Drawing Up a Budget for Employee Training: What to Consider

What factors should you consider when drawing up a budget for employee training?

Employee training is becoming more and more important a business function with every passing year, for a few reasons:

• Digitally-driven change is accelerating at an unprecedented pace
• To successfully change, organizations require employees that are digitally literate and productive
• To close the ever-widening digital skills gap, organizations must develop robust employee training functions

When it comes to drawing up a budget for employee training programs, there is no simple solution – employers must consider a variety of variables when choosing how to allocate resources.

Below, we will examine some of the most important ones to evaluate.

Drawing Up a Budget for Employee Training: Factors to Consider

Here are a few of the most important considerations that should weigh into any employee training budget:

ROI

The overall ROI is one of the best performance indicators to choose from, since it distills the cost-benefit ratio into a single indicator.

However, ROI itself is not necessarily so easy to calculate, since the benefits of employee training are not always financial indicators.

The benefits of employee training come in forms such as:

• Improved digital skills
• Increased productivity and performance
• Greater ability to innovate
• Increased software ROI 
• Improved employee confidence, engagement, and satisfaction
• Higher employee retention rates
• A more streamlined digital workplace

When combined together, these variables can offer a decent picture of the overall ROI of training efforts.

It is certainly possible to quantify many of these metrics, but not all of them.

It may be tempting to strictly evaluate results in terms of one metric that matters, such as ROI or employee productivity, but as we’ll see below, there are many other areas to consider.

The Impact on Organizational Performance

It can be easy to equate the ROI of employee training with organizational performance.

After all, organizational performance is often a main reason to implement training programs.

Organizational performance is certainly one of the most important aims to focus on.

For many, this term is often synonymous with organizational effectiveness, which is frequently defined as how effectively and efficiently an organization is able to meet its stated goals.

To determine employee training’s impact on organizational performance, it pays to track specific indicators.

For instance:

• Determine the relationship between specific employee performance metrics and targeted organizational outputs
• In cases where employee performance can be enhanced through employee training, implement a solution designed to impact those specific metrics
• Track changes in employee performance indicators, as well as organizational performance indicators

A data-driven process such as this can offer insight into the actual effects of the training efforts and whether it is performing as intended.

Digital Maturity and Digital Transformation

Digital transformation is the road to digital maturity – and employee training makes it possible to traverse that road successfully.

When considering employee performance, it pays to look not just at employees’ productivity, but at the future of the organization.

In other words:

• Consider the organization’s long-term digital transformation agenda
• Evaluate whether the employee training program will be sufficient to support that digital transformation strategy
• Ensure that sufficient resources are allocated in the budget for the entire life cycle of the transformation program

In fact, it pays to remember that there is no end goal to digital transformation.

Organizational change is continual, which means that employee training programs must be robust as well as agile.

Organizational Change and Agility

Employee agility drives organizational agility.

That is, employees’ ability to adapt, change, and learn new things has an impact on the organization’s ability to change and respond to changes in the business environment.

If an employee training program sets its crosshairs on cultivating employee agility, then the organization itself can expect to become more dexterous and adaptable.

When drawing up a budget for training, consider how much of the training program is aimed at “hard skills,” and how much is aimed at cultivating agility.

These aims can include:

• Being open to new ideas and new technology
• Focusing on pro-learning attitudes and concepts
• A focus on continual optimization, rather than performance metrics that stop at a glass ceiling
• Micro-training programs that continually deliver practical skills within the workplace context

To foster agility, organizations must start by embracing the concept. 

Then they can budget resources for agility training, continuous micro-training, and building a culture of pro-learning.

Spend Wisely to Fuel Organizational Success

Effective employee training is becoming crucial for success in the digital economy. From employee agility to digital literacy, employers should pay attention to a range of possibilities when drawing up a budget for employee training.

With one eye on the future and another on fuel employee performance, it will be possible to create training programs that drive organizational success, now and in the future.

If you liked this article, you may also like:

Organizational Change February 12, 2024

What is self-paced learning, and how do you...

Organizational Change November 27, 2023

What is manager effectiveness, and how to improve...