Average training expenditures per employee fell 11 percent in the past year, from $1,202 per learner in 2007 to $1,075 per learner in 2008, according to a report issued Friday, January 23, by research firm Bersin & Associates  The report also showed the U.S. corporate training market shrank from $58.5 billion in 2007 to $56.2 billion in 2008, the greatest decline in more than 10 years.

A November study by training services firm Expertus and research provider Training Industry found that more than twice as many respondents expect training budget decreases rather than increases for 2009.  Forty-eight percent expect their budgets to decrease in 2009, up from 41 percent in 2008. Only 17 percent expect their budgets to increase in 2009. In addition, since 2008 budgets were first approved, far more saw decreases (38 percent) than increases (11 percent).

It makes total sense to me, as training is seen as a “cost”, not an investment that immediately pays back dividends.

Let’s look at some numbers… I’m all about the numbers.

• According to the Bureau of Labor Statistics (www.bls.gov), the median wage of our country’s 134,000,000 employees is about forty-one thousand dollars or nearly twenty dollars per hour.  For employees with a bachelor’s degree or higher, the average salary is 50 percent higher, sixty-six thousand dollars per year, or thirty-two dollars per hour.
• The average replacement costs for higher educated (and higher skilled) is at least 50 percent of the employee’s annual salary, which means a company outlay of thirty-three thousand dollars for each replaced worker.

That’s a lot of dollars and percents.  What we now have to figure out is the ROI of training, the return on investment.

Let’s skip the argument that training makes employees more valuable by giving them new or additional skills that can be used by their employer.  It’s true, but hard to quantify.  Let’s skip the argument that training improves the productivity of employees, adding to their through-put and decreasing costly errors.  It’s true, easier to quantify, but we don’t need it for our ROI calculation.

We’re going to concentrate on the cost of training (now $1,075 per employee per year) and the relationship to turnover costs.

8 days.

Huh?

$1,075 equates to eight days of replacement costs for an employee who earns sixty-six thousand dollars a year.

If an employee who receives training stays eight days longer than she would have without the training,  it’s a “push” as they say in Vegas.  If they stay a month longer, your return on investment is two-hundred and fifty six percent.  Spend eleven hundred, save twenty-eight hundred.  If you stretch out the training and they stay an extra three months (you tricky little devils), your ROI skyrockets to seven-hundred and sixty-seven percent… spend eleven hundred, save eight thousand, two hundred and fifty bucks.

Real money.  Math rocks.

YOU HAVE TO TRAIN YOUR EMPLOYEE SO THEY CAN LEAVE, OR ELSE THEY’LL LEAVE.

Got it?  Good.