Application: Investment in Training and Development
Description: How Much Is Enough?
Author:  Dr. Deborah Fisher
October 24, 2006
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How much should an organization invest annually in the development, education, and training of employees? That’s kind of like asking “How high is up?” It’s hard enough to determine how much money companies do invest, let alone how much they should.

I’ve been collecting information about this topic for several years. I’m fascinated because this is so critical and so frequently overlooked. We all know how to maintain our equipment and squeeze savings from our systems. But we’re all over the map on how to leverage our biggest asset: our workforce. The main consistent element seems to be inconsistency; many of what I expected to be obvious conclusions turned out to be incorrect assumptions. As I've gathered information, some of my initial expectations have proven to be true, but there were also some surprises.

Surprises…
Wrong assumption 1: High tech is high spending. Answers I have received from high tech ranged from under $800 per employee per year to as high as $5000. Rather than being consistently high, some tech companies gave values close to their construction industry counterparts, whose margins are far narrower.

Wrong Assumption 2: Government is predictable. I worked with two major government agencies, engaged in arguably very similar work. One was investing less than $600 per person per year in education and training of its employees. The other was investing about $2500.

Wrong Assumption 3: Expert recommendations are higher than actuals. The American Society of Training and Development (ASTD) recommended 62 hours per person per year the last time I checked, a value which converts to about $3000 if you use a standard burdened salary rate of $100K. The Construction Industry Institute (CII) at the University of Texas at Austin is a conglomerate of owners and contractors in the construction industry. They recommend the equivalent of $1750. As you can see, these are higher than some actual values, but lower than others.

No Surprise Here…
Right Assumption 1: This was an easy one. Employees want more than they get. The employee feedback in the government agencies was that they needed or desired about $4000 per year – more than $2500 and a lot more than $600! Anecdotally, employees in high-tech have the same feeling: something akin to “we would do our jobs better if we had better access to training and development."  And although this claim has become nothing but background noise in many organizations, it may well deserve a closer look.

Right Assumption 2:  Middle management employees are being ignored.  One company stated that the amount spent depends upon how “new and/or senior” the employee is, with more money going toward the two ends rather than the employees in the middle.

Conclusions...
Does your organization know what you’re investing annually in the education and training of its employees? Is it enough? It was reiterated, again, at the annual meeting of the Society of Women Engineers (SWE) that “there is a shortfall in qualified knowledge workers due to retiring boomers and low levels of engineering enrollment.”  This month I watched Fortune 500 companies give job offers right on the floor of the SWE Career Fair. The “War for Talent,” as it has been called, is on. Providing enough development opportunities is but one arrow in the quiver, but it is an important one.

But more important is leverage. Technology and resources are the same in a flat world. Everyone pretty much gets the same bids on equipment prices, materials, labor, subcontract prices, burden rates, etc.  What sets each company apart is how productively these resources are implemented within an organization. This is a significant opportunity, as well as profit potential!

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