How to Conduct a Cost Benefit Analysis of Training Programs

Congratulations! You’ve spent a lot of time and money searching for and recruiting the right candidate, and now they’ve finally been brought on board. Or maybe you realize now’s the time to institute a reskilling or upskilling program for current employees. Regardless of the program, it’s imperative that you ensure your people are trained properly. But how much more will that cost you?

According to the Association for Talent Development’s 2018 State of the Industry report, organizations spent an average of $1,296 per employee on learning in 2017. This is the sixth year in a row that direct learning expenditures rose (and a 1.7% increase from 2016’s average spend per employee of $1,273).

Whether it was for onboarding, instituting a reskilling or upskilling program, or other training programs, employers spent an average of 34.1 learning hours per employee.

But how do you know exactly how much a training program will cost you and your business? Performing a cost benefit analysis can help you zero in on a more accurate number.

Conducting a Cost Benefit Analysis

Employee Training Cost = Total Training Expenses / Number of New Employees

First, you need to calculate your total training expenses. These may include:

The training method: Online learning, classroom-style training, on-the-job training, simulations, or a mix of any (or all) of the above

Logistical expenses: Travel, space rental, etc.

Lost productivity: Dependent on how many current employees are involved in the process, whether mentors are used, as well as how long training lasts. An exact dollar amount can be determined by taking the employee’s annual salary and dividing it by the amount of time lost.

Content delivery method: Computer programs, videos, and other necessary equipment

Training time: How long programs last and/or if reinforcement training is needed/used

Other factors that can affect training expenses include the size of your business (cost tends to be higher for smaller businesses), the industry you’re in (level of technicality/specialization, number of regulations, etc.), and the skill sets of incoming and/or seasoned employees (how fast they pick up new skills, if they’re already familiar with some of the processes, etc.).

Other Factors to Consider

It’s also important to consider factors other than costs, including how much the training will address the current performance gap of employees and the overall impact it will have on business goals.

The Bigger Picture

Although the amount of time and money spent on training programs can be a hefty investment, it’s a worthy investment. After all, improper or half-hearted training can lead to sloppy or unacceptable work and—ultimately—employee turnover, which means repeating the entire searching, recruiting, onboarding and training process all over again.

And this can be costly. The Society for Human Resource Management (SHRM) reported that it costs a company six to nine months of an employee’s salary on average to replace him or her. Therefore, if an employee earning $80,000 leaves, the company will spend $40,000 to $60,000 to find a replacement.

Instead of spending that amount as a result of turnover, why not properly train employees from the start, investing those dollars in their education and increasing the probability they stick around?

Here to Help

The Software Guild is here to ensure your employees are properly trained at a cost-effective rate. Whether looking for training related to web development, application development, back-end development or data engineering, we’re here to create a custom learning stack built specifically for your business and its needs.