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Dear Workforce How Do Companies Measure The Cost Of Training

To measure true cost for ROI purposes, consider indirect costs along with direct costs.
January 16, 2002
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Related Topics: Training Technology, Basic Skills Training, Behavioral Training, Dear Workforce, Technology
QDear Workforce:

Can you provide me with examples of how companies calculate the cost ofinternal training for their employees?

- Calculating cost, HR Coordinator, manufacturing, Hingham, Massachusetts.

A Dear Calculating Cost:

There is some divergence between how companies calculate the cost of internaltraining and how they should calculate it, to get to the true economic costs.Most companies have a pretty good handle on the direct costs incurred by thetraining function, which typically include:

  • Curriculum design and development costs.

  • Program materials and supplies.

  • Compensation (including benefits) of program deliverers.

  • Travel expenses for the deliverer and other staff.

  • Administrative costs (such as the costs of registering participants andcoordinating logistics).

  • Facilities (room charges, audio-visual equipment, etc.).

  • Incidental costs.

However, if one wants to measure the true economic cost of training (ifneeded for a credible ROI analysis, for example), one must also include theindirect costs. This means looking beyond the training department's cost centerand including costs incurred by the other functions within the organization. Thecosts typically borne by the participant's department include:

  • Cost of taking the participants off the job.

  • Cost of participants' time spent on pre- and post-program activities.

  • Cost of participants' managers' time spent on pre- and post-programactivities.

  • Travel costs.

Finally, one should consider costs incurred by other functions in the designand delivery of the training program, such as the value of subject-matterexperts' time spent assisting with design or delivery.

While it may seem like a daunting task to capture all of these costs,remember that it is rarely possible to capture all costs with 100% precision.One should instead strive for reasonable estimates of the costs that are moredifficult to measure.

SOURCE: Donna Neumann, CPA/MBA, senior consultant, Organizational SolutionsGroup, Personnel Decisions InternationalCorp., New York, New York, July 26,2001.

LEARN MORE: See "How an Industrial ManufacturingCompany Became an E-Trainer"


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