I am currently involved in building a business case to influence my organisation's current spend on employee development. It is currently very low and I would like to hear from anyone who currently experiences a different climate and is willing to share their current spend, so we can incorporate some comparisons into our data.
Is your organisations willing to commit 5-10% of total payroll on employee development? Please let me know..
Michael Esau
5 Responses
Current Research
According to the 2004 ASTD (American Society of Training and Development) survey of more
than 375 major corporations, companies spend between 1 and 3% of their total payroll
on training.
In some cases, the “benchmarking” companies spend as much as 4% – and
budgets have increased, despite the US recession.
On a per-person basis, the average spent on training is more than $700 per employee per year – and in the “leading” companies, more than $1400 per employee per year.
Ah but shouldn’t it be about the training you need… yes & no
You’ll probably get lots of responses about not setting a specific budget and analysing need, identifying costs, setting budget, meeting need.
I’m not sure this nirvana actually exists.
Number crunchers want to know how much they can spend… then use the model above to demonstrate that you are only spending what you need.
My company is looking to commit between 1 & 2% of payroll on employee training and development.
Red Herring?
A typical yet challenging situation.
Leading or benchmark companies seem to spend around double in payroll terms than many other companies. This probably has not made them ‘leading’. Rather, they got to be ‘leading’ through a combination of factors and in their journey have developed their philosophy to the point where they (and their shareholders) really value training, and are successful enough to be able to afford to invest double the amount others do.
Do not confuse correlation with cause!! This is the big mistake many practitioners make when they use control groups in their training evaluations – you know, take 2 groups with roughly equal performance, train one group, compare performance levels after training, hope that the trained group performs better, and if it does, compared to the control group, then asume that this is down to the training.
Having been in the kind of positions in senior management where these kinds of decisions are taken, I didn’t often see an argument for more investment on training win on the grounds that “Company X spend this amount per capita, so should we”. I did tend to see winning arguments along the lines of “investing £100K in training will deliver extra £400K to the bottom line, change the following behaviours in these areas, and contribute to staff morale, and here’s the PROOF”
It is quite possible to do excellent training and spend very very little!
Good luck
Martin
Some basic questions should help to justify training
It might help to ask line managers in your organisation:
How much time do you spend: supervising, correcting employees’ errors, guiding, supporting?
How many tasks do you do that could potentially be delegated, if people you manage had sufficient training to do them?
In other words, if a manager’s high-cost time is spent in any of the above activities, and better training of employees means that: 1) they would not need so much of the manager’s direct input and/or 2) could cover some tasks that the manager is now doing, you may be able to estimate the cost savings in managers’ time that could better be invested in creating a more responsible, proactive and creative workforce. Chances are that this would also lead to a more highly motivated workforce, and better retention of high quality employees. Employees’ gain is often the organisation’s gain, as well.
The best way to budget?
After reading your original question and the responses given so far, when making your proposal you need to justify the training department’s existence. Make the board of exec. see that you are not just a “cost” but that you actually have a tangible “benefit” on the bottom-line. This might be one of those “Nirvana” situations however with good MI and a good system to back it up, you can generate metrics that can work in your favour.
In a direct comparison between an amount per head and a %’age of payroll method of budgeting I would suggest the latter. Not only is is more equitable and easier to report on but you can also factor in training project related expenditure that could otherwise be “out of budget” and therefore rejected – thus scuppering potential individuals & organisational advancement.
Best of luck!