Top Tips for developing a business case for training
Top Tips for developing a business case for training
Just as we develop business cases for projects and other change initiatives, the same can (and perhaps should) be developed for training and development.
The following is a well-known quote from Anne M. Mulcahy, keynote speaker at LifeCare Inc’s Life Management 2003 Conference and former chairperson & CEO of Xerox:
“Employees are a company’s greatest asset – they’re your competitive advantage. You want to attract and retain the best, provide them with encouragement, stimulus, and make them feel that they are an integral part of the company’s mission.”
It’s an effective explanation as to why investing in the skills of employees is so crucial.
Today’s competitive environments require competitive advantage and people are an important source of that. Of course, employees are not owned by the organization; it’s an individual’s prerogative to seek opportunities elsewhere should they desire a change, progression, or more recognition.
Should we invest in the knowledge, skills and development of employees if we don’t have control over that investment in the long term?
The following tips offer some useful advice and guidance to decide.
1. Consider UK Government best practice for developing business cases and spending proposals.
A business case based on the INTERNATIONAL GUIDE TO DEVELOPING THE PROJECT BUSINESS CASE document is defined as:
“The best estimate of how much a proposal option will cost in economic terms, including an allowance for risk and optimism.”
According to Infrastructure Business Case: International Guidance it’s:
“a management tool developed over time as a living document as the project develops. [It] keeps together and summarises the results of all the necessary research and analysis needed to support decision-making in a transparent way.”
These resources propose creating five cases for the proposed investment:
- The Strategic Case
- The Economic Case
- The Commercial Case
- The Financial Case
- The Management Case
2. Analyze investments in trainings with Managing Benefits guidance, authored by benefits management guru Steve Jenner.
Managing Benefits specifies the business case as:
“The justification for an organizational activity (strategic, programme, project, operational), which typically contains timescales, costs, benefits and risks, and against which continuing viability is tested”.
3. Considering Timescales
Investments in skills and knowledge can be made over different time perspectives. A typical training course for (for example) a project management framework takes 3-5 days and helps the learner to understand the framework in detail. However, the benefits of applying the framework in the live environment are related to the ability of the organization to implement it, which could take weeks or even months.
Further analysis can take even longer. In this example, the organization may need to wait weeks, months or even years to review the effects of training and development against completed projects.
Timescales for the training business case should therefore include the time when the funds will be spent, as well as the time where benefits can be effectively calculated.
Analysis needs to calculate the return on investment taking into consideration the different value of money in time (e.g. by using the net present value (NPV) formula) to reflect the differences in value of funds invested and received back.
4. Considering Costs
Be careful to ensure that both direct and indirect costs are accounted for.
Direct costs would include the course and (if applicable) examination fees. Course fees should incorporate supplementary elements such as study material, training materials, accommodation and refreshments. However, that isn’t always the case!
An example of an indirect cost is the employee’s time. A reduction in available hours/days may result in a direct loss of revenue and billable time. There may of course be an impact on service levels, the cost for which may be difficult to predict.
For a consultancy organization, for example, the cost of employees not engaging with clients is almost certainly greater than fees paid to the training organization.
5. Considering Benefits
The key to properly assessing the viability of the investment in training is to properly identify the benefits. This can be difficult and is often confused with outcomes.
According to Managing benefits by Steve Jenner benefits are:
“the measurable improvement resulting from an outcome perceived an advantage by one or more stakeholders, which contributes towards one or more organizational objective(s)”
Whereas an outcome is:
“A new operational state achieved after transition of the capability into live operations.”
Outcomes are very difficult to compare against the costs as they don’t have financial value. The outcome of training delivery can be the new knowledge and skills attained by the employee/s, whereas benefits could be increased revenue or cost reductions.
Courses can deliver both types of benefits:
- The awards/certificates of employees can help in achieving increased sales when these credentials are needed to win tenders.
- New and improved employee skills can empower greater productivity and minimize costs associated with lower productivity and mistakes.
The benefits for the employee/s also need to be analysed. The output of training for the individual is the certificate, award or recognition received. This can contribute to achieving benefits such as improved renumeration.
Another benefit for the employee is an increase in their value, making them more attractive to other employers, possibly competitors. This, of course, presents a risk of the investment not delivering the expected return.
6. Considering Risks
Managing Benefits by Steve Jenner defines a risk as an:
“uncertain event or set of events that, should it occur, will have an effect on achievement of objectives”.
Risks to the delivery of training need to be analysed; obvious risks include bankruptcy of the training provider or absence of delegates. Also important are the risks influencing the benefits, for example:
- The inability to implement new knowledge due to low levels of maturity in the team/department/organization can negatively impact the return on investment.
- Employees leaving the organization will not be able to use their knowledge and skills for the advantage of the investing employer.
It’s also important to properly differentiate risk causes from their effects to avoid bad decisions during risk analysis. For example, the threat of an employee leaving the organization can have different risk causes. According to iHire’s “Top 10 Reasons Why Employees Leave Their Jobs in 2021” feature, the third most popular reason is a lack of growth opportunities.
In conclusion, it’s not the investment in training which causes employees to leave, but the lack of subsequent opportunities. This detailed analysis of risks enables the identification and implementation of effective mitigation.
A famous quote from Richard Branson is worth remembering here:
“Train people well enough so they can leave, treat them well enough so they don’t want to.”
The analysis of timescales, costs, benefits and risks will help to assess the viability of an investment in training and professional development.
Few would argue that such investments are wise; without it, organizations can be left with damaging skills shortages that can adversely impact day-to-day activities, innovation, service and quality.
“The only thing worse than training your employees and having them leave is not training them and having them stay.”
Henry Ford, Founder, Ford Motor Company
As with most investments, the challenge is finding the right balance between costs, outcomes and risks. The business case concept helps in analyzing different options and identifying the best approach, for both the organization and its people.
Whilst originally designed for projects and programmes, the concept can also be applied effectively to investments in human resources.
About the Author: Tomasz Nedzi, skills 2004 UG
Tomasz Nedzi has been managing projects since 1993. He became an Approved Trainer in 2006 and now teaches others to manage projects and operations effectively. Tomasz is the CEO and Lead Trainer for PRINCE2, AgilePM, Facilitation, OBASHI, Service Automation Frameworks (SAF) and AQRO at the skills® group of companies (skills® 2004 UG in Germany and skills® sp. z o.o. in Poland).
Click here to find and connect with Tomasz on LinkedIn
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