Most managers ask themselves the same question every year:
“How do I justify a training budget?”
Budgeting is always a tense time of the year with critical deadlines and company initiatives taking priority over other important aspects of the job. Training often becomes an afterthought in the budget process, but it is an important part of bringing change to your department. In The Importance of Training in the Workplace, Shelley Frost writes, “Despite the potential drawbacks (expense, time away from work), training and development provides both the company as a whole and the individual employees with benefits that make the cost and time a worthwhile investment.” You can offer awesome learning opportunities for your employees and justify your training budget by following these four steps:
Write Out the Benefits
This step should occur before you determine ROI or put forward the budget to the executive team. It is important to address the impact training will have on your organization. Your company may benefit in any number of ways from fewer accidents to better treatment of equipment to money saved through properly executed sales initiatives. Life Cycle Engineering says in their blog How Do I Budget for Training and Justify It, “It seems a little backwards, but being able to anticipate the positive outcome training will have can help you create and justify your budget. Positioning training as an investment in continuous improvement that will have significant returns, rather than as a cost, will help your case.”
Bottom line: Promote your training program as more than an expense. Highlight the strategic benefits of expanding the knowledge of your employees.
Determine Your ROI
Assessing the Return on Investment (ROI) is a vital part of any budgetary decision. You need to put together facts and figures to help the executive team see the value of training. Understanding the value to the entire organization versus your specific department will impact their decision when it is time to approve the budget.
To determine the ROI of the program, take the gain from the investment, subtract the cost of investment, then divide by the cost of the investment (more on calculating ROI). Next to the intrinsic benefits of better educated employees, ROI is key in gaining budget approval. For example: When an employee knows how to properly operate a piece of machinery, wear and tear on the machine is reduced, which saves money on replacement parts, repair, and additional machines needed over the years.
Bottom Line: Monetize the strategic benefits and the financial benefits of the program and convert the numbers into an ROI that will ensure training budget approval.
Create an Environment of Continuous Improvement
When something happens at work and causes serious downtime, how does that affect employee productivity? How much money does your organization end up losing because work is placed on hold until the problem is fixed?
Michael Leboeuf says in his book “The Greatest Management Principle in the World, ”If you believe that training is expensive, it is because you do not know what ignorance costs. Companies that have the loyalty of their employees invest heavily in permanent training programs and promotion systems.”
Imagine a smart, effective reason to reduce costs by sending your employees to a rewarding course that will help them identify pitfalls and create a proactive environment of continuous improvement! You’ll notice your organization will increase time management skills, motivate one another and build on their working relationships.
Bottom Line: Check these stats showing the cost of ignoring training, and then make sure your program addresses them to create improvement.
Utilize Key Employees
You likely have a few “Rockstar” employees that absorb knowledge through training and achieve measurable results for your organization. These employees lead a motivated and engaging workplace culture as they exhibit leadership skills and influence others in healthy office competition.
It is essential to retain top talent and avoid the added budgetary expense of training new employees. You can save money that can go into needed training programs by simply keeping your top employees on the payroll.
According to SHRM the average cost-per-hire is $4,129.00 and average amount of days to fill that position can take up to 42 days!
Don’t stop at simply retaining your employees though. When employees can have ownership over processes and really feel like they are making an impact, they are more engaged and are less likely to leave.
Consider using your star employees as workshop leaders, allowing them to instruct their co-workers on what it takes to succeed. Allowing your best workers to share their experience is a budget-friendly option for training and will allow you to put your training money toward outside training programs that further the impact on your company
Bottom Line: Allow top talent to thought-share with their co-workers and use the budget for training on effective, powerful training options that will enhance your workplace culture.
For more on Training and Development, Benefits and Compensation, Team Building, Performance Management, Employee Relations, Leadership and Executive Coaching and Development, and all things “HR”, The Pendolino Group is here to support you and your team. Contact us today!
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