How to Justify A Need for Training
Is Your Training Plan Being Cut Year After Year? Read On…
It’s a battle out there, folks. Between a fragile economy, steep competition, and the rising costs of business, its understandable that the first form of cost cutting comes in what is known as discretionary spend. If you think you’re the only manager whose budget for training and employee development is routinely cut, if not eliminated entirely, think again. Many managers suffer the same fate every year; despite having included it in the financial plan, the means by which you send employees to training or take a class yourself are quickly removed from your budget .
Before I get into how to justify and request training – for both you and your employees – let’s look a little more closely at the basic makeup of a budget so that you can understand why the cost of training is so commonly flagged as a prime candidate for cost control.
The Basics of Budgets
Most budgets consist of 3 basic chunks of money:
People: As implied, the main portion of your budget usually goes towards employee compensation. Once you add up all of the salaries of your employees, there will be an added value on top of that (anywhere from 20% – 50% of salaries) representing benefits, like healthcare. People represent a major expense to a business, which is why your staffing budget and headcount are always sensitive topics.
Allocations: The second key component of a budget is known as an allocation. An allocation is a fancy accounting word for what I call a “tax.” Allocations are a general charge you pay for out of your budget when you are a cost center. Depending on your company, the allocation amount could include things from paying a small portion of your CEO’s salary, to paying for electricity and general expenses of the office. Allocations usually come in the form of a fixed amount of money that is deducted from your budget each month.
Expenses: Finally, expenses (more formally known as discretionary spend), are the portion of your budget out of which you pay for everything else. Unlike preplanned costs for people and allocations, expenses are essentially “pay as you go.” Said differently, discretionary spend can be seen as money leaving the company. Expenses include things like travel, meals for working meetings, office supplies, and of course, training. Thus, to control costs in a business, you will typically start by reducing your expenses. Because training falls into a discretionary spend bucket, it is always one of the first things to go when companies start looking to save money and control costs.
How to Justify a Training Need
Now that we’ve covered the money, let’s shift gears and talk about how to justify a need for training. To do this, here are 4 questions you want to be prepared for when requesting a training class:
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Why is training needed?
The first, and most obvious question you will have to answer is why training is required in the first place. In anticipation of this question, you should have firm data and rationale to support your need for training, for either yourself or your employees.
Some questions that may help you answer this are:
1. When was the last time you or your employee(s) had the opportunity for formal training or professional development? Do you have some historic information?
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2. Are there specific development needs being addressed by the training (basic skill development, advanced software user courses, technical skills, etc)? Have these needs been documented in either employee development plans, or written performance reviews?
3. What alternatives to training are there, and why are those options not viable?
When it comes to the question of Why? gather some data ahead of time to help you illustrate the need and the overall rationale for why no other options are appropriate.
Is it in your budget?
Second to asking why the training is needed, the next most obvious question you will be asked is whether or not you have planned for the expense in your budget. And how you answer this is really important. If the answer is ‘yes’ then you are in a great position to say the training expense is something that was planned in your budget and is therefore not going to adversely impact the overall financial plan. Note that even if it were a planned cost, budgets may still have been trimmed and you may still have an uphill battle to justify the training.
If there answer is ‘no’ then you’ll have a harder time getting the expense approved. In this case, look for alternate ways costs can be controlled. For example, if you planned to hire a new employee on January 1, but have not be able to fill the position for a few months, what sort of cost has been “saved” as a result? Alternatively, perhaps a customer funded some activity earlier in the year. Perhaps you can use those funds to “offset” the cost of training, again, preventing and adverse impact on the budget. If those options do not exist, try to find the most economical way to get your team they training they seek. Managing a budget is tough, but remembering that the budget includes a variety of components will help you piece together a financial justification for training. Work closely with your finance department to keep your need to provide training for your staff fresh on their minds should an opportunity comes up to spend a little extra funds.
What value will we get out of it?
When it comes to justifying anything, the first word that should come to your mind is benefit. The same rule applies to explaining why you or an employee needs training. By taking a given training course, what benefit will it return to the business? Like a Return on Investment (ROI), spending $10,000 on a training seminar for a few employees needs to offer some sort of benefit and value to justify the cost. While the benefit is unlikely to be a discrete amount of increase in profit, for example, there are likely to be other beneficial results. For instance, maybe the training will help improve the speed at which your employees can turn around new quotations to prospective customers, or perhaps it will reduce your need to increase staff next year since your employees are more skilled and efficient at their jobs. Regardless, make sure the training you are trying to justify does indeed have some real benefit to offer, and be prepared to share this information with the approving entity. As a point of caution, “my employees asked for it” is not a good answer. Tie the benefit to business performance.
This year is tight. Can we push it into next year?
You should be prepared to offer alternate dates, times and locations for the course or seminar that your employees wish to attend. For example, if it’s October and the 4th Quarter is especially tight for your company, you will want to be in a position to say the same class is offered in January, if November is just too much. Being able to offer an alternate, less “impactful” time when the cost can be absorbed is a great way to negotiate an approval. Keep in mind that when the budgets are really tight, there is never a good time to spend money from a business perspective. Even if you have to push training out a few months or quarters, be persistent with your request, and continually focus the conversations on the benefit.
Requesting training is not straight forward, but there are things you can do to help your cause. And while it is not viewed as the most meaningful way to develop employees, training still has plenty of merits and is still an important part of improving your workforce. Justifying the need for a training class can be frustrating, but when you are armed with the right data, flexible in terms of timing and able to show a real benefit to your company, you will succeed.
Need More? Check out The 70-20-10 Rule for Employee Development