Developing a budget for training or professional development for your employees can be a daunting task for many HR professionals. The average direct learning expenditure per employee is $1,273 according to the Association for Talent Development’s (ATD) 2017 State of the Industry report. This report also found that the average amount of formal learning hours per employee is 34.1, not including informal learning such as on-the-job learning. Both of these figures are increases from previous years which reveals organizations are putting more effort and money into developing their workforce. Being clear about specific training needs and associated costs is critical for budget planning purposes. However, there are so many unknowns that occur during the year that trigger the need for a specific training that could throw off an entire budget.
You can alleviate some of these “pains” by doing your due diligence during the creation of your learning and development budget. Here are a few of the obvious and not so obvious things you should consider when developing your training budget:
Training Needs Assessment
A Training Needs Assessment can greatly improve the predictability of your trainings for the next year and for years to come. It is best to conduct a Training Needs Assessment annually. A Training Needs Assessment can be conducted in-house or you can bring in an outside consultant to assess the needs of your organization.
An assessment like this can help determine where the opportunities for improvement are in your organization. It can determine if you need to dedicate monies to leadership development or succession planning if you have an executive or manager that will be transitioning out of the organization. It can determine if you need to re-train managers on how to conduct performance reviews.
You can determine these things by talking to your people and looking at your people metrics. If your turnover rate is increasing, find out why then figure out what type of training, either for the managers or the employees, is necessary to improve that metric.
When conducting formal Training Needs Assessments, it can be very useful to divide the needs by continent, site, division, levels of employees, etc. to help you put together a clear plan for who needs to be trained and on what topics. When there are large groups who need the same training, it makes it easier to know whether classroom training is the answer, individuals should be sent out, or webinar or e-learning participation could be used.
The administration costs that you can budget for truly depend on the size of your company. If you are a small organization and the only administrative aspects to training fall on an HR Generalist to coordinate and schedule training for a group of 60 people, three times a year and can keep everything tracked in a simple spreadsheet, your administrative line may be very minimal.
However, if you are a larger organization that needs to track and evaluate the training of 500+ employees, you may be investing in an LMS (learning management system) to document, track, and report all of your training programs.
Not every workforce “pain” you experience can be fixed by sending a handful of employees to training. Sometimes the pain is actually a strategic misstep that needs to be addressed on a higher level. Sometimes the pain is when only one employee is experiencing issues which may be resolved with one-on-one coaching rather than sending the employee off to training.
For instance, if you are having trouble with one or two recruiters bringing in talent to your organization, that may be alleviated by training those recruiters directly.
However, if your organization is experiencing a high turnover rate and are losing out on high-performing talent during the recruitment process, it may be time to take a look at your overall talent management strategy.
Mid-size or large organizations that already have an in-house trainer on staff for onboarding new employees or train on soft skills can actually send their already-salaried trainer to training that teaches them how to train employees on a specific topic.
This is ideal for organizations that already have an instructor on staff and are looking to expand their in-house training capabilities.
Coaching and Mentoring
For many avenues of professional development, particularly for employees on leadership tracks, it’s important to support those employees through their objectives and goals. Coaching is typically focused on ensuring that key employees such as senior leaders and executives are continuing to develop effective workplace behaviors. Coaching can be paired with assessments that help identify leadership and interpersonal styles and areas of improvement for focus.
Mentoring programs can be developed for employees who may not be (or desire to be) on leadership tracks but are still looking to grow as a professional. Mentoring programs can either be set-up in-house in which more senior employees are mentoring entry-level or associate employees, or they can be set-up to involve outside professional networks.
Direct Costs (the Basics)
Whether you are using an outside firm or an in-house instructor, there are a laundry list of questions you must ask and things you must account for, direct-cost-related, when developing your training budget such as instructor fees, technology requirements, travel, and more. Here’s the list of a few direct-costs to consider and may be applicable:
- Trainee travel, lodging, meals, etc.
- Instructor travel, lodging, meals, etc.
- Instructor fees
- AV costs
- Facility rental
- Technology costs
- Materials (workbooks, videos, etc.)
- Food and beverages
- And more
There are a number of indirect costs you also have to account for when developing your budget. These indirect costs include things such as employee lost time and impact on the organization. In fact, if organizations are averaging 34.1 hours of formal learning per employee per year, accounting for that many lost “man-hours” per employee adds up quickly.
It’s important to consider the lost work time of the trainees because you’re still paying them for their time in training but they aren’t directly doing their job.
This also affects any position that may need a replacement to fill-in during their time in training and that cost should be accounted for.