Knowing how to measure time and cost to train is critical to any L&D effort. Employees see development opportunities as one of the most important aspects of their career. Plus, when L&D enables higher skill levels at a company, it’s a win-win. But at what cost? HR professionals need to look at such factors when deciding on the total benefits of a learning program.
Why it’s Essential to Measure Training Time and Cost
In 2022, large companies in the United States spent an average of almost $1,700 per learner on training courses. But, despite this level of investment, we are still seeing statistics like these:
- 46% of executives believe that the skills gap in their company has grown (year over year increase of 4%)
- 49% of executives believe that their workers don’t have sufficient skills to carry out strategy (year over year increase of 9%)
Obviously, something is going wrong with the L&D programs that these employees are receiving. From a manager’s point of view, one of the biggest problems is that all the expenditure and time spent learning is not paying off. But remember that $1,700 is an average. If you want to understand what your L&D investments are buying, you need to be able to calculate them across a wide range of factors.
Training Cost Components
You’d be surprised at how many elements are involved in learning and development programs–and most of them represent some kind of expense for the organization. But, once you know what they are, it’s more or less a matter of just adding them up.
Time Away from Work
When employees are taking courses, they are usually not working (unless they are salaried employees who agree to study on their own time). This comes with a cost that is often tangible, but sometimes not. As an example, if a salesperson earns $7,000 a week for the company and is absent for a week, the productivity loss is straightforward.
But if a senior manager goes to a three-day workshop and isn’t present to lead their department, it might be more complicated to estimate the cost to the company. How do you measure potential confusion and lack of direction?
Plus, the loss of executive hours is often the most expensive part of an L&D program. This is because their productivity has the greatest effect on operations, and executives earn the highest pay rates–so their lost hours are the most expensive.
Resources
L&D initiatives usually require training supplies such as printed material, apps, and survey forms. Even for online courses, some employees find it easier to read from paper. You’ll also have to allocate expenses for the venue of the training, such as a conference room, and may need to furnish that room with audio-visual equipment and desks. In addition, another expense can be a learning management system or a talent development platform.
Keep in mind that the type of course will have an effect on expenses. For example, training an airline pilot requires a multi-million dollar simulator. In comparison, teaching new employees how to fill in a time sheet is practically free.
Experts
Technical trainers, coaches, and external mentors all have fees at varying levels. The more niche and high level the course, the larger the fee. For instance, engaging an experienced executive coach for a critical business function like an initial public offering will probably be very expensive, whereas hiring somebody to teach typing will be less so. Even internal mentors will have to be accounted for as employees who are not performing their regular tasks.
Administration
It takes time for HR/L&D teams to organize programs. Even if everything is arranged using a platform, the effort invested by HR must still be allocated to training expenses. This includes everything from building a course syllabus to follow-up surveys and interviews.
A Note on ROI
Calculating training costs is only one step in determining their value. Once you understand the true expenses related to training, you should also think about return on investment (ROI), which is:
(Return – Cost) / Cost)
ROI is the figure that really tells you the monetary value of L&D. For example, if you spend $1,000 on sales training (the cost) which leads to a salesperson boosting their productivity by $10,000 per year (the return), then that’s a course worth repeating.
The difficulty with understanding ROI begins when benefits are less tangible, which is similar to some of the costs mentioned above. For instance, if an employee takes a communications course, and writes better emails as a result, what’s the dollar value of that improvement? For reasons such as these, calculating ROI is yet another level of complexity on top of adding up expenses.
GrowthSpace Measures Up
One of the reasons why GrowthSpace is being applauded by HR professionals is because it makes life easier for L&D teams. Through a unified platform, essentially all aspects of learning and development can be administered, from goal setting to finding experts to evaluating results.
Due to features like these, the effect of GrowthSpace on the organization is not just that it delivers personalized talent development at scale. It also makes L&D program administration faster and more efficient, which can ultimately decrease expenses – and headaches.
