The Effects of Employee Development Programs on Job Satisfaction

This research paper, submitted in partial fulfillment of a Master of Science degree in Training and Development at the University of Wisconsin-Stout in May 2001, investigates the effects of employee development programs on job satisfaction and employee retention, considering their impact on business success. The study analyzes data from the Gallup Organization and the American Society for Training and Development, concluding that training and development significantly increase employee satisfaction and influence their decision to remain with a company. It also highlights the crucial role of organizational culture in supporting employees throughout the development process. The paper reviews the history of employee development, explores individual and organizational outcomes, and provides recommendations for employers and employees. The research underscores the importance of ongoing employee development for organizational success and highlights the shift from focusing solely on promotions to emphasizing skill development and employee retention in a changing job market.

THE EFFECTS OF EMPLOYEE DEVELOPMENT PROGRAMS ON
JOB SATISFACTION AND EMPLOYEE RETENTION
By
Karen Shelton
A Research Paper
Submitted for Partial Fulfillment of the
Requirements for the
Master of Science Degree in
Training and Development
Approved for Completion of 4 Semester Credits
TRHRD-735-001
_____________________________
Research Advisor
The Graduate College
University of Wisconsin-Stout
May 2001

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The Graduate College
University of Wisconsin-Stout
Menomonie, WI 54751
ABSTRACT
Shelton Karen L.
(Write) (Last Name) (First Name) (Initial)
The Effects of Employee Development Programs on Job Satisfaction and Employee
Retention
(Title)
Training and Development Dr. Joseph Benkowski May 2001 51
(Graduate Major) (Research Advisor) (Month/Year) (No. of pages)
Publication Manual of the American Psychological Association
(Name of Style Manual Used in this Study)
This research analyzes the significance of employee development programs on employee
retention and job satisfaction. It also takes business success into consideration. The
method for this project consisted of an analysis of two studies, one conducted by the
Gallup Organization and the other conducted by the American Society for Training and
Development and the Society for Human Resource Management. The study determined
that training and development increase employee satisfaction and are significant in an
employee’s decision to stay with a company. It also indicated that the impact of training
decreases without the organizational culture to support employees in the development
process.

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ACKNOWLEDGEMENTS
I would first like to thank my wonderful fiancé, Doug. I could not have gotten
through this project or this degree program without his love, support, understanding, and
help creating graphs. I would also like to thank my good friend Kelli. Without her
encouragement, I do not think I would have maintained the motivation to finish.
I would also like to thank my family. They are amazing role models for me and I
would not have ever pursued this degree without them.
Finally, I would like to thank Dr. Joseph Benkowski, my Research Advisor,
Academic Advisor, and the Training and Development Program Director. Joe not only
guided me through this project and challenged me to make it the best it could be; he also
helped me through the Training and Development program. I cannot thank him enough
for his help and encouragement.

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TABLE OF CONTENTS
I. Research Problem and Objectives………………………………………………… 1
A. Introduction………………………………………………………………… 1
B. Problem Statement…………………………………………………..…….. 1
C. Definitions…………………………………………………………………. 2
D. Research Objectives……………………………………………………….. 3
II. Review of Literature……………………………………………………………… 4
A. History……………………………………………………………………… 4
B. Employee Development Programs…………………………………….…… 6
1. Philosophy………………………………………………………….. 6
2. Structure……………………………………………………………. 9
3. Key Components……………………………………………….…… 11
C. Individual Outcomes……………………………………………………….. 17
1. Career Competencies……………………………………………….. 17
2. Employee Satisfaction………………………………………….…… 19
D. Organizational Outcomes…………………………………………………... 21
1. Employee Retention………………………………………………… 21
2. Market Competition………………………………………………… 22
3. Managerial Support…………………………………………….…… 23
III. Research Method…………………………………………………………………. 25
A. Research Design……………………………………………………….…… 25
B. Population………………………………………………………………….. 27
C. Data Analysis………………………………………………………….…… 28
D. Comparison Methodology…………………………………………………. 29
IV. Results……………………………………………………………………….…… 32

