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Dear Workforce How Much Per Person Should Our Manufacturing Firm Allocate For Training

This isn’t the best approach. Instead, assess areas where changing performance will yield the most value and then implement strategies to achieve that goal.
May 26, 2002
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Related Topics: Basic Skills Training, HR Services and Administration, Behavioral Training, Dear Workforce
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A Dear Need Numbers:

Determining an appropriate training budget for your employees requires anunderstanding of what areas you’d like to address and why. So, rather thanstarting with the question, ‘what can I do with $1,200 per person this year?’it’s better to ask ‘where does a change in performance for a group ofemployees provide the most value to my company?’ Then, determine what thatvalue is and what it will take to get there.

If, for example, there are opportunities to improve your production employees’yield in a way that offers an acceptable return on investment, then do it. Let’ssay you can create an annual value to the company of $100,000 (resulting value)by increasing the volume of production through training. Let’s likewise assumeyour company requires a 10 percent return for this investment. If you can reachthat $100,000 increase by spending $90,909.09 or less, you have a financial casefor the training. [100,000/(1+0.10) = 90,909.09] You have spent $90,000, andrealized $100,000 in value, covering your costs plus the 10 percent returnrequired. Apply the same logic to professional employees.

Remember that value to your company takes many forms: increased revenues,lower costs, improved cash flow, lower turnover rates, increased compliance, andhappy employees, to name just a few. Sometimes it is worth allocating a setnumber of dollars per employee for them to use as they like. This may be a wayto retain your employees. Regardless of what you do, you’ll need to have areason why. Have your managers help you.

SOURCE: Brian R. Ruona, consultant, Organizational Solutions Group, PersonnelDecisions International, Atlanta, Georgia, Feb. 6, 2002.

LEARN MORE: Tapping Unused Resources in Lean Times

The information contained in this article is intended to provide usefulinformation on the topic covered, but should not be construed as legal advice ora legal opinion. Also remember that state laws may differ from the federal law.

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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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