Most training budgets get spent. Very few of them get used.
That is a difficult reality that many HR departments are facing at the moment. The cash pours out of the building, licences are purchased, a few webinars are organised… and the same employees are handing in their resignation letters half a year later.
Here’s the thing:
Learning is the number one reason why people stay where they are. 88% of organisations list retention as a challenge and offering learning opportunities is their number one solution to improve it. Funds are not the issue then.
The way it gets allocated is.
A budget built for retention doesn’t resemble your typical budget. It’s leaner in some areas, significantly larger in others, and laser-focused on your employees wants and needs.
Here’s how to build one.
What you’ll walk away with:
- Why Most Training Budgets Miss Retention
- What Turnover Is Really Costing You
- Where The Money Should Actually Go
- A Simple Way To Split The Budget
- How To Tell If It Worked
Why Most Training Budgets Miss Retention
Most budgets are created in reverse order. Someone selects a platform, purchases seat licenses for all employees, and declares it a learning strategy. Companies currently spend an average of $874 per learner annually, much of which is content that is opened once.
Generic training doesn’t make anyone stay. Relevant training does.
So here’s one question to ask before approving anything related to training: what will this training let somebody do next week that they can’t do today? If you can’t answer that question, it doesn’t deserve funding. Much spending lives simply because nobody has said that sentence aloud in a meeting.
Imagine a warehouse floor. Or a hospitality team. Where most employees speak English as a second language. Webinars on leadership won’t help them. But an intensive English course will. When you invest in people by paying for organized English classes in Newark, your front line workers gain fluency. Quickly. They become eligible for that supervisor position. They can read the safety manual themselves. They can de-escalate a customer complaint alone.
That’s not a benefit. That’s a lifestyle…and few leave the company that provided it.
What Turnover Is Really Costing You
Before deciding what to spend, work out what leaving costs.
Replacing an employee costs 50% to 200% of their yearly salary, depending on the position. On a $55,000 salary, that’s $27,500 to $110,000 right there. Hiring costs. Lost productivity while the position remains vacant. 3-6 months before the replacement is fully effective. And all the institutional knowledge they take with them.
Now compare that to a training line item.
Here’s what that maths looks like in practice:
- 20 staff leave in a year
- Each departure costs a conservative $30,000
- That’s $600,000 a year in turnover
Reduce that by just 25% and you save $150,000. All of a sudden that $40,000 training budget doesn’t seem costly. In fact, it starts to look like the best insurance policy you have.
Those are the numbers you can take to the finance team. Because those are written in finance-team speak.
Where The Money Should Actually Go
Here’s where most budgets fail. Funds get allocated shallowly to everything rather than deeply to a few things people truly care about.
Skills That Lead Somewhere
People don’t leave companies, they leave roles that go nowhere. Invest in classes that have a promotion, certificate or salary increase at the end. Instead of ones that just satisfy compliance. Organizations with healthy learning cultures have 57% higher retention because employees can envision what’s next.
Language And Communication Training
This field is grossly undersourced pretty much across the board. Approximately 28.9 million people in America struggle with English fluency, and many of them are currently employed producing valuable work in positions they’ve exceeded.
An intensive english course is one of the few investments in training that yields dividends in three ways at once:
- Safety: fewer misread instructions and fewer incident reports
- Promotion: internal candidates for roles you would otherwise hire outside for
- Loyalty: nobody forgets the employer who paid for it
Here’s another reason an intensive english program should be in your budget. It has a definitive end point. Rather than an ongoing subscription with no end in sight, there is a start date, an end date and something to show for it.
Manager Development
Employees quit managers, not companies. So manager training is typically the first thing sacrificed during budget cuts. Invest in it. One bad manager will silently destroy every other dollar spent.
Fixing the situation isn’t usually costly either. A few days on a leadership course together with some coaching sessions and plenty of practice running one to one will usually be cheaper than replacing the two members of that manager’s team.
A Simple Way To Split The Budget
Forget complicated models. Something like this works for most mid-sized employers:
- 50% on role-specific skills: the skills that make someone excel at their job and be prepared for their next role
- 25% on communication and language: this includes an immersive english program for staff who require it
- 15% on manager development: the single biggest retention lever there is
- 10% held back: for requests that come straight from employees
That last 10% makes a much bigger difference than you might think. When someone requests a course and hears yes, it screams:
You’re worth investing in.
Pretty simple, right?
How To Tell If It Worked
A retention-based training budget must be measured by retention. Not by attendance. Not by completion. Not by number of users last month.
Track these four numbers instead:
- Turnover among staff who completed training versus those who didn’t
- Internal promotion rate
- Average time to fill supervisor and team lead roles
- Tenure at the 12 and 24 month mark
Evaluate them quarterly. If turnover hasn’t changed in one year, you are spending in the wrong place. Move the spend, don’t increase it.
And talk to people. Ask employees what training would keep them onboard. Solutions will be much less expensive than what the platform sales rep suggests.
Tying It All Together
Retention only gets better when your training budget is focused on things employees want:
- Skills that lead to a better job
- Training that removes a barrier holding them back
- Managers who have been taught how to manage
First, determine your turnover costs. That number should determine your budget. Spend big, not broad. Invest in the boring stuff that actually makes a difference, like an immersive english class or real manager mentoring. Then measure your programs by tenure and promotions instead of just attendance.
Do that and the training budget stops being a cost line on a spreadsheet.
It becomes the reason people stay.
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