Research, Statistics To Help You Budget for Employee Training

Benjamin Franklin once said, “an investment in knowledge pays the best interest.”  As someone who works in the field of learning and development, I tend to agree.  Training isn't something that's 'nice to have,' it's a vital part of a company's long-term investment and growth strategy.  This seems like a simple point, and it's something all leaders and L&D managers alike, agree on. But do companies provide enough training? 

We all know that employee training, learning and development is a critical part of attracting and retaining talent and meeting revenue goals, but did you know that only a fraction of staffing firms include an actual line-item for employee training in their budgets? Most wait until there is a budget surplus, while others only invest in sales, or recruiter training when there is a BHAG (goal) or a massive change in the marketplace.

Management training? Forget about it. Very, very few staffing firms invest in training their managers.

It's a funny thing, everyone knows and agrees on the importance of employee training yet we put it off as long as we possibly can. Employee training, and sales and recruiter training in particular, is one of those things in life where there is never a good time. You're always going to be busy and there is always going to be other initiatives and competing priorities. After all, do you invest in employee training during a boom market when employees are busy trying to close deals? Or, do you invest in a down economy when employees are struggling to bring in new business? Is there a right or wrong answer to this question? The chicken or the egg?

if investing in employee training is something you and your firm are struggling with or contemplating, or if you're trying to put together your sales training budget, below I share some research, statistics to help you budget for employee training.

How Much Should I Budget?

Having worked with over 400 staffing firms across the country, we have found that average spend on annual training per FTE is between 2% and 5% of annual salary.  

$100K employee = $2,000-$5,000/year  | $50K employee = $1,000-$2,500/year

While few staffing firms have a line item for employee training in their budgets, most do invest in their employees.  These are averages for sales reps, recruiter and front line managers working in the staffing industry across all staffing verticals -Clerical & Admin, light industrial, IT, Engineering, Scientific, Accounting, etc.  If customer experience and loyalty are critical to you (they should be if you operate in the staffing and recruiting industry), go higher. If you’re competing like mad for talent, go higher.

How Often Should I Be Training My Employees?

The average organization (for all industries) delivers 4 hours of training per month per employee for a total of about 45 training hours per year. Seem like a lot? If it does then you know you are lagging behind.  If you haven’t trained since new hire onboarding, you’re lagging well behind average. 

My company, Menemsha Group, provides sales training, recruiter training and management training for staffing and recruiting firms.  We focus primarily on IT and Engineering staffing firms in which there is some complexity and nuance to the sale, the demand for quality talent is high, and because it is such a competitive industry with low barriers to entry, about the only way to differentiate is by creating a better customer experience (over the competition).  Our per employee prices for a full year of ongoing development fall into the mid to upper end of the range, so I can validate the research. 

The Correlation Between Employee Training and Employee Retention

Employees, especially Millennials, value training, learning and development opportunities, which makes it no surprise that employees are more likely to stay with the employer who invests in their continued education. Organizations with successful training programs typically see a significant increase in employee retention.

Turnover is costly, and most businesses can’t afford to lose their top-performing employees.

• Organizations with poor onboarding processes are twice as likely to experience employee turnover.
• 70% of employees would be somewhat likely to leave their current job to work for an organization known for investing in employee development and learning.
• 34% of employees who left their previous job were motivated to do so by more career development opportunities.
• 86% of millennials would be kept from leaving their current position if training and development were offered by their employer.
• Over 70% of high-retention-risk employees will leave their company in order to advance their career.
• Retention rates rise 30-50% for companies with strong learning cultures.

Why Invest in Employee Training?

In case it is not obvious, employee development and career advancement are 2 of the top 3 things millennials search for when accepting jobs. And only 50% of sales professionals believe their company provides them with the training they actually need to be successful.

Companies spend 5X to 10x on salary and recruiting expenses to recruit and hire a sales rep or recruiter and then only a tiny fraction of that to develop and retain them. 

Employees are Disengaged at Work

As many as 1 in 3 people leave their organization within the first year, either voluntarily or involuntarily. An incredible 22% of staff turnover happens within the first 6 weeks of employment.  According to Gallup's State of the Global Workplace report, 85% of employees are not engaged or actively disengaged at work.

What can we learn from this? We need to do something to engage workers, especially now that many will continue to work remotely. If this applies to your organization, it's time to do something about it. Higher retention rates and less labor turnover is crucial for business success.

Justifying Your Employee Training Budget

Here’s some great research to help you plan your employee training budget:

• Both HR Magazine and ATD site double the profit per employee that prioritizes training.  Companies who invest a minimum of just $1500/employee will see 24% higher profits.
• CSO Insights proved a 63% average improvement across teams where the manager was getting development (that’s just average improvement)!
• Great onboarding can cut a new hire’s time to quota in HALF. Imagine your new recruiters or reps hitting quota in 6 months instead of 12 months and the impact that would have on your bottom line!!  See how we helped Consultis accelerate new hire time to quota attainment.

If you need an ROI model, check out our eBook, The Definitive Guide to Tracking and Measuring Sales Training ROI.  You might also want to check this out, The Formula and Data Model For Calculating New Hire Ramp