Justify your budget

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In today's tough financial climate more training managers have to consider their return on investment. Anthony Greenfield head of learning, business improvement company Boxwood Group argues that this is a discipline that reaps rewards.

Any self-respecting business knows that training and development are essential to improving corporate performance. It is widely recognised that a failure to enhance people’s skills will have a negative impact on the bottom line.

Training is usually a fact of corporate life, and is an accepted pre-requisite of healthy business activity. But unlike other areas of the business, such as sales, marketing or operations, training departments are seldom required to illustrate their worth in terms of hard currency or profit.

Typically, company bosses are content to know that effective training is being delivered without knowing exactly what return on investment it makes. Even companies with a passion for results can have a blind spot when it comes to evaluating the benefits of training.

Major plcs spend billions on training every year. But, with the exception of an enlightened few, their expenditure is often an act of faith that would be anathema to directors considering investment of a similar size elsewhere in the business. As a result, the company from the top down may harbour an uneasy feeling that training is a must-have rather than a measurable process with tangible results.

Small wonder then that when trading gets tough and budgets tighten, training is the first to come under the microscope.

Training investment decisions
Boxwood recently undertook research to develop a White Paper* analysing the thinking that accompanies training investment decisions.

Several pointers emerged as to why many companies fail to make the link between their business performance and spending on training. They included:

  • A difficulty in distinguishing the benefits of training from other drivers of business improvement
  • Widespread use of short term, subjective measures, such as training evaluation feedback, to assess effectiveness
  • A breakdown in communication between the people who commission training (HR) and those who benefit - or not - from the results

As a consequence, training is in danger of becoming a poorly designed, irrelevant and expensive window dressing to satisfy the company’s public commitment to developing its people.

Measure the impact of training on business
Starting from the moment a company puts together a training objective, the all-important question should be 'what business impact will this have?' Necessarily, the emphasis then moves towards tailored initiatives designed specifically to improve the individual’s performance as a contributor to the company’s balance sheet.

Such a process may utilise some traditional methods of training measurement, such as the standard ‘happy sheet’, but should also employ rigorous and long-term tests with potential to provide hard facts.

These include follow-ups with line managers to discover how individuals improve and new skills increase output, combined with more sophisticated investigations, such as links to key performance indicators.

The process must be robust
Ideally, the finance department should be consigned to monitor and verify the process independently. It is not easy to do, as it demands new ways of working, a broad picture of the business and an understanding of what drives specific business improvement. It should also take into account the culture being sought. Do you want your training agenda be cost or sales driven, for instance?

Scientific evidence is not always on tap. What’s more important is that this process instils discipline. It forces companies down the route of searching out and calculating what the true benefits of training really are. It means that training is designed specifically to deliver improvements and that the process of assessment is undertaken to show, transparently, that it does just that.

Ultimately, though, it means that the training budget gains a reputation of being money well spent.

* For a copy of Boxwood’s training White Paper contact Anthea Mercer at mailto:[email protected]

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