Rab`s Centre for Creative Leadership Catalysts & Transformers

CHAPTER 14

WHATS SPECIAL ABOUT TRAINING & DEVELOPMENT BUDGETS?

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Agenda

Rab`s Centre for Creative Leadership Catalysts & Transformers

What is Budget? What is HR budget? General Estimating Policies Ways to Absorb Estimation Fluctuation Computing the cost of performance deficiencies. Computing The Cost Of Training . How budgeting help the Go/ No-Go Decisions. Summary

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Budget
A budget is a financial plan. List of all planned expenses and revenues.

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It is a plan for saving, borrowing and spending.

Provide a forecasted revenues and expenditures, Financially performance in the execution of certain strategies, plans & trainings. Actual financial operation measurement against the forecast. 3
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HR Budget
Overhead Cost
Payroll, including Salary Overtime Allowances Attendance, Meal or Others Bonus Increment Recruitment Cost

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Training Cost
External Programs Registration Fees Travel Expenses Certification Exam cost Consulting Fees Trainer Salary Program material Food & Beverages