5 Inexpensive Ways to Pay for Training Employees

February 15, 2016 Finance and Accounting, Product Development, Teams and Organizations

How I Cut the Cost of Training My Employees in Half

Many managers are familiar with the old 70, 20, 10 Rule for employee development. The Rule suggests that 70% of an employee’s development should be learning-by-doing while 20% should be through mentoring. According to this principle, the last 10% of an employee’s growth and development should be the result of training. Unfortunately, since formal training makes up such a small part of employee development, many managers and organizations push it off entirely.

After all, training employees takes them away from their work and the timing of classes is never convenient. Further, even when formal course instruction is viewed as essential, the cost of paying for the class can be prohibitive. Then, at the slightest hint of a financially tough quarter, all training funds are instantly cut. “They’ll figure it out” we just say.

Still, training is a highly impactful form of advancing your employees’ skill sets, particularly when it comes to things like learning new software tools or learning a new process. Realistically, the money we save by letting our employees ‘figure it out’ may easily be consumed through their resulting inefficiency.

But let’s face it – training employees can be expensive and sometimes it’s just not in the cards when times are tough. If you’re struggling with the budget but aren’t willing to just let your employees ‘figure it out,’ rest assured, there are ways around this problem.

Here are 5 tips for reducing the cost of training employees, and how I overcame the impossible with my own team.

Identifying the Need for Training My Team

A few years ago, I took a new position in my company. It was November that year when I joined a team of about 40 professionals. By the time I walked in for my first day and met my team, though, the budget for the following year had been set. Like any new manager I made it a point to spend time with my new employees so I could get to know them and settle into my new position as soon as possible.

Through my discussions, though, I quickly learned that a major source of frustration as well as roadblock in terms of productivity resulted from a lack of training. Specifically, only 5 of my employees had ever received formal training in an essential software package that everyone was required to use as part of their daily activities.

Eager to address the situation, I looked into the costs. To train my entire staff in all the necessary components of the software, it could cost me somewhere between $50,000 and $100,000. The problem: I had no budget to accommodate an expense of that magnitude in the next year.

How to Pay for Training When Your Budget Doesn’t Allow It

Waiting another year to try to get training was not an option for me. First, it meant another year in which my employees would struggle to do their jobs. To me, not providing training would adversely impact both productivity and morale.

Second, given the financial challenges my company was dealing with at that time, a budget proposal that had a line item for $100,000 in training would quickly be rejected for the next year and I’d be in the same position.

But I was determined to figure something out.

Here are the 5 things I did to reduce the cost of the training my team, and it’s impact on my department budget.

1. Spread Out the Training Costs

There was no conceivable way I could pay for training my team that year at a cost of $50,000+. But the fact that training needs had been neglected for years really bothered me. So, my first action was to prioritize.

Our corporation had a partnership with an outside company for preset training packages for beginner through advanced users. So, using the training class syllabi for the beginner, intermediate and advanced user classes, I had employees rate their comfort and skill level with the topics covered in each course. I also had them identify if they were ‘daily users’ or ‘casual users’ of the software.

Using the scores, I identified 6 groups for training:

Course	Daily Users	Casual Users
Beginner Level	Group 1	Group 2
Intermediate Level	Group 3	Group 4
Advanced Level	Group 5	Group 6

Since I wanted to make sure each employee received the full training, those who took the beginner level course would also be enrolled in the intermediate level and advanced user trainings when scheduled. More experienced users, however, would skip the beginner level and only join at either the intermediate or advanced classes.

Given the size of my team, and having no way to pay for all the training classes at once, I knew I would have to forego some of the classes that year. I decided that Groups 4, 5 and 6 would have to be scheduled the following year in order to split the costs of training and minimize the impact on the budget.

2. Bring Training To You

The second action I took was to examine the cost of training at the software company’s training center, and compare to the cost of paying to bring a trainer on-site to my office. I did a simple cost analysis as shown below.

Cost of Sending Employees Training
Course Cost per Employee	$1,500
Travel Cost per Employee (5 days)	$2,000
*Total Cost per Employee*	*$3,500*

Cost of Bringing Trainer On-Site To Office
Course Cost (8 to 18 people)	$10,500
Travel Reimbursement for Instructor	$2,000
Cost of In-Office Meals (5 days)	$1,500
Total Cost of On-Site Training for Each Group	$14,000

From my cost analysis, if any Group had more than 4 employees, paying for training would be easier by bringing an instructor to our office. As it turned out, the smallest Group was 5 people, making it less expensive to have an on-site instructor for all six Groups, for an initial grand total of $84,000.

3. Share Expenses With Others

One challenge I ran into was the fact that on-site training had a minimum class attendance of 8 people (and a maximum of 18). In my case, two of the six groups would have fallen below the minimum of 8 students. So, to ensure I had enough employees to warrant on-site training, I reached out to other managers I knew around the business (whose teams also used the same software) to see if they had any employees who needed training.

Fortunately, another manager identified several of his employees who could benefit from the courses. To pay for the training, we agreed to split the cost of two courses his people needed and share the burden between our two respective budgets. Doing so saved me $14,000 ($7,000 per class).

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4. Find Internal Instructors

As I continued on my quest to reduce the cost of training and to get my people the knowledge and skills they needed for their jobs, I came to know that an employee elsewhere in the company had previously worked as a certified instructor for one of the courses.

Upon reaching out to his manager, I worked out an arrangement to pay for the employee’s travel to come to my office to train my employees in his respective course. Though a rather fortunate and unique situation, I was able to take advantage of it.

By using my network, I saved the $21,000 I would have paid the outside company in course fees.

5. Find Ways to Offset the Cost

Finally, through discussions with the financial controller for my department, I learned that I could partially offset expenses to my budget through credits from outside funding. In other words, if we were able to generate some additional revenue, we could use that to cover the cost of the training.

In my case, we managed to pick up a few small projects over the course of the first year, netting about $10,000 in services. My controller was able justify this payment to be credited back to the budget, which partially offset the cost of the training. (Make sure you work with your Finance department to confirm the credits and adjustments made to your budget are in compliance with accounting rules; in my case, it was).

The costs of training hit the bottom line, but the unanticipated revenue partially offset those expenses in my specific budget.

How I Reduced Employee Training Costs for My Team

Ultimately, what would have cost me $84,000 for all six courses, only ended up hitting my budget (over a two year period) at a cost of around $39,000, or less than half of what I would have shelled out if it were not for some creative efforts. This was roughly $1,000 per employee.

While training can be expensive and is often the first thing to get cut when cash is tight, it is a necessary part of employee development. Sometimes, though, you just need to get creative to make it happen.

For me, getting the training class for my employees was very important. Having been overlooked for several years, it was a big win for my employees who suddenly felt valued. And though the situation was not ideal, it was a small win for me. It helped me quickly gain the respect and trust of my team and improved productivity across my department.