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A. Amount of Training Available……………………………………………… 32
B. Training Methods…………………………………………………………... 34
C. Employee Empowerment in Development………………………………… 36
D. Organizational Culture…………………………………………………….. 38
E. Recruitment and Retention…………………………………………….…… 39
F. Job Satisfaction…………………………………………………………….. 40
V. Conclusions and Recommendations……………………………………………… 43
A. History of Employee Development Programs……………………………... 43
B. Role of Employee Development in Retention and Satisfaction……………. 44
C. Benefits of Employee Development………………………………………... 44
D. Employers’ Role in Employee Development………………………………. 45
E. Employees’ Role in Employee Development……………………………… 46
F. Recommendations………………………………………………………….. 47
References…………………………………………………………………………….. 49

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Chapter 1
Research Problem and Objectives
Introduction
In any industry the success of an organization is extremely dependent on its
human resources. Although there are many other factors that play a key role, a company
must have effective employees in order to stay financially solvent and competitive. In
order to maintain this valuable commodity, organizations must be aware of employee
satisfaction and retention. Many companies make the mistake of assuming that
employees are only seeking financial benefits for their jobs. This assumption overlooks
the high importance many people place on the intrinsic benefits of their careers. It is not
only a mistake for employee satisfaction and retention, but it also has negative business
consequences. Organizations must have employees who are able to quickly adapt to an
ever-changing world market. Companies need to invest in on-going employee
development in order to both keep employees and be successful.
Problem Statement
The problem of this study is to analyze the significance of employee development
programs on employee retention and job satisfaction with regard to business success.
Purpose
The purpose of this study is to review current literature and analyze previous
studies to evaluate whether or not employee development programs are beneficial to an
organization. Although it is not specific to a particular company or industry, it is intended
to give a general overview of the concept. Research and practical evidence of career

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development programs already exists. This study will take pieces of these two areas and
draw conclusions about how to use the information.
Definitions
Business Success: A company’s ability to remain solvent and grow within its market.
Career Competencies: The knowledge, skills, and abilities needed for a person to attain
his/her desired career.
Career Planning: An organizational initiative to help employees assess their skills, define
their career goals, and create an action plan for accomplishing those
goals. The organization is also responsible for holding employees
accountable to those goals.
Corporate University: A training environment used by some companies intended to make
training and development opportunities constantly available to
employees at a sight designed for such activities.
Employee Development: A system for assisting employees to develop within their
current jobs or advance to fulfill their goals for the future.
Employee Retention: A company’s ability to keep quality employees who are
contributing to business success.
Employee Satisfaction: The level to which employees enjoy their jobs and are willing to
put forth effort toward the success of an organization.
Goal Setting: The process of establishing one’s plans for future jobs and careers.
Market Competition: The organizations that are in the same business as a company that
compete for the same customer or client base.

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Organizational Culture: The overall environment in which an employee works within a
particular company.
Research Objectives
This research project will meet the following objectives:
1. Review the history of employee development programs.
2. Analyze the role of employee development in retention and
satisfaction.
3. Analyze the benefits of employee development.
4. Review the employer’s role in employee development.
5. Clarify the employee’s role in employee development.

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Chapter 2
Review of Literature
History
Employee development programs are not a new idea in the United States. General
Motors established one of the first corporate universities in 1927 with the General Motors
Institute (Gerbman, 2000). The concept was slow to catch on, but in the 1950s a variety
of organizations followed the same path. During the 1950s General Electric established
Crotonville Management Development Institute and Walt Disney began Disney
University (Gerbman, 2000). McDonald’s followed this trend with the establishment of
Hamburger University to train its managers in the early 1960s (Garger, 1999). Despite
these progressive organizations, employee development and career planning still
experienced some growing pains.
In the 1970s, career planning and development efforts were focused on young
employees that seemed to have high potential. It was a way for companies to plan for the
future and nurture young workers for senior management positions (Moses, 1999). This
career path model fit well with the traditional commitment employees would offer to
companies. Chris Argyris referred to this commitment as a “psychological contract” in
which employers were almost guaranteed long term loyalty and commitment to the
organization in return for giving employees job security, opportunities for promotion, and
training (Feldman, 2000). The ability to get on this fast track to the top of a company
diminished in the 1980s when companies were moving to a flattened hierarchy with less
room for promotions. People quickly realized that they were reaching plateaus in their
careers and the opportunities for advancement did not exist (Moses, 1999). The concept

