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Training Incentives - The Good, the Bad, and the Ugly

Incentives for employee training can help a company to defray costs and increase efficiency, while also building a state's intellectual capital.

Jenny R. Massey, Senior Project Manager, Bingham Economic Development Advisors (Feb/Mar 08)
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After nearly two years of trying unsuccessfully to access funds from the three programs, the company decided to hire a consultant. It became clear that the applications were not completed with the correct information, and one program required board-approved amendments to fix the issues. It was also apparent the state was just as frustrated as the company, as state officials had been out to the company's facility to explain the programs at least seven times, yielding no results. The consultant secured extensions on the programs and accessed the entire sum of money within two months. The consultant was able to generate quick results due to familiarity with state programs and previous experience with the project managers. It became the consultant's task to make sure that the training was reimbursed; previously, the company did not have any dedicated personnel responsible for the grants.

Of note, the company did not reach predicted five-year employment goals. It was unable to collect all of the tax credits committed to the project, which made training money even more valuable. Companies often overlook nontraditional methods to reduce costs, but training incentives can make a real impact on company financials.

The Ugly
Companies that are "promised" incentives and aren't able to use them because of "failure to meet or comply" with program requirements feel misled.

Training incentives can be counterproductive when companies think they are going to receive training money, plan their training budget, spend the money, and then realize that they are not going to be reimbursed because of a failure to comply with program requirements.

For instance, a large car manufacturer in the West was promised a $150,000 grant to train employees on a new manufacturing certification. The company submitted an initial draft of an application for training. The state requested a few changes to the budget list since the approval board would probably not allow that particular training. If the company were to remove the training, then their budget expenditures with the grant would be cut by two thirds. After three months of discussion with the particular approval board, it became apparent that the training would not be approved on the grounds it was deemed unnecessary. None of the board members were specialists in car manufacturing.

An inflexible and slow process cost the company time and $150,000. This is a terrible result, especially after assurances of a quick process and the excitement of finalizing the project and distributing related press releases. This situation created a rocky partnership between the state and company at best. Considering that the other incentives were equally difficult to claim, the company has already expressed that it will not expand at its current location, but instead look to move to another state.

In Sum
In a perfect world, training enhances work force, thereby leading to an improved standard of living. There must be a positive link between training and profitability. Training incentives are an opportunity for the state and company to partner for mutually shared benefits. It is the company's responsibility to commit to realistic growth and wage numbers and reach those goals within a specifically stated amount of time. It is the state's responsibility to create well-designed programs with straightforward and flexible processes.

Companies are the best judges of the types of training required to make their businesses competitive; therefore, state training programs should be flexible enough to allow for changes in technology. Companies should have dedicated staff or consultants responsible for training incentive reimbursement. Training money that is set aside by state authorities that is not being used by companies does nothing to develop a state's intellectual capital.

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