How are training costs calculated?
The costs of learning may be difficult to decipher without an all-inclusive cost analysis system. Many trainers perpetually defend their approach through a comprehensive justification of course content, methodology, and cost effectiveness. Once all of the relevant factors have been isolated and supported by data, it is much easier to decide when and how the training will be conducted, if at all. Similarly, with the right data the decision to conduct training in-house or by an outsourcer can be determined. Some of the questions that must answered to determine training costs include:
- Facilities: Where will the training be conducted? Are hotel rooms and meeting space required? If the training is Web or computer based, are specific resources dedicated to the equipment, utilities, software and hardware maintenance? Are participants reimbursed for lodging when they attend overnight training?
- Instructors: Are facilitators paid a salary, per diem, or billed by an outside firm? Are trainer expenses considered? Does the company have to pay to certify the instructors or pay any license fees to use the materials?
- Participants: What are the combined salaries and benefits costs that will be dedicated to the time spent on training? What is the price for the time spent out of the office, at seminars, traveling, or preparing for training while still at work?
- Material format: What type of materials will be used? Is the media, books, tapes, CD-Rom, Web-based or video? How will the material be obtained? Any shipping, packaging, or transmission costs? If the material is developed in-house is the talent available or must the company recruit the technical expertise? Will the materials still be timely and technologically relevant when the training is actually delivered? If not, what are the redesign costs?
- Communication and marketing: Will materials be produced to generate interest in the training? Brochures, pamphlets, direct mail, postage, and Web sites all have development costs in addition to material cost. Will time be spent by senior managers selling the training internally? Will employees be actively solicited through kick-off and information meetings? How much time will be spent learning about the training?
- Tuition reimbursement: What is the cost of the actual benefit as described in the company policy? What is the level of utilization by the employee population? What are the costs of communicating the program and processing the benefit? Does the company policy exclude reimbursement for unsuccessful completion of course requirements?
Some of the less apparent issues include:
- The learning curve. How long does it take for the employee to get "up to speed?" What are the adaptation costs, the costs of potential mistakes while in the learning process? If the employee is in a production type situation, what is the cost of lost production on an incremental basis, if the employee had been fully trained from the start?
- Productivity inhibited. What would the employee be doing if they were not taking time from their regular tasks to be trained? Would more income be generated for the company? How would that time be used more profitably or effectively? Could the time have resulted in the development of new accounts or products, faster production, or greater organizational efficiency?
- Company culture and expectation. Some organizations have massive expectations from the image and culture they communicate through their training experience. Training may dominate company culture and be a catalyst for many associated programs that are developed to enhance the training experience. Promotion and reward systems may be geared towards the training effort. Incentives may be given when training is completed or goals which training addresses are attained. All of these expectations result in higher per-capita costs -- per employee. Additionally, because training intense companies tend to use the most sophisticated methods and expensive materials, the per-capita cost may be far greater.
All of these intangibles must be isolated to truly determine the overall cost and associated benefits of the training experience.
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