CIPD - Costing and benchmarking learning and development

Learning, training and development

July 2009

This factsheet gives introductory guidance. It:

covers how to work out your organisation’s costs and total spend on training
provides ideas on how to compare the costs of different learning methods
considers the practical issues involved in benchmarking an organisation’s training
includes the CIPD viewpoint.

Why think about the costs of training?

The development of talent and skills is essential for organisational success in the modern economy. In the CIPD’s view, one consequence of changing business and delivery models has been a shift in focus from training to learning, but training has an important complementary role to play in accelerating individual and organisational learning alongside other, less directive, activities like coaching, mentoring and peer group learning.

Go to our overview factsheet on learning and development

However, there are costs involved in both learning and training, and being able to calculate how much is spent on training and development activities, or to benchmark the level of that spend internally or externally is important for all HR and training professionals.

Costing learning and training activity can be the basis for:

preparing training plans and budgets
making difficult decisions on priorities when budgets are tight
ensuring that full value is gained from the expenditure
communicating the benefits of this investment to other managers
carrying out an assessment of whether a particular training intervention provides value for money
making decisions about whether to outsource or buy in training services or provide them in-house
comparing the costs of achieving the same outcomes via different methods
comparing training spend against similar organisations
calculating the return on investment in training.

Spending time and resources on non-essential training is not going to contribute to organisational objectives so careful analysis of learning needs and clear specifications for training are the first steps in ensuring the value of training activity. There may be other criteria which your organisation uses to assess the value of training too.

Costing spend on training

External courses

Sending people on an external training course is relatively easy to cost as there will be a cost/person charged for the course plus any associated travel, accommodation and subsistence costs.

Internal training programmes

Development costs

These one-off costs include:

designing the best methods to meet learning objectives
designing materials, pre-course material and handouts
preparing evaluation tools.

If external consultants are used the costs are easily identified from their fee. However, sometimes internal teams of training professionals and specialist managers design the programmes – and in these cases it is important that the development costs are fully recorded by noting all the time spent on design. The finance department may be able to provide person hour or day costs.

The internal route is often assumed to be the low-cost option, but comparing the true costs in this way may show that using consultants may be more cost-effective because of their experience in development work and existing portfolios.

The cost of a pilot course may be considered as a development cost, although if it is successful you have the benefit of one group of trained delegates.

Delivery costs

The costs of delivering a developed course are compiled per course, and include:

costs of trainer(s) - these may be consultant fees or the costs of using internal training staff
venue costs - charges from a hotel or training centre or may involve assessing the costs for using internal facilities where the finance department may be able to help.
- training rooms
- equipment
- accommodation, if relevant
- catering
costs of printing materials and handouts
administrative costs involved with making the arrangements for the course and the delegates.

Other learning interventions

Providing informal learning also gives rise to costs. For example running an in-house coaching programme with line managers can incur significant costs of, for example:

designing and administering the total intervention
initial training programmes for line manager coaches
time of managers and coachees during sessions
time to design evaluation systems and gather data
providing supervision to line manager coaches.

E-learning and other technology based learning

E-learning is often introduced for cost saving purposes. However, it is necessary to calculate the initial cost of buying or designing the e-learning, plus the cost of maintaining content. Other upfront costs can include the provision of PCs or broadband facilities, the cost of coaching or mentoring to provide blended learning as well as the cost of learner time (see below). It is essential to measure the take up of such provision to ensure that the costs are being spread over actual learners rather than the predicted take up. See our factsheet on e-learning for more information.

Go to our e-learning factsheet

Costs of learners’ time

Regardless of whether learning is formal or informal there are costs associated with delegates' time away from work. It is easy to identify the costs if temporary staff are brought in or if overtime payments are made. It is less easy to calculate the cost of losing productive work but it is possible with help from your finance department. These costs are usually estimated as:

Cost/day = salary ÷ number of working days (often taken as 228 days) + overheads.

As a common rule of thumb, overheads are often calculated as between 30% and 50% of salary costs. In some organisations a loss of profit is included, but this makes a more complex calculation.

The cost of delegates' time away from work will not usually enter into any calculations for comparing different types of training intervention unless the options are of different durations, but they should always form part of any assessment of the overall cost of a learning or training event.

Value and evaluation

Costs of developing evaluation tools should be covered in the initial development costs and can vary between a simple analysis of end of course questionnaires to more complex and costly processes, involving consultants', delegates’ and managers’ time. Training budgets need to include provision for the type of evaluation, and the information that will be required.

More information can be found in our factsheet on evaluating training and our research work on the value of learning.

Making cost/effectiveness comparisons

With data on the costs of different training interventions, and evaluation data for each, it is possible to make rational decisions about where to invest a training budget, either in terms of which learning to promote or in terms of which methods provide the most value in learning outcomes for the costs of provision.

