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Training Budget and How It Ties to Operational Goals of a Firm

Updated on November 2, 2013

Introduction

What are components of a training budget? How is it tied to operational goals? Also, what justification would a human resource professional use in order to incorporate a Management Learning System and an E-Learning platform. Next, what are the benefits in an online learning system versus the traditional method of learning. And lastly, why is it important for an HR Professional link a training budget to operational, tactical, and strategic goals with an organization? All these questions will be answered in this article.

Training Budget and How It Is Tied to Operational Goals

In today’s world, many organizations feel that training is part of their return investment. Without having properly trained personnel, the quality of work will falter and timelines for putting out products and/or services will be delayed. That means for every day a product or service is delayed, the company loses money. Without having properly trained staff, the learning curve will be huge and delays will come in. So what do companies do in order to lower the gap? They rely on training and instruction. Being that training is a major part of a company’s overall goal, the firm must have money allocated for initial and recurring training in their annual budget. Let’s face it, without having money set aside for training is like not investing on your own capital. Many organizations see the importance of having a properly trained staff. And that is why an organization may invest heavily in to having a large training budget.


Objectives

On that note, the first component of a training budget that will be mentioned are Objectives. Before making a training budget, an evaluation is needed based on a company’s need. That way it will make the best use of limited funding in order to maximize its effect for an organization. In other words, money will not be thrown away on training that will not satisfy a company’s needs.

Training Costs and Maximizing a Return Investment

The next component that will be talked about are Training Costs. This is where it is critical to get an accurate cost related to training. Things such as training materials, the cost of flying people and boarding employees to training locations or having an instructor come out to teach are factors to consider. Basically, a cost break down per person is what should drive this. In many cases, outsourcing a company that specializes in certain areas of training should be considered in the overall allocation of funding within a training budget.

Once a proper training method is selected, then the last thing to do is to forecast the return investment on the training provided. Basically, the question to ask is as follows. What critical skills will a person learn that will move a company forward? In other words, will the skills a staff member learns be helpful in lowering the time needed in order to complete a procedure or task? In essence, this question should always be asked through the evaluation of a training program.

LMS & E-Learning and the Cost of Traditional Learning Comparison

LMS (Learning Management System) and E-Learning are concepts that were brought to today’s business world through the marvels of modern technology. Basically, a curriculum is developed electronically and can be delivered via online or through Computer Based Training (CBT) over at the worksite. Another important aspect to this method is that it can track the progress of individuals and groups with learning outcomes. The advantages of this method of instruction is that you do not have to pay trainer wages, travel costs for trainers or people going to training, and the loss of work man hours. The one drawback to this method is the initial development costs. Basically, a curriculum may have to be devised and refined upon before being available. And usually a lot of money would need to be readily available upfront in order to do this task. But the advantage of this is that once established, it can be tailored to the level of training needed in order to satisfy the different level client staff members. Also, once it is set up at the worksite, training can be tracked and monitored. Then work efficiency can be seen overtime.

Training Budget Link with Strategic, Tactical, and Operational Goals of an Organization

A company’s training budget should be linked to the strategic, tactical, and operational goals of an organization. The key thing to remember is that training received will determine the company’s return investment outcome. In other words, when people are trained at the lowest level, operational, this in-turn will have an increasing effect to the higher level goals of a firm. For example, when personnel are trained in certain skills that will increase efficiency by lowering the time to accomplish a task. Then a higher output ratio can be then determined on the percentage of time saved in accomplishing that very same task. From the tactical level, managers can then determine a daily/weekly/monthly output. From there, Upper-Level Managers can begin to develop and fine tune a strategic plan. Thus, forecast to their clients on the projected delivery of a product and/or service. Simply put, what effects the lowest level workers will affect the entire hierarchy of the organization by the delivery time of a product. A good example of this are aircraft manufactures for the airlines. Planes are ordered by the client airline. Then companies like Boeing begin the process in fabricating a plane while at the same time follow the process with a monitoring type time-table. Once a baseline is established, then they can further improve the manufacturing process by seeing where people could use further training in order to increase efficiency and increase production output. This in turn will help all levels of management give an accurate forecast on the number of planes that will be delivered to the airlines on a monthly basis till the order is filled. The main point to stress is that when personnel skills are fine-tuned through required training, then the investment return for a company will be seen when the end result is shown through the output of a product.

Conclusion

In conclusion, this article talked briefly about the components of a training budget and how it is tied to a company’s all around goals. Next it spoke about the justification of a Management Learning System and E-Learning as compared to the traditional learning arrangement. And lastly, it discussed why it is important to link the budget to operational, tactical, and strategic goals with given examples. Hopefully, this will give insight and ideas in order to help any HR Professional seek guidance on how an training budget should be tied to an organization's operational goals.

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      Bernardo D. LaFontaine 

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