How to Determine Your Online Training Budget

Written by Bill Cushard | May 28, 2014 8:43:00 PM

As companies build a training department, there are many questions that come up. What training role should we hire first? Should we start with live training or online training? What learning technology should we choose? How much should we invest in the overall training function? How much of the investment should be spent on the different functions within the training department?

These are important questions that should be raised and debated, but if you have never built a training function, it is difficult to know where to start in addressing these questions. I would like to help you address the last two questions in this post, how much to spend and in what proportions.

Start with a Benchmark

It is important to begin with some benchmarks. For starters, does employee learning pay off? There is evidence to suggest that it does. In the book, Return on Learning, Accenture showed evidence that consultants who completed more training were more billable than consultants who took less training. Intuitively, we know that people who learn more, probably perform better, but evidence supports our intuition. Moreover, overall spending on training is increasing. Companies would not increase investment in anything unless there was a reasonable belief that the organization would benefit in some way.

Now that we all agree that an investment in employee development is important, let’s turn to the question, “How much should we invest in training?" According to two studies, one from Bersin by Deloitte and one from ASTD, organizations on average spend about $1,000 per employee per year. That does not mean you need to spend that exact amount. It is an average. But as a point of reference, in one organization at which I ran the training department, we spent over $1,000 per employee per year, and it was a high performing team (and company). In another company where I led a training department, we spent nearly $400 per employee per year, and it was not nearly enough to do anything meaningful.

So now that you have a ballpark about what you should be investing in employee development, how much of it should you spend on online training?

How Much Should You Invest in Online Training? It Depends

It depends on the strategic decision about how much of your training will be delivered to employees through live training or online training. If you are just starting out, building a training function at a company with multiple offices and otherwise dispersed, most of your investment should be in online training. If you are a small company, and all employees are located in the same building, I would not do any online training.

So again, it depends.

Obviously, there is no one answer to the question about how much to invest, but with the benchmark of $1,000 per employee per year, you can at least build a model for budgeting what you could spend and know whether it might be enough or too much.

If you already have a training department and are already doing online training, how much are you investing in employee development per employee? What proportion is allocated to online training? Share in the comments below.

Bill Cushard, authorblogger, and learning experience (LX) designer, is a human performance technologist (HPT) with extensive, in-the-trenches experience building learning organizations at companies like E*TRADEAccenture, and ServiceRocket. You can follow him on Twitter or on Google+