Join Ajay Pangarkar for an in-depth discussion in this video Answering the financial questions, part of Gaining Internal Buy-In for Elearning Training.
- Have you ever been asked by a business leader something like how much is this going to cost? What will you do with the money? Or how will it improve profitability? Chances are you have. Money isn't most people's favorite topic of conversation, but in business, it matters. Your leaders don't expect you to be a financial expert, but they do expect you to be financially literate. This means they expect you to understand the numbers and recognize the financial impact on the business.
Here are some tips to answer your leader's financial questions successfully. First, acknowledge you're competing for scarce resources. Training is one among many internal business activities competing for resources, especially money. If you want leaders to take you seriously, then you'll need to build a case demonstrating how your efforts will contribute to the business and showing how you'll use the money.
For example, say there's a 10% increase in demand for your company's product. HR proposes hiring more staff, costing the company time, money, and possible turnover. But you believe developing a targeted training effort will improve staff productivity by 20%. You'll need to show leaders how training costs less than HR's proposal and demonstrate how a 20% productivity gain will meet the 10% increase in demand.
Second, identify your business leaders' primary financial preoccupations. Typically, leaders focus on four specific financial expectations, which are coverage, liquidity, activity, and profitability, or simply use the acronym CLAP. Leaders apply these financial reporting tools to gauge your organization's financial performance. You may be asking, so what does this have to do with training? Well, every internal business activity, including training, impacts these measures.
Fundamentally, training's purpose is to help people function better to improve their organization's financial health. Identifying these poorly performing financial areas allows you to target those employees requiring improvement. Let's revisit our production example. From an initial assessment, the production employees are unable to meet the growing demand. This affects product availability, ultimately reducing sales. As a result, customers are buying their competitors' products, hurting your company's profits.
Your role would be to first evaluate why production can't meet demand, then determine how a training effort will address the issue. Third, differentiate between training and training infrastructure. From an accounting and financial perspective, your business leaders intuitively see each one differently. Leaders will refer to training activities as a period expense. This means that the training, just like any other expense, occurs in the actual period.
Once a training is complete, it is complete and expensed. For them, the result is intangible, and their hope is that training made an improvement. Training infrastructure, on the other hand, are tangible items required to develop and deliver the training. Leaders consider these items or assets as long-term investments and expect them to contribute value throughout the asset's useful life. For example, say that a previous production training effort consists of on-the-job coaching and e-learning courses.
The cost to develop and deliver the coaching along with the employee coaching time and watching the e-learning courses would be a training expense. The training infrastructure, e-learning software and hardware, required to develop the course and track employees would be treated as an investment that is expected to add value beyond the specific training activity. Leaders view these types of long-term assets the same as a person owning a house.
The house is a long-term investment. It provides immediate value as shelter for your family and the idea is that over time it will increase in value. Recognize that purchasing training technology and equipment is not simply something to buy and expense immediately. Prepare to explain the long-term value that these investments will deliver to future training efforts and to the business overall. When answering your leader's financial questions, be aware how your training efforts contribute to the business' bottom line.
- Defining learning as a business activity
- Identifying the three primary stakeholders
- Answering questions from stakeholders
- Addressing operational concerns
- Leveraging RADAR to support elearning
- Overcoming challenges