What Is the Cost of Cutting Learning Budgets?

What Is the Cost of Cutting Learning Budgets?

by Gwen Day

The recent economic recession forced many organizations to slash budgets of all "nonessentials." For many, this included employee learning budgets. But there is an inherent trap in doing this: It can present a higher cost in the future, often higher than the savings. No one wants to waste money or resources, so it's critical to consider the impact of eliminating investment in learning and development on an organization's future and its employees and seek out alternatives to budget elimination that still cut costs.

Employee learning and training must be focused on strategies that enable the organization to meet its goals, whether production quotas, sales goals or market share. And while it's often difficult to draw a straight line of cause and effect from training to results, it can be done. The key is to consider what the cost would be without the training, just as much as it is about what training costs.

For example, a customer service training program costs $50,000 and can be linked quite easily to the company increasing and retaining its customer base. But if the training program is eliminated and the $50,000 "saved," what costs are incurred? The impact and cost of not training are often felt in ways not as quickly transferred to the balance sheet: loss of goodwill with current customers due to improper customer relations, spiraling into lost customers, lost employees and lost market share. Potentially, there are other costs, such as increased absenteeism, employee disengagement, damaging changes in corporate culture and detrimental shifts in employee morale and attitudes. Over time, these costs are likely to be much greater than the saved $50,000.

Programs With the Greatest Impact

When having to make difficult choices about which programs to maintain, concentrate in those having the greatest impact. So even if a more expensive program is retained, the payback in the end is greater. A good example is new hire orientation, often seen as time and resource intensive and a ready target for cutbacks. But where would an organization be without it? Would new hires have the knowledge, skills and tools they need to be successful? Would retention rates be maintained? While new hire orientation programs affect a smaller population in an organization, they often represent a higher ratio of impact when compared to the expense of the hiring and selection process and the possibility of having to duplicate it when a new hire doesn't last.

Informal Learning Strategies

Informal learning rarely appears on the budget sheet, but remains strong in most organizations. It occurs as co-workers discuss new procedures or processes, and it has the capability of crippling an organization if not recognized and managed appropriately. For training departments with constrained budgets, it represents an area of leverage. While some executives might see informal discussions as wasted productivity, employees can be encouraged to use this information as a way to improve performance.

Examples include informal peer-to-peer mentoring programs and on-the-job coaches. Increased focus and attention is being given to informal learning in the workplace, but there is often difficulty in tying it to the bottom line. Again, the debate must be focused on what the result would be if it were eliminated. Smart training managers will find ways to use this as an alternative to formal training, including using new social media methods such as Twitter and using it to present training virally. In other words, send the trainers out with a training objective, but use informal discussions with employees to disseminate it. It won't work for everything, but it can work for more than you might think.

Creating Agreements With Employees

The most difficult message to convey to employees when cutting back or eliminating the learning budget is that they are still important and critical to the business. It is a message often delivered to dead ears and often rings hollow even for those saying it. A way to circumvent this judgment is to form agreements with employees concerning their learning. Learning agreements are most effective when created in partnership with the individual's manager and when they are genuine and focused on the individual's needs and abilities.

Many organizations use performance goals, but if the focus is tilted slightly to concentrate on the learning of the individual, it becomes a powerful tool for the organization in reaching its larger goals. The key is to focus on how the learning will be used on the job by both the employee and the manager, what success looks like and recognizing when employees have learned what they set out to learn in their agreement and celebrating that.

[About the Author: Gwen Day is owner of learning and development consultancy New Day Consulting.]