Bitesize No. 2 - Putting a £ Value on Training

It is amazing how much training takes place and how much money is spent without any effort being made to put a real value on what such training is worth.

This is a pity because training can make a significant difference and generate very considerable pound signs.

Also, if managers do not really consider the true value of training they will never give as much commitment to making it work as they should.

Why not practice putting a value on training by considering for a moment what a 1% increase in sales would be worth in your own organisation.

If you have sales of £100 million that is an extra £1 million.

However, we have to look at how much of that would be profit. If we assume a 10% net profit margin then that is worth £100,000 on the bottom line.

For those of you who work in the public or not-for-profit sectors you probably do not have profit margins to focus on so how can you put a value on your training?

The most obvious way would be to look at a 1% reduction in costs through greater efficiencies generated by training.

So, what were the total costs for your organisation last year, (excluding fixed and overhead costs for now) and what would 1% of this be worth.

Interestingly, we do not have to consider profit separately here. Any pure cost savings should go straight to the bottom line.

Take the NHS, if the cost of running a hospital is £100 million per annum then a 1% cost saving will be worth £1 million.

Revenue (or income) and costs are basically the only two ways to add value through training.

However, if it costs a hospital £10,000 to treat the average patient then a £1 million cost reduction means that hospital can treat another 100 patients a year. So value can be interpreted as opportunity cost.

The great advantage of getting used to talking about training in terms of its real (or potential) value in pound's sterling is that it always attracts more attention.

It is speaking a language that managers understand.

Whenever possible, always think of any piece of training in terms of the value it might add before you express it in terms of skills, knowledge or behavioural terms.

If you think managers need to spend more time developing their staff you had better be prepared to tell them what this could be worth. Otherwise why should they bother?

Practice with these sorts of figures until you are confident that you can inject them into your next training meeting.

Paul is happy to take questions and comments and can be contacted at:mailto:[email protected]

Earlier articles in this series can be found at:
The Bitesize Business Partners Page

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