Hard cash for soft skills: Making a business case for trainingby
There always seems to be more demand for training and development than budgets to pay for it. So how does one make a case for a training programme that would satisfy the sternest of finance directors? Richard White has some suggestions.
If you are looking to make a business case for training that will impress, then it is necessary to keep the focus on how training will affect the business rather than the individual. The biggest challenge seems to be justifying programmes involving softer skills and personal development, that seem more like a perk than something that will add to the bottom line.
The more specific and tangible you can make the business case the better. For example, whilst a programme may increase the motivation of attendees, it's the activity that results from the extra motivation that will have the financial impact.
Finding the money
There are four areas to investigate to find the financial justification for your training and development programme. I am going to use a mnemonic (SOAR) to make it easier to remember.
S – status quo
O – outcome
A – additional income
R – reduced costs
To help illustrate each of the four stages I will use a real-life example: Hazel is the training manager of a medium-sized IT software business. She wants to justify a management development and coaching programme for Mark, a senior sales manager. The total investment will be £6,000. This is more than the business has ever spent on one individual and is likely to raise eyebrows, especially as Mark is already a very successful sales manager.
The status quo
The existing situation within the business is a good place to start. Make sure you include not only the current circumstances but also what is likely to happen in the future if nothing were to change.
Mark is a brilliant sales manager. His team love him and he has taken sales to record highs. He inspires great loyalty in his sales people and they rarely miss a target. The only problem is that Mark is a bit of a prima-donna. His peers complain about him all the time and he has upset a number of board members on more than one occasion. There is growing pressure to do something about Mark or he will have to go.
The outcome is how you want things to be as a result of the investment in training and development. Hazel wants to be in a position in six months' time where Mark's boss and his peers are not complaining to her on a daily basis. She wants to be able to sit in a board meeting where the only reference to Mark is how much he has changed and how he is now showing potential for promotion rather than dismissal.
How will the training programme lead to extra income for the business? You need to point to both increases in future income and the avoidance of any reductions in income.
Mark already has very high sales figures so it is unlikely that the proposed intervention would lead directly to extra income. If he is fired, however, then there will probably be a negative impact on sales performance from his team who are very loyal to him.
How will the training and development programme reduce costs or avoid future costs? For example, new legislation may include heavy fines and training could be needed to prevent incurring penalties for non-compliance. The avoidance of these future costs are as valid as any other form of cost reduction.
The cost of replacing Mark alone is likely to be a minimum of £50,000 and could take at least six months. To get Mark to leave quietly would probably involve some kind of payoff which would probably be significant. There would be other cost savings such as the recruitment costs of replacing team members who may leave as a result of Mark's departure.
Bringing it together
Now that you have assessed how your training and development programme will affect income and costs, you need to start building your business case. It is best to base it on tangible and short-term impacts to the bottom line, especially when trying to justify something very intangible like personal development training and coaching.
Central to Hazel's business case is that investing in Mark will save the business a minimum of £50,000 in terms of having to let Mark go. The ideal scenario is a business where Mark is pulling together as part of the team. There will be lots of extra weight added by referring to additional income and cost impacts, but investing £6,000 to save £50,000 is good enough! That is a return in excess of 800%!
Not every training and development programme will be capable of financial justification, but using the above model will help to demonstrate how a large number of your projects help the profits of your organisation to soar!
Richard White is managing director of Pro-Excellence, a company providing inspirational business development coaching and mentoring for business owners, reluctant sales people, and non-sales staff. For more information visit www.pro-excellence.com