Training and Development as an Investment (Lecture 2: 13 November)

Budgeting Training:

Every Organization differs in training budget according to size, operation and management orientation. Some report it as a percentage of payroll expense , other on a percent of expected revenue,  and allocate training dollars per stage of the training cycle.

At what time should training and development budget should be increased.

• During the first six month of operation.

• Introduction of new product or a new system.

• Period of increased growth and increased hiring.

• While implementing management development programs.

The training budget should closely aligned with the goals and objectives of the organization for the year. 

The T&D department should explore how training can help a property on crises and come through them more quickly and profitably; articulate these effect of training on the organization, and  justify new training initiatives to upper management. Quantifying the cost of a particular problem, can help to justify training dollars to resolve the problem thorough measurement and comparison. Evaluation of training at different point of time ensures the return on training. 

Historical Perspective:

• Training department fail to promote training and their value
• Trainer used to play multiple roles.
• T&D goals were broad, impossible to quantify.
• Training was held responsible for all employee actions.
• Difficult to choose right person to conduct the training.
• Training as an expenses

Today’s perspective

• T&D is  more accountable financially and need to justify their existence.
• T&D department and top management promote training and incorporate in organization strategic plan.
• Training as an investment.
• Zero based budgeting, which built training budget from the front line up each year.Formulation of training budget which ensure that all employees receive some training each year.

Sharing cost with others

• There is always limitation of resources.
• Look for partner with the vendor of the product to train employees.
• Charging the user department for the training.( charge back)
• Development of competency based curriculum.

The training proposal.

• Required to win funding and support for training.
• It is a complete report on training stating who ,what, when, how and cost of the training.
• It must be in language which is direct and bottom line oriented.
• It defines objective, goals, cost, time etc. of the training in relation to organizational goals.

Cost of training:

Costing practices:

• Use systematic approach
• Determine the life of the training.
• Determine costs to every overhead early.

Collecting the Data:

• Maintain all original quotes, estimates and invoices.
• Gives more validity to the data from proposal

True costs:

• Labor cost: Payment and wages to instructors, technicians, any support staff, and training developers, trainees’ wages.
• Material cost: Determine all the material s require for training and divide into expendable and non expendable group.
• Delivery cost: Cost incurred during the actual delivery time and those which facilitate the delivery process.
• Other costs:
• Replacement cost: cost of individual substituting for the training.
• Overhead: Different factor used in training, desk, table, chairs, office supplies, rent, etc.
• Pre- program cost: It include all the cost associated with the problem and process analysis when identifying training needs.
• Follow-up: Surveys, questionnaires, interviews, trainees time, supervision’s time etc.
• Indirect: maintenance, support services, equipment, telephones etc.
• Cost of cost analysis: training plans, time spent in conducting the analysis, cost of software to help analysis.
• Opportunity cost:  they are the cost which is incurred for leaving the next best alternative.

Sources of cost: It will help in accurate estimation of cost, which can be obtained through:

Instructional Designers, Trainers, Articles, Colleague, Previous cost analysis, suppliers etc.

Intangible cost: Are those cost which is not easily quantifiable.

Opportunity cost, ineffective training, etc.