In addition, benchmarking, either internally or externally, can give you an idea of how your spend compares to others' or general averages.

Benchmarking

A benchmark can be defined as a point of reference or comparison, a standard or criterion. In HR terms benchmarking is about comparing the costs and benefits of activities against data obtained from inside or outside the organisation - internal or external benchmarking.

Undertaking a benchmarking exercise on training activity and spend can sharpen the focus of an organisation’s training and learning effort by highlighting areas where resources are deployed cost-effectively.

What sort of information?

Having a range of measures, including those collected while examining the costs of training, means that you can start to make comparisons across different organisations. For example, data covering the following areas can be collected:

learning function efficiency measures
- how many employees receive training?
- how much training (expressed in terms of hours or days) did they receive?
- what sort of training did they receive (management/inter-personal skills training, technical, health and safety etc.)?
- how much, and for how long, did people access e-learning?
- the number of training staff employed compared to the organisation as a whole
key performance indicators and benchmark measures
- what is the training budget (per employee)?
- what is the actual spend (per employee)?
- costs of different types of activity.

Our research on the value of learning also points out the importance of measures of return on investment and return on expectation.

Find out more about our Value of learning research report

This data will allow you to address important questions such as:

Is the LTD function delivering operational effectiveness?
How effectively is the functional capability of the workforce being developed?
How well are learning interventions supporting critical success factors?
How do learning operations compare with those of other relevant organisations?

Internal benchmarking

For internal benchmarking, metrics can be compared across operating units of the business where key performance indicators (KPIs) and benchmark measures can provide a strong approach to assessing the value and overall contribution of learning to different units.

Our Helping people learn web area includes a relevant case study on implementing and reporting on basic skills training at Hilton International.

Go to the Hilton case study links

External benchmarking - sources of information

Some organisations participate in sector-specific initiatives where there is an agreement between participants to collect data using agreed definitions and to share results on a confidential basis.

In addition, there are a number of sources of published data.

CIPD’s Learning and development survey

Each year this survey provides data on current and emerging trends and issues in learning and development. It provides annual figures for:

the median spend per employee on training, broken down between the private and public sector, and large and small organisations
the proportion of training budgets spent on different training activities
the average number of training days per employee.

It also comments on whether these figures are rising or falling over time. The 2009 survey findings were based on over 850 completed survey forms and included respondents’ views on how economic recession was affecting the level of investment in training in their organisations.

Go to our latest learning and development survey report

Other publications

Our Who Learns at Work report provides data from employees about who receives training and their perceptions of the effectiveness of different learning methods.

Go to Who learns at work report

We also produce regular surveys such as the Labour Market Outlook and the Employee Outlook which occasionally have data relevant to training.

A number of government publications also provide figures on the proportion of employers who offer training to their employees, the overall cost of training and how they use government or other providers of training and qualifications. Examples are: Workforce Training in England survey¹, The National Employers Skills Survey (NESS)².

Other reports inlcude the Institute for Employment Studies report on measuring the contribution of skills to business performance³ and the ASTD WLP scorecard⁴ for the US viewpoint.

Strengths and weaknesses of benchmarking

When using external benchmarking care must be exercised over how terms are defined. For example, the ‘costs of training’ often tend to report on readily available information rather than more difficult aspects like the costs of trainee time. Figures on the incidence or extent of training may also only cover off-the job training and ignore less formal methods.

When using surveys you need to ensure that you are aware of the activities that are captured, and realise that the difficulty of collecting other data may lead to neglecting potentially more important issues.

CIPD viewpoint

Calculating the cost of training is not a difficult process, although getting some information may require detective work. As learning and talent development become less trainer-centred, information may be less easy to capture, but still not impossible. Recording the benefits and returns on expectations is also necessary so that training professionals can show the effectiveness of their activities together with those in other professional disciplines to whom the costing and benchmarking of services is almost second nature.

References

DEPARTMENT FOR INNOVATION, UNIVERSTIES AND SKILLS. (2007) Workforce training in England 2006. London: DIUS. Available at: http://www.dfes.gov.uk/
rsgateway/DB/RRP/u015212/index.shtml
LEARNING AND SKILLS COUNCIL. National employer skills survey. Coventry: LSC. Available at: http://research.lsc.gov.uk/LSC+Research/published/ness/
TAMKIN, P. (2005) The contribution of skills to business performance. Brighton: Institute for Employment Studies.
AMERICAN SOCIETY FOR TRAINING AND DEVELOPMENT. WLP Scorecard overview. Alexandria, VA: ASTD. Available at: http://wlpscorecard.astd.org/

Costing and benchmarking learning and development