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How to Get a Larger Training Budget Approved

This originally published on HRZone.com on June 30, 2017. 

Training Budget Approval Tips

There’s never enough money, is there? Lately you’ve been stretching your training budget dollar so much that old George looks like he’s had a couple of facelifts.

Would it help to know that you’re likely not the only one trying to balance red and black? In 2016, half of U.S. companies’ training budgets remained the same as the previous year’s, according to Training Magazine’s 2016 Training Industry Report. Meanwhile, 37 percent of companies said their budgets increased, and 13 percent reported a decrease.

The same report showed that training expenses have essentially stayed flat. Last year, expenses were about $70.65 billion, almost matching spending in 2015, about $70.6 billion. Those figures include internal design and training delivery costs, salaries for talent development staff, and spending on external products and services.

The problem is, as the old saying goes, “You gotta spend money to make money.” Accordingly, you’ve revised your employee onboarding budget to spend more than you did last year, and it’s long overdue.

How do you get that larger training budget approved?

Getting the OK seems like a long shot; asking for more money is always an uphill battle. By sticking to the following tips, you can soften the blow to your organization’s executives when you present your budget. The result? More dollars in your department coffers.

Explain the problem and solution in numbers

Your decision makers want data. They want to know what’s in it for the organization and feel confident they’re getting a solid ROI. To that end, you’ll need numbers that justify the additional expense in training. Executives are especially interested in the following:

  • Percent of new hires retained in last year and/or three years, replacement costs, and potential savings. Recruiting and onboarding new hires is far costlier and time-intensive than developing current employees. According to the Center for American Progress, the average cost of losing an employee is around 20-22 percent of their salary. Some can cost 50, 150, even 200%. That’s substantial; your mileage may vary. What to do: Review the number of employees you’ve lost in the past year or three. Assess the percentage. Estimate the replacement costs and come up with a total dollar amount. Present the percentage and costs compared to your target retention rate and the potential savings should you hit it; don’t forget to subtract the difference between your current and proposed training budgets. Then share the research regarding the impact of onboarding on retention: employees with a solid onboarding experience are 69% more likely to stay for at least three years.
  • Key performance indicators/past results. Hopefully you are tracking the results of your current training and can demonstrate year-over-year improvements that tie directly to your efforts. The best indicator of future success is past results.  What to do: Assemble your KPIs and look at trends. For example, did sales increase after you implemented that web-based training? By how much? Did instances of lost productivity reduce after your department rolled out that course on efficiency? All of these numbers are ammunition to build your case for improved training, as it leads to better results and reduces shortfalls. Turn your KPIs into graphics (pie charts, tables, etc.) to make things clear for decision makers. Then share your KPI predictions should your budget be accepted. Be optimistic but wary. Your predictions may be the best answer to their question, “Why spend more?” To help them see your value and request in an alternate light, consider framing your budget request in terms of how much it would cost if your company hadn’t implemented your training and onboarding. How much downtime could have resulted? How much business might have been lost?
  • Spending by the competition. In 2016, the average training budget for large companies was $14.3 million, while midsize companies devoted an average of $1.4 million, and small companies spent an average of $376,251. If the other guys are spending more on training, sharing that fact may light a fire under your company’s leadership, as, more often than not, they want to stay ahead of the competition. You don’t need exact figures from your specific rival. Averages will do. If your spending is below the average for your industry, you can make a case that change is needed to keep up with the Joneses. ​What to do: Compare your annual budget with the average annual budget of similar-sized organizations within your industry. That information can be found here, on page 29.

Summarize the general benefits of training

Give your company’s executive team a recap of what’s in it for the organization. Why should they allocate more dollars to something that’s been working just fine? Your task is to remind them of the benefits of training:

  • Employee satisfaction
  • Reduced turnover
  • Increased performance
  • Increased knowledge retention
  • Better talent

More details on these benefits can be found here.

Stop stretching that dollar more than you have to. Take a careful look at your needs, revise your budget, and prepare for your presentation by collecting the numbers and recapping the benefits of training. Reap the rewards of money well spent.

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