How to plan for the hidden costs of employee training and development
It’s generally accepted that a business will incur costs associated with employee training and development efforts. From onboarding costs to cross-training internal teams, these costs can vary widely. While it’s possible to budget for some of the more apparent costs of training – such as the fees associated with hiring a trainer, renting a training space, and investing in learning technology – others are hidden and have a tendency to crop up at the wrong time.
What can an organization expect in terms of employee training costs?
Each year, Training Magazine releases its Training Industry Report which details the trends in the eLearning and workforce development markets. The most recent report from 2015 included data from Dun & Bradstreet and Hoover of US databases, with some 125,778 American companies represented and nearly 800 respondents.
Total costs for training in 2015 amounted to $70.6 billion, an increase of 14.2 percent over the previous year. The largest slice of the pie includes training expenses (travel, equipment, facilities) which added up to $28.7 billion, nearly double the amount spent in 2014, and outside products and services which cost companies $8 billion (up from $6.1 billion).
Small to mid-size companies experienced the largest increase in training costs, while big companies remained at about the same rates as last year. This was attributed to an increase in hiring of learning and development employees (37%). Large non-profit and service based organizations had the biggest learning expenses of all the companies polled.
The need for training will only increase as companies compete in a volatile election-year market. One expert predicts that in order to survive, organizations will have to become learning workplaces rather than rely on recruiting industry experts to stay ahead. The added pressure of integrating ongoing learning will have many companies looking for ways to control costs for learning and development of employees.
How can organizations plan for hidden training costs?
Putting together a reasonable training budget is at the heart of building a strong organization. Therefore, having a solid plan for handling the obvious and hidden costs for employee training makes the most sense. Based on two industry studies from The Association for Talent Development and another from Bersin by Deloitte, the average investment per employee should be around $1,000 and 20 hours per year. That’s not to say there won’t be variables, as college coursework is still more expensive than in-house training --- this is just a basic guideline.
Hidden costs, such as extras that arise during travel, employees who fail to complete training or need repeat training, and anything else unexpected can easily double this cost. The Society for Human Resource Management shares some insight into some other insidious costs that can sneak up on training budgets. Some examples include:
- The cost of the employee’s salary while he or she is attending training and not producing anything for the company
- The extra cost of training materials and new equipment purchased for the employee
- The time that employees may take working with a mentor while learning
Strategies for controlling and reducing training costs
Fortunately, there are many ways to control the costs of training employees at all stages of their careers. In this way, there’s a greater training budget to go around so everyone has an opportunity to excel.
Monster.com contributor Chris Lewis shares some excellent methods for controlling training costs. These include:
- Cross-training employees to perform multiple jobs so that there are no lost productivity days
- Pairing new hires with seasoned employees as mentors
- Utilizing video and audio conferencing in lieu of having employees travel to training sites
- Inviting area experts in to speak at brown bag training sessions for free.
A company must carefully balance the value of any training with the outcome – which is how quickly the employee will be producing and generating revenues post-training. Tapping into free and low cost sources of learning, internal expertise, and customized training for each job type are all ways to reduce the hidden costs of employee training in the workplace.
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