For many organizations, 2024 has been a year of cost containment, in which all expenses are scrutinized for potential cuts. As a non-revenue-generating function, human resources and the HR budget are common targets of this scrutiny.
Cost efficiency is an important goal, but now is not the time to cut back on spending related to employees—especially for learning.
Several key trends that we’re seeing right now are actually increasing the need for additional investments in learning. These include the growing use of talent mobility, a competitive labor market for in-demand skills (such as those for using artificial intelligence), growing skills gaps, and increasing numbers of exclusively remote employees. In response to these trends, many organizations—including 96% of respondents to APQC’s® Current State of Learning and Development Survey—said they increased their learning spend over the past 12 months.
See more: Facing belt-tightening? Why HR must fight for its budgets and resources
After breaking down cross-industry data on what organizations spend for employee learning, here are resources to help you benchmark your organization’s learning spend and strategies to help you build a business case for sustaining or increasing your learning budget.
How do you know what the appropriate learning budget is for your organization? At least one important consideration is what your spending looks like relative to your industry and talent competitors. The measure illustrated below breaks down the cost of onboarding, developing and training per employee, which allows for comparison between organizations with different workforce sizes.
At the median, organizations spend about $1,100 per employee for onboarding, performance management, development and training. Among these activities, organizations tend to spend the most for development and training ($313 at the median) and the least for onboarding ($136 at the median).
These figures include spending on learning management systems or other forms of technology that enable employee learning. At the median, technology makes up nearly one-third of spending on learning and development (30.1%).
How to use this measure
It’s important to consider your learning spend within the broader context of your organizational revenue, spending within your industry and your organization’s specific learning and development needs.
For example, if your organization has a high degree of internal mobility or a high volume of new hires, it makes sense that you might be spending more on learning and development than your benchmarking peers. Organizations competing to attract and retain talent also tend to spend more on learning and development.
Continually track your learning outcomes to assess the return on investment of your learning spend. Include quantitative measures (for example, the number of certifications awarded, number of employees trained, number of errors/mistakes made by employees) and qualitative measures (performance review trends, focus groups, open-ended survey responses) to provide a holistic picture of learning outcomes.
Making the business case for your learning budget
If your learning and development budget is at risk of reduction, it’s critical to make the business case to sustain or even increase investments in learning. Below are three steps you should take as you prepare your business case.
1. Collect evidence of learning needs
It’s important to develop a realistic sense of your organization’s learning needs for your business case. You need to know where the organization is going, where the capability gaps are, what the plans are for closing these gaps, and how learning fits into those plans. To collect evidence of learning needs:
- Consult your workforce and succession plans.
- Interview business leaders about their business objectives and associated talent requirements. Look for pain points that increased learning could address.
- Interview HR business partners about the objectives and talent requirements for the business areas they support.
- Think about learning in the context of engagement and retention. For example, are employees feeling stagnant, overworked or disengaged? Would learning help employees see a path to new and interesting projects or roles?
- Consider where your organization stands relative to learning technology. Does your organization need increased investment to upgrade current technology?
Make sure to assess the validity of these inputs. Do the assumptions make sense based on your knowledge of learning and based on what recruiting leaders are seeing when it comes to hiring?
2. Present the how, the why and the ROI of learning to business leaders
Once you have collected and validated your organization’s learning needs, connect them to your organization’s ability to achieve its business goals. Be prepared to present:
- A “how” for the application of learning funds that decision-makers will understand and see as feasible.
- The “why” of learning investment. Include “what if” scenarios that demonstrate the anticipated impacts of an inadequate learning budget on the ability to achieve business objectives.
- The ROI of learning spend. Where possible, connect learning outcomes to other talent and business measures that leaders care about (measures of workforce productivity, rework and time to productivity, for example). If you don’t already track the ROI of learning spend, be ready to present a framework for how you will do so.
The more you can align your learning budget with priorities that leaders care about, the more receptive they will be to increasing or sustaining it.
More from Elissa Tucker: What’s the ‘right’ number of HR employees?
3. Prepare to engage skeptics
Be prepared to engage and respond to pushback from decision-makers. We’ve listed some of the most common challenges to increased learning budgets (and some potential ways to respond) below. Use your knowledge of your organization’s culture and priorities to tailor or add to these responses.
Why can’t we outsource learning or pursue low-cost options? Be ready to show how these have already been considered and factored into the requested learning budget.
If employees leave, we’ll lose the money we invested in training them. Explain that employees will be more likely to leave without substantive investments in learning and development. The pursuit of better career development opportunities is, in fact, one of the top reasons employees choose to leave their jobs, second only to higher compensation.
Why don’t we just hire people with the skills we need instead of developing current employees? In many cases, it will be cheaper and faster in terms of time to competency if you develop existing employees. This is especially true of skills related to new technologies (e.g. artificial intelligence), where talent in the external labor market is likely to be scarce.
Why can’t employees just learn on the job? Not every role or skill can be taught in the flow of work. Further, even “on-the-job” learning needs at least some formal planning and requires infrastructure (including resources) to support it. Be ready to discuss roles or skills that your organization could feasibly develop in the flow of work and those that require other forms of learning.
Artificial intelligence will reduce or eliminate our learning needs. It’s true that AI is predicted to take over work that is currently being performed by even high-skilled workers. However, this does not necessarily mean there will be fewer learning needs. AI may actually require more continuous learning to keep human skills up to date in order to complement and make the best use of new technologies.
Key takeaways
It’s an employer’s job market in many ways, but this does not mean it’s time to make cuts to employee learning and development. Learning could be the antidote to many of the challenges facing both employers and employees, from disengagement to declining productivity, skills gaps and beyond. Measure your learning spend and carry out the steps outlined above to build a solid business case that helps retain employees today while building skills for tomorrow.
Data in this content was accurate at the time of publication. For the most current data, visit www.apqc.org.
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