How to Run a Cost-Benefit Analysis for Employee Training
Well-run employee training programs are an investment. Here’s how to understand them.
Employee training can be a difficult investment for many organizations to evaluate. One the one hand, there are some obvious costs associated with it. The more time new hires spend in training, the longer it takes to prepare them for their jobs, and the less flexibility the organization has in managing workplace turnover.
On the other hand, by investing in employee training, organizations not only improve the capabilities of their workforce, they also boost job satisfaction, which can lead to better productivity.
There are clearly a number of factors at play, and while many can be difficult to measure—let alone assign a strict dollar value to—a careful breakdown of your program’s purpose can help to clarify the picture.
1. Why are you running a training program?
When you hear the words “employee training,” you may be thinking about a specific scenario, such as bringing on a new hire. However, employee training can involve many different situations. Knowing your objectives is the first step toward determining the costs and benefits behind a program. These objectives might include:
- Facilitating employee onboarding. Far too many organizations fall short of providing their employees with adequate training. Even experienced workers face a learning curve when entering a new office. Starter courses would go a long way toward helping this situation.
- Improve emergency responses. Learning scenarios give employees a more realistic environment in which they can put theoretical knowledge to the test.
- Train a new skill. As technologies and industries change, many workers require extra training to keep up. Since this support has a lot of value for workers, many view ongoing training as an incentive to stay with a company.
- Develop leadership abilities. Most organizations have better success promoting new leadership from within, rather than hiring from without. But while some people may appear to be natural leaders, others benefit from guided leadership training.
2. How can you measure your results?
Once you have established your objectives, it’s time to identify what results you’re hoping to find. These results are often not the same for every program, and many programs are looking for several results, including:
- Time to complete training. A training program that can be reduced from a month to two weeks, or from a week to a few days, without sacrificing the material or learning outcomes, can be a big cost saver.
- Positive outcomes in emergency scenarios. In crisis response situations, training is of the utmost importance. The more learners can prepare for emergencies, the more likely it is they’ll be able to respond well.
- Number of qualified employees. Your total number of workers who have achieved certification can affect your capabilities, and add to the flexibility of your organization.
- Reduction in costly mistakes. Poorly-trained employees can contribute to production errors, or can lead to customer service complaints.
3. Consider qualitative results as well.
Not all measures of success are easily quantified. But that doesn’t mean they don’t translate to a real return on investment. A few other factors to consider are:
- Does the new training program boost employee satisfaction? Training can boost confidence by helping employees feel more prepared.
- Is your staff more productive? Both higher satisfaction and better management can lead to a more efficient office environment, which can quickly offset the cost of employee training.
- Have you improved communication between employees? Training provides common ground for employees, as well as improving their work proficiency.
4. Factor in the costs of developing and running the program.
Finally, subtract from the benefits any costs you are able to identify. Again, some of these may be easier to measure and quantify than others.
- Costs of training program development. Any online educator can tell you that developing a training program is one of your biggest and most obvious costs. This cost will be affected by the complexity of your program, as well as the method of delivery.
- Training materials. Does your program require books? Printed training manuals? Computers? Other technology? While there many be a number of costs to include, these usually have a specific dollar amount attached.
- Internal worker time spent in training. Employee training at most organizations can take anywhere from a day or two to several weeks. During this time you will be paying wages without seeing any gain in revenue.
- Time spent by instructors or mentors working with new learners. It’s not just the time the workers spend that must be taken into account, but the time instructors spend working with them. This is true whether you assign this task to a manager, or hire someone from the outside.
- Cost of upkeep. Finally, let’s not forget ongoing training and the cost of recertification. While this is usually less than the other expenses, it’s still important to establish whether part of the expense involved will be recurring.
Measure, iterate and improve.
You may run your numbers and achieve a result that fits your parameters, but that doesn’t mean you should leave it there. Very few training programs are perfect on their first run-through, and even fewer stay perfect over time. Organizations change, industries change, and generational expectations change. The good news is, if you pay attention to your outcomes and refine your program, your training can only get better.
Online training programs and blended classrooms can be of particular assistance in this area. Whereas live classrooms and one-on-one mentoring sessions can provide learners with the personal feedback they need to finish a course, online modules can reduce the cost of teaching time, standardize the lessons, and provide data feedback about learner progress.
It’s clear that the best results will come from a combination of the two. And if organizations can use data from their training programs to refine their processes, they will see their ROI improve as well.