This blog post was originally published on September 20, 2017 and was updated on December 2, 2020.
Creating a budget for developing your people can be a daunting task for many HR professionals. Throw in a global pandemic and you’ve got an even more challenging task. While there are many unknowns, it’s still critical to plan and be clear about specific learning needs and associated costs.
You can alleviate some of these “pains” by doing your due diligence during the creation of your learning and development budget. Here are nine actions to consider when creating your budget.
1. Benchmark Your Organization
The average direct learning expenditure per employee is $1,299, and the average amount of formal learning hours per employee is 34.0, not including informal learning such as on-the-job learning.
Understanding your industry and how your organization compares to these national figures may give you a baseline for your budget planning. However, every organization is different, and therefore, has differing needs and approaches to staff development.
2. Conduct a Training Needs Assessment
A Training Needs Assessment is one method that can be used to improve the predictability of your professional development 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 also determine if you need to re-train managers on how to conduct performance reviews or at least provide refreshers on a regular basis.
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 a Training Needs Assessment, it helps to assess needs categorically (e.g. by location; division/department; position level, manager vs. individual contributor, etc.). 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 webinars or e-learning should be used.
3. Initiate Employee Engagement Surveys
With millions of employees working remotely, employers should consider adding employee engagement surveys to their budgets. An employee engagement survey measures the strength of the employees’ emotional connection and commitment to the organization and its goals. Research shows engagement contributes to a number of business outcomes, including increased retention, motivation, and productivity.
Employee engagement surveys are usually administered online. Standard and pulse versions are typically available. The data can be segmented and analyzed by using demographic categories like location, division/department, and position level.
4. Review Administrative Costs
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, 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 want to invest in an LMS (learning management system) to document, track, and report all of your training programs.
5. Invest in Consultations
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, you may be able to alleviate this issue by training those recruiters directly.
However, if your organization is experiencing a high turnover rate and is losing out on high-performing talent during the recruitment process, it may be time to take a look at your overall talent management strategy.
6. Experiment with Train-the-Trainer
Mid-size or large organizations that already have an in-house trainer on staff for onboarding new employees or training 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.
7. Support Employees with Coaching and Mentoring
For many avenues of professional development, particularly for employees on leadership tracks, it’s important to support those employees by helping them achieve 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.
Mentoring programs can also 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. In either case, training for both the mentors and for those being mentored is necessary to ensure the mentees get the direction and development they need.
8. Factor in 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 learning and development budget. Also, depending on your organization’s comfort level with the risks associated with the global pandemic, you may want to factor in (or out) instructor travel, facility rentals, and any costs associated with in-person training. Here’s a list of a few direct-costs to consider, if applicable:
- Trainee travel, lodging, meals, etc.
- Instructor travel, lodging, meals, etc.
- Instructor fees
- Facility rental
- Technology costs
- Materials (workbooks, videos, etc.)
9. Don’t Forget Indirect Costs
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 absence and impact on the organization. In fact, if organizations are averaging 34.0 hours of formal learning per employee per year, accounting for employee absences adds up quickly.
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 in your budget.
The Association for Talent Development’s (ATD) 2019 State of the Industry report