According to the 2018 State of the Industry report from the Association for Talent Development, organizations spend an average of 11% of their budget and $986 per employee on direct learning expenditures. Due to economies of scale, smaller organizations actually spend more per employee than larger organizations even though they have a much smaller training budget.
Many companies large and small understand that in today’s competitive and ever-changing market landscape, the choice is really between paying the price of learning or paying a price in the marketplace. Companies that don’t invest in employee training and development will face more turnover, recruitment challenges, lost productivity, lost sales, loss of staff to competitors and lack of innovation.
Still, for many HR professionals and department managers, building training into the annual budget can pose a challenge. Accuracy predicting expected costs and defined ROI are some areas that cause heartburn for those holding the purse strings. The following are process recommendations you can use to create your training and development budget for 2020. Using them now could yield more, or at least adequate, financial support for current and future training and development initiatives.
Build your case.
Do what you can to show your leaders the value of investing in their employees. Help them understand the correlation between workforce training and the bottom line. Along with the metrics on the training cost per employee, include comparative cost data on employee retention, engagement and attracting quality hires to shore up leadership’s support for training and training ROI.
Prepare an explanation about the identified skill gaps to further establish a clear case for training. If learning directly improves performance, the cost of not training may be higher than the cost of investing in employees.
Research and Identify your Key Training Needs.
Each year carries a new set of training and development needs. Be prepared to meet these needs by finding out exactly what they consist of. What issues is your organization or department expecting to face in 2020? Examples could include change management, operations, leadership development, workplace harassment, onboarding and safety.
Company training and development needs usually fall into three categories: industry-related, job-related and task-related needs. All are worth investigating.
A certain amount of industry-related knowledge helps support employee performance, as does job-related knowledge which includes skills and competencies that empower the team member in his or her role. Task-related needs involve any piece of an employee’s job function that might bottleneck their overall performance. Think of the employee that excels in customer service calls, but struggles at data entry. Or the star salesperson that produced quotes at a glacial pace.
You can start by analyzing high-level factors like the economy, new environmental policies or trade policies and changing workforce demographics. Then drill down to a closer look at performance within departments and evidence of missed opportunities. Feedback from your customers via reviews, surveys, and discussions can also be enormously helpful in identifying weak areas that need to be addressed.
Talk to managers and employees about what they need to improve team efficiency and personal performance. Give them a safe space to relay valuable information about how they could improve and let them know their input will be used to design solutions that impact everyone for the better. Take anonymous surveys. Collect feedback through email. Create focus groups. All your legwork will pay off when your programs meet real identified needs and leave a long-lasting impact.
From your quantitative and qualitative research, you’ll more accurately identify the areas for training and development to include in your budget.
Create a Cost Per Employee Estimate.
Estimate cost for each type of training by factoring the number of participants in each training and development category. Then, factor in the instructor’s fee and his or her travel and lodging. Or account for the cost incurred by pulling internal staff off other tasks to facilitate employee training. Be sure to factor in the cost of materials, facility use and food. Additionally, you may want to add in a buffer for new hires and company growth if you’re expecting those in 2020. You’ll come out with an accurate per-person estimate that eliminates surprises (which CFOs hate) and carves out a healthy budget to power real workforce progress (which you love!).
If you put in the hours to analyze, research and position your plans on paper, they’re more likely to get financial approval for your training needs and deliver on their intended results.
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