<i>Dear Workforce</i> How Do We Calculate a First-Ever Training Budget

June 15, 2010
Dear Leading Without Examples:
Ask around. Question other business leaders about how much they budget for training. Use the information as a reference point, but not to dictate the actual amount you will spend. Remember, your training program is unique to your company's culture, mission, people and values.
Map core competencies. A mapping process needs to occur to establish core competencies by job type, and for leadership specifically. This can be a complicated and long process, but if done strategically and in a collaborative framework, yields great results to build a budget that is fiscally sensible and aligned with the business enterprise.
Assess performance. Once core competencies are mapped, begin to analyze employees by competencies to determine
learning gaps. This process helps you to determine specific training needed, along with a corresponding budget. This personalized approach can significantly accelerate opportunities for success, because it is customized as well as having general themes to address in training.
Start small, grow gradually. Trying to do too much too quickly could lead to frustration and failure. Focus on one or two programs during the first year and grow gradually. This also keeps costs down during the learning curve. Ramp up additional levels of training as your company gains lessons about leadership.
Go outside, stay inside—or both. Your organization needs to decide the extent of training conducted in-house versus how much is outsourced to training consultants. Having skilled staff to conduct the training will save the expense of hiring outside consultants. Off-the-shelf training from consultants can run as high as $3,000 a day, and customized projects can easily cost $10,000 or more. Still, most organizations typically use a mix of internal and external resources, so don't disregard this option.
Use blended learning. A blended learning approach uses diverse training components, including face-to-face training, webinars, online courses, case studies, simulations, exercises/projects and stretch assignments. Your budget needs to estimate the costs of the various approaches, based on the company's goals for training.
Measure return on investment. This can be measured both quantitatively and qualitatively. From a quantitative framework, one can envision sending salespeople to training seminars, then analyzing their sales figures before and after training to measure any difference.
Qualitatively, when a leader attends training on performance management, this too can be studies using pre- and post-training with his direct reports. The expectation is that training should produce a noticeable improvement that justifies your initial investment.
Consider the finances. Conservatively, a training budget that is 5 to 8 percent of revenue is reasonable and consistent with many organizations. The number of people trained usually is in direct proportion to the cost of training. Typically, the more people trained, the greater your training budget will be.
Partner with universities. Contact local universities and colleges about potential partnerships. Many academic institutions will develop customized leadership programs on behalf of real-world companies. This would enable your company to gain valued insight on the latest leadership practices. You might also consider partnering with other companies to explore sharing costs with external consultants.
SOURCE: Dana E. Jarvis, adjunct professor, Duquesne University, Pittsburgh, May 7, 2010
LEARN MORE: Once your training budget is set, focus next on getting employees to embrace cross-training.
Workforce Management Online, June 2010 -- Register Now!
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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