Organizations continue to spend billions of dollars each year on training and development to benefit and engage employees - programs that typically fail to produce tangible business results. No wonder the majority of executives are sold on seeking out ways to aggressively cut training costs.
Under the auspices of helping organizations to effectively benchmark, align, and manage their training needs assessment functions, much has been written over the years about training metrics.
With increased financial pressures, figures such as those outlined below have received a lot of scrutiny and attention lately:
- Training expense as a % of revenue
- Training investment measured per employee, per team
- % administration training costs
- % delivery training costs
- % in-house vs. outsourced learning solutions
Building a smarter training budget is about ensuring that training assessment and investments get meaningful results. Those results must be relevant to the business and are rarely achieved by doing training “as cheaply as possible.”
It is true that, once you have aligned your training investment priorities and approaches with the business, benchmarking training costs can be a useful exercise to ensure that your expenditures are in line. But most savvy executives agree that training effectiveness comes before training efficiency. It is smarter to simply cut programs that have low value sell internally vis-à-vis the results—the generic, open-enrollment-based, underutilized programs—than to spend time and effort trying to make them more efficient.
Unfortunately, we still find that many training budgets and training initiatives start and end with costs and efficiency and that they miss the most important step altogether—the one that sells executives and the one executives find most persuasive, business alignment.
Step #1: Business Alignment - Identify the Business Priorities
The majority of executives buy, invest, and budget based on their view of the value provided. The formula is really quite simple. If the comparative benefit is greater than the investment, executives will typically fund and support a project. In order to create a smarter training budget that will be approved and supported by executives in your company, the first step is to identify the key business sales training priorities for the next 12 – 24 months so that you can align your plans and budget with those priorities. To understand your company’s priorities, you should make sure that you can clearly answer the following four questions—only then can you begin to create a “smarter” learning strategy and training budget:
- What are the company’s top 3-5 strategic decisions and priorities?
- What are the company’s greatest challenges/opportunities?
- What are the key actions that are being taken in the next 12-24 months to achieve those strategies?
- What is the current financial situation of our company, our competitors, and our industry?
- Increasing revenue and margins
- Reducing costs
- Improving productivity, communication skills best practices and capital effectiveness
- Delivering on commitments to shareholders of stakeholders
