Companies that invest more in internal training for their staff recover faster from economic turmoil, according to a new study.
The research, carried out by the Moore School of Business at the University of South Carolina, also found that selective staffing boosted productivity and profit in pre-recession periods, and also helped firms to recover more quickly following a downturn.
Professor Robert Ployhart, in collaboration with Youngsang Ray Kim, a doctoral student at Moore, found that effectively managing HR (human resources) allowed flexibility and adaptability within a range of economic conditions. Firms that implemented hiring freezes and cut back on training during recession were found to have taken longer to recover.
The study examined the effects of staffing and training on firm productivity and profit growth before, during and after the Great Recession (December 2007 to June 2009) in more than 350 firms.
Ployhart said: “Larger firms were hit harder by the great recession because they tended to have more profitability—hence, when markets contracted, they had more room to fall. Nothing insightful there, but the interesting thing is that if you only look at the period when the recession hit and profits fell, one would have the impression that talent was unrelated or even negatively related to profit. Yet this short-term view obscured the bigger picture, which is that better hiring and training actually helped firms recover.
“Companies should realise that even when the economy is uncertain or even turning negative, you shouldn’t stop investing in people.”