How do I budget for training AND justify it?

Knowing how to set the appropriate budget and calculate the ROI from a learning initiative is crucial to gaining budgetary support for your department’s continuous improvement efforts. I don’t need to give you a crash course in how to prepare a budget. You have probably created and maintained budgets in the past. Your budget may include items such as labor, direct materials, energy and utilities, maintenance costs and packaging materials. It serves as a formal plan of action expressed in monetary terms. Planning for softer costs, such as those related to training, are often an afterthought or an “under-thought.”

Before starting on your training budget or trying to determine ROI, think about the additional capabilities your organization needs and the value of those added capabilities to the organization. What does the organization stand to gain from learning something new? Once you understand the value it will bring, you can determine how much you are willing to spend.  

First you will want to address what’s in it for the organization. If you want to have any chance of getting your training budget approved, you need to justify it in terms of the benefit to the organization. In Rita Smith’s new book, Strategic Learning Alignment, she makes the point that learning organizations need to make a business case for learning. She writes “the only reason that learning functions exist is to drive business outcomes.”1

In the case of continuous improvement, the organization can benefit in many ways from learning to create a more proactive culture around equipment failures. Think in terms of the major assets you have at your facility. What effect does unplanned downtime on a critical asset have on production? What are the costs involved to replace major equipment due to improper maintenance? We’re talking big bucks here! What if you could spend a fraction of those costs to send your people to a top-notch root cause analysis course where they will not only learn how to use RCA tools, but also how to put an effective RCA program in place to reduce recurring failures, create a culture of continuous improvement and become a proactive organization? Your organization will be able to improve processes, reduce down time, capture more meaningful data, increase production, and strengthen internal partnerships. Now we are beginning to see the return on investment in terms of the benefit to the organization.

There are also benefits for the individual who participates in training. Using the same example as above, an individual who participates in the root cause analysis training will become an asset to your organization by being able to determine the latent and human roots of failures. This person will be directly involved in eliminating recurring failures which will save your organization time, money and resources. The individual can be tied to achieving measureable results for your organization, which leads to greater employee engagement, increased productivity, recognition by peers and superiors, possible pay increases, mentoring and leadership opportunities, and lower employee turnover. To tie this back to organizational benefits, when employees can have ownership over processes and really feel like they are making an impact, they are more engaged and are less likely to leave. This is a huge bonus for you…just ask HR how much it costs to replace an employee!

Gaining a better understanding of the organizational and individual benefits will give you some solid ammunition to build your business case for training. One important aspect of training to remember is follow-through. All learning does not take place in the classroom. In fact, 80% of learning takes place outside of the classroom when participants apply what they have learned. Because learning is a process rather than a single learning event such as a training class, it is important for individuals, and the organization, to set specific, measureable goals for what they plan to achieve in the weeks following training. Goals should be aligned with the overall vision for the organization, so it is important that goals are defined prior to training and that an employee’s manager is involved in setting them. Setting goals with a specific deadline and regular review times increases accountability, boosts learning transfer and retention, and provides opportunities for coaching. Tracking these goals and the indicators of the results will help you determine the ROI and the impact of the training program.

It seems a little backwards, but being able to anticipate the positive outcome training will have can help you create and justify your budget. Positioning training as an investment in continuous improvement that will have significant returns, rather than as a cost, will help your case. As you prepare your budget for next year, assess your business to determine areas for improvement and plan accordingly.

© Life Cycle Engineering, Inc.

1 Smith, Rita Mehegan. Strategic Learning Alignment: Make Training a Valuable Business Partner. Alexandria (Va): ASTD, 2011. Print.

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