On-The-Job Training and Learning: Formal Training versus Learning by Doing

The paper looks at and compares two methods of on-the-job training: formal training and learning by doing. The former involves an intensive training period prior to the employee directly taking on the position for which he or she was hired for, while the latter, the employee begins immediately and is expected to learn on his or her own through experience over time. The former method allows less room for shirking but involves a period of investment in the form of the value of output or service that is effectively foregone as a result of the more resource-intensive training regime. Perhaps surprisingly, even if the formal training program does not significantly improve upon the probability of future success in production or service provision, formal training can provide higher net benefits to the training firm than learning by doing because the savings from the reduction in shirking can be greater than the cost of foregone output.