How to Budget for Training and Development—And Get Others to Help
Creating a budget for training and development is easier said than done. Most CHROs and HR directors focus on how to budget for training and development, but the real obstacle is how can you convince the organization to pay for it?
How It All Comes Down to A Fight for HR Dollars
Imagine these scenarios:
- Factory-floor employee injuries are at an all-time high. The department manager calls HR for help.
- Claims of harassment have hit middle management and the executive offices. The company’s legal counsel calls HR for help.
- New employees are taking too long during onboarding. The COO calls HR for help.
- Sales revenues are down and quotas are not being met. The VP of Sales calls HR for help.
- High-potential employees are leaving because they don’t feel they are a part of any succession plans. Multiple department heads call HR for help.
Every quarter, you are called upon to solve exactly these kinds of problems. Everyone, from the CHRO to the HR director to the Learning and Development Manager, has these kinds of issues on their mind constantly.
And all of us can easily see the remedy for each of these problems: Training. More specifically, the scenarios call for safety training, anti-harassment training, company policy training, sales training, and leadership training, respectively. If the organization had provided better training, these issues would not exist.
So, naturally, you go shopping for training solutions. You wisely decide that a robust suite of eLearning courses would solve all these issues. You pick an LMS that has the flexibility you need, along with best-in-class reporting, organization, and authoring tools. You also get access to some great off-the-shelf content. Everything should be in place save for the actual purchase—right?
Unfortunately, your solution also comes with a price tag. The story, as they say, is just getting started.
Why HR is On the Hook for Everyone Else’s Problems
So your chosen solution comes with a price tag. This should not be a problem, because every department has a problem, and the training solution you’ve chosen can address them all.
However, when you present that price tag to the folks in Accounting, suddenly every department head grows T-Rex arms. No one wants to pay the bill. Everyone turned to HR for a solution, so they feel HR has to pay for the solution out of their own budget for training and development.
As we all know, HR budgets are usually not the highest in the company. And they are usually the first on the chopping block during times of financial strain.
Even when the budget is there, rarely is there room in it for new training tools. Remember that 80% of what is budgeted for learning and development goes toward administrative costs; in fact, a report from Training Magazine found that, last year, organizations spent 11% less of their HR budgets on learning tools and technologies, compared to the previous year.
So here is HR’s dilemma: It is proven that investments in training provide substantial returns, and that lack of training hurts the company in many ways. Yet, HR departments are still denied the budget to present the necessary training. What can you do?
Balancing the Scales and Proving the “Worth” of Training
Here’s the problem: When decision-makers see the price tag for your learning solution, that’s all that they see. What you need them to see is the cost of not adopting the solution.
This takes a little creativity on your part, but with the resources you have available, it’s possible. For example, start gathering statistics on the following, which you can then compare to the cost of the training courses that cover them:
- How much did the company pay out for first aid or increased medical insurance claims due to avoidable employee injuries within the last year?
- How much did the company pay to settle harassment claims? How much is the company willing to pay for future claims?
- How much does production suffer while waiting for new employees to get in place?
- How much does the Sales department spend each year to bring in outside sales trainers?
- How much does the company spend to hire recruiters to find high-potential employees? How much money and opportunity is lost while they are getting up to speed?
- How much does the company spend to bring in motivational speakers or consultants?
Once you have these numbers and can substantiate them, add up the costs. You can then compare this number to the cost of a new LMS plus associated content, and argue that the potential cost savings of having effective training in place could alleviate the need for the expenses above.
Getting Others to Join You
Armed with your numbers and learning and development budget, you can now ask each department to chip in to pay for their piece of the training pie. Once they realize that, in the long run, they will actually save their budget by chipping in, they will be more inclined to help you save your budget!
The cost of effective employee training should not be the sole responsibility of the HR department. If all departments benefit from a solution, why can’t they all contribute?
So when it comes time to set that HR budget, don’t just give a cursory look at the budget for learning and development. Gather those other numbers and really make the business case for effective training. If you can show the budget dollars, everyone will ultimately save, everybody wins.