How Much to Invest?


By Neal Glatt

When it comes to employee development, the question that I always receive is, “How much should we invest in training for an employee?”  It’s an important question because development is an expensive and critical part of the employee experience but we never want to make a bad investment.  After much consideration and surveying, I’ve determined the optimal investment in employee growth is…

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On average, 10% of an employee’s total compensation should be set aside for growth and development initiatives, plus their time required.  Importantly when calculating that number, the total compensation used should be of the role the employee is aspiring towards and assuming high quality performance.

At lower levels of the organization, this budget is mostly utilized by non-financial costs, such as on-the-job training and mentoring time.  Consider an employee who works 40 hours per week at $25/hour.  If they spend one hour per week learning from their manager, who perhaps makes $35/hour, then the cost of that mentoring session is already 3.5% of their compensation for the week.  The leaves only another $65/week or 2.6 hours of their time available to stay on budget, so two quarterly one-day trainings that takes 8 hours and cost $200 brings uses the entire budget save for a couple hours.

For senior managers, the only expertise available may be an outside coach who can easily cost $1,000 - $2,500 per month.  This is easily on target for a 10% investment of total compensation when we consider what the best possible version of the employee would cost based on their performance.  Similarly, a professional development education program or college degree will align in the same range.

One of the top considerations for professional development budgets however is that management support is already present, because learning happens organically through interactions with those who are more advanced than us.  If we don’t have that person on board, then the investment may have to increase to compensate for a coach or expert externally.

Generally, managers aren’t explicit enough about setting these budgets, collaboratively determining how to spend them with employees, or sharing the resources available to them with the entire organization.  It’s time to budget appropriately for development to transform into the company that we need to be.

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Tags: Training , Investing , Employee Development ,