The Two Wisest Training Investments
Ask your organization’s president if he or she believes in training, and you’ll likely get a strong, “Absolutely!” Few would argue that training is a bad thing. Consider:
- A study by ASTD and Dale Carnegie identified training as a lead factor in employee engagement.
- Companies with engaged employees outperform those without them by 202% (Gallup).
- 40% of employees who receive poor training at work leave within their first year.
Why is it then, that whenever it comes time to trim the operating budget, training is often the first line item cut? Is the decision to trim training based on all the factors of cost-versus-return, or is it a decision often made out of a lack of this information?
There are two areas in which training produces a phenomenally high rate of return (ROI) that is often measured in weeks or months, not years: training for customer contact staff, and training for supervisors and managers. Both areas are essential for your organization moving in a positive direction.
Customer Contact Staff Training
An organization’s ability to generate and retain revenues is affected most by the people charged with customer contact functions, such as sales and customer care. Customer contact staff is the fastest group to recoup the entire cost of training since an increase in sales and/or margins (the objective of any such training) should quickly offset the cost of a training program. How quickly? In many cases, in just a month or two!
Here are two case studies from 2013-2014…with actual results achieved.
Example 1: A manufacturer’s sales team of twelve individuals attended two days of training on B2B needs assessments and social selling, at a cost of $8,500. Costs included the training content, trainer, travel expenses for all participants and trainer, and ancillary costs. Training was arranged for a time that would cause the least disruption to ongoing sales. Thirty days following the training the average participant increased his or her monthly sales by $5,000 each, with a 25% gross margin, which meant each participant contributed an additional $1,250 per month gross profit. Thus twelve people added $15,000 each month in additional margins, meaning that the total cost of the training was paid back in the very first month. At the end of one year, a net addition of $171,500 was realized, yielding a Year 1 ROI of 2,117%!
Example 2: A telecommunications service provider invested $22,000 to train 28 customer care employees. They were seeking to improve their retention of customers beyond the initial term of their service agreement. At an average bill of $86 per month, adding an addition year of service would net the provider $1,032 in revenues. After a year the average customer care employee saved an additional 1.3 customers per month: 28 employees X additional saved 1.3 customers/month/employee X 12 months X $1,032 recurring revenue = $450,777. So the payback of the $22,000 training cost was achieved in about 3 weeks, with a 12 month ROI of 2,049%!
Hard to argue with these figures…where else could your organization achieve a 2,000% ROI in a year?
Supervisor and Manager Training
What percent of your organization’s assets are being managed by the supervisors and managers of your enterprise? If your organization is typical, you can make a strong case that your supervisors and manager make decisions affecting 90% or more of your organization’s assets. Such decisions affect areas such as staff, equipment, brand image, customers, suppliers, inventory, goodwill, perhaps even the price of your stock.
What investment is being made to equip them to make the very best day-to-day decisions about your organization’s assets? Most supervisors and managers are not seasoned and experienced professionals…they likely came up through the ranks because they performed well while in the ranks. And while many may be under the supervision of other more experienced leaders, your supervisors and managers are making the majority of their decisions affecting the organization’s assets absent specific direction from their more experienced supervisor.
Multiplier Effect. Your managers’ and supervisors’ scope of control means that mistakes in direction of staff, application of best practices, not spotting problems while they are small, and a host of other areas can multiplied by the number of people and assets under their direction!
You’ve got a few choices here:
- Hope that they make good decisions – though “hope” is rarely a great strategy in such matters.
- Micromanage them – and raise a generation of dependants who cannot make decisions.
- Equip them to become self directed so they can make consistently good decisions – and that will involve training.
What is the impact on your organization when your supervisors and managers make consistently good decisions? Just to name a few areas where the multiplier effect yields tremendous results:
- Sales and profits go up.
- Expenses go down and/or yield a higher return.
- Good employees are more engaged and stay longer.
- Customer satisfaction and brand value are increased.
Actions to Take
- Don’t try to make the case for training without an ROI calculation. For each contemplated training investment, develop an expected-case ROI calculation to accompany the request for funding.
- Present training ROI calculations as part of your annual budgeting process.
- The ROI calculation will tell you if the request is self-funding; that is, the entire cost is recouped within the remaining budget year.
- Self-funding training means that you don’t need to wait for a new budget year; your organization simply needs to decide how quickly it would like to have the extra sales, profits, expense savings, etc. that training will yield.
- Don’t allow budget cuts to take out the initiatives that yield superior ROIs. Instead, seek to cut in areas with poor or negative ROIs.
- If the ROI payback period of training exceeds a year, unless the training is mandated by law or statute, consider what must be changed or eliminated to reduce the ROI payback period.
The fact is that surviving and thriving is getting increasingly difficult in our competitive global economy. The issues you face are becoming more and more complex, and competition is looking for ways to eat your lunch. It’s a fallacy to think that simply time and experience will equip your staff to face the future. People cannot do what they don’t know, and they can only know what they have learned. How will your organization move forward and get better at capitalizing on tomorrow’s opportunities without the right investment in training today?
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