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of career planning became less realistic for both individuals and organizations because
neither could count on long term commitment (Feldman, 2000). The stock market crash
of 1987 was a major turning point in employee development. Daniel Feldman keenly
states that, “where once large corporations were seen as bastions of job security, they are
now seen as minefields of job insecurity” (2000). Not only were corporations flattening,
they were also downsizing and restructuring to compensate for loss of revenue. These
drastic changes in the job market also led to changes in employee development programs.
Barbara Moses states that, “today, job security is dead and loyalty to the
organization in the tradition sense has died along with it” (1999). Under this assumption,
companies have to change the way they view employee development. Where once
training and development were viewed as mechanisms for employees to move up the
corporate ladder, promotion is no longer an incentive for employees because it is not a
definite option. Companies began realizing that they can challenge employees with
“lateral moves, skills development, job enrichment and special assignments” (Moses,
1999). Although organizations could not offer the same commitment of the past with the
market change in the 1980s, they could use employee development to support and retain
employees who were not lost in the downsizing and restructuring (Moses, 1999).
Employee development took a necessary shift from focusing on promotion to focusing on
skill development (Feldman, 2000). As the stock market gained strength again through
the 1990s, retention again became an issue for organizations. However, the shift in
mentality meant that employees may not make a commitment for their entire careers, but
they may stick around for a few years in a company that showed a concern for them

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(Moses, 1999). Employee development went through a process of rebuilding in the
1990s.
According to the Corporate University Xchange, a New York based corporate
education research and consulting firm, there were approximately 400 corporate
universities in the United States in 1988 (Petrecca, 2000). This number jumped to 1,600
in 1999 and the Corporate Xchange estimates more than 2,000 such programs currently
(Wilson, 2000). Jeanne Meister speculates that the number of corporate universities could
surpass the number of traditional universities and become the primary source of post-
secondary education by 2010 (1998). Although it is a bold prediction, investment in
employees is on the rise. The 1998 Industry Report by the American Society for Training
and Development (ASTD) indicated that U.S. organizations with more than 100
employees spent more than $60 billion on formal training that year, and 26 percent
increase since 1993 (Garger, 1999). Employee development programs come in a variety
of shapes and sizes, each with advantages and disadvantages.
Employee Development Programs: Philosophy
Different companies have established different types of employee development
programs for a variety of reasons. In the early 1990s Sears Credit, a firm based out of
Hoffman Estates, Illinois, underwent a major restructuring and responded with a career-
development initiative. This new venture was done in order to align employees with their
new and changing jobs, and to ensure that all employees were adding value to the
company. They also felt they were not sharing career opportunities with employees and
the knowledge and skills to take advantage of those opportunities (O’Herron and
Simonsen, 1995). JC Penney, a nationwide retail department store, established a virtual

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university to help their employees access knowledge as quickly as possible (Garger,
1999). Tires Plus, a tire retailer based out of Burnsville, Minnesota, offers Tires Plus
University (TPU) to its employees in an effort to enhance recruitment, retain strong
workers, fill leadership positions, and promote the overall wellness of employees. A key
component of TPU is that it coincides with a special promotion track for workers who get
involved (Dobbs, 2000). Young & Rubicam, Inc. and Bozell Worldwide, two New York
advertising agencies, put employees through a cross-disciplinary program to help them
build an arsenal of skills as well as learn about all aspects of the companies (Petrecca,
2000). NYNEX, a regional subsidiary of Bell Operating Company, offers “Career
Renewal,” a program designed to help employees build their skills and be marketable,
whether it be with NYNEX or another company (O’Herron and Simonsen, 1995). U.S.
Tsubaki, a manufacturer/supplier of power transmission and motion control products out
of Wheeling, Illinois, established UST University as a learning system to, “determine,
design, deliver and evaluate training and organizational development programs that meet
strategic, organizational and individual needs” (Callahan, 2000). These are just a few
employee development programs that exist. Although they vary in nature, most programs
are based on a similar philosophical construct.
Mel Kleiman points out that, “the fundamentals of a good employee training
program are: orientation, soft skills training, and technical skills training” (2000). These
concepts are the general foundation for any employee development program. Janet
Kottke believes that employee development programs should contain the three “Cs: core
workplace competencies, contextual framework within which the organization conducts
its business, and corporate citizenship” (1999). The core competencies in this model are,