150,000 kuna annually. Divided by the number of employees, this means that on average 300 1,000 kuna is monthly invested in employee education, which fits the above mentioned research. The economic crisis has unquestionably influenced investment in education. Even though additional accumulated or acquired knowledge can be a solution to many problems in these times of crisis, the interviewed companies agreed that they invest around 30% less in employee education, which is a direct result of turnover and profit decrease. Nonetheless, knowledge transfer to employees has managed to survive, despite the fact that 23% of the interviewed companies in the Republic of Croatia have completely terminated investing in employee education due to financial problems.

5. Conclusion

A few concrete conclusions can be drawn on the basis of the collected data. Above all, lifelong learning has become more important than ever, which was a starting point of this paper. There are numerous examples of world companies, as well as local companies, whose activities are holding steady or being improved, which sell their products and strengthen their positions in the ever-stronger market that is oriented towards Europe by constantly investing in employee education. The researched theory indisputably demonstrates the potential for further examination, i.e. implementation in daily business activities. With regard to the contemporary trends, which are characterised by speed and change, educational techniques are continually being improved, modernised and thus more available. Information and communication technologies, and especially the Internet, additionally supplement educational processes. Furthermore, distance education (e-learning), which was only experimentally used until recently, is becoming a standard way of learning in the business environment. Croatian companies have already recognised the importance of employee education. They have successfully adopted the educational business culture and continue to notice its key advantages. It is an encouraging fact that, despite the time of crisis, the majority companies are still providing additional employee education. Nevertheless, some companies still remain as a challenge, since they do not offer acquisition of new content among employees, either because they do not know enough about this topic or due to financial problems. It remains to be seen how the end of the financial crisis and the recovery of economy will influence this type of investment of Croatian companies. Educated workforce will be the best response to the international competition, which is already present. Raising awareness of this fact is an important task for both parties, both the employers and the employees. Until recently, the hiring process and employee care and development were strictly within the managers domain, but are now becoming one of the most important success factors of companies. Successful company management will surely accept theoretical facts, which will be implemented with minor modifications. It is becoming certain that Croatian companies, soon to become European companies, will base their success on the most valuable capital human knowledge.

6. References
1. Bahtijarevi-iber, F. Management ljudskih potencijala. Zagreb : Golden Marketing, 1999.

2. Parker, Raymond A. Human Resource Handbook. Indianapolis, Indiana 46278 : Russell R. Mueller Retail Hardware Research Foundation, 2008. 3. Obrazovanje i razvoj zaposlenika u hrvatskim organizacijama. Poloki Voki, N., Grizelj, H. Zagreb : an., 2007, Ekonomski pregled, pp. 851-880. 4. MojPosao.net. Istraivanje o edukativnim potrebama 2009. Zagreb : EduCentar, 2009. 5. Dr.sc. Pirl, Elvi. Sveuilite Jurja Dobrile u Puli. [Accessed on: 4 August 2010] http://www.ffpu.hr/fileadmin/Dokumenti/Obrazovanje_02.ppt. 6. Toffler, Alvin. Future Shock. New York : an., 1971. 7. Handy, C. The age of paradox. Boston : Harvard Business Press, 1995. 8. Buckingham, Marcus, Coffman, Curt. First, break all the rules: What the World's Greatest Managers Do Differently. s.l. : Simon & Schuster Trade, 1999. 9. Edukacija zaposlenika. July 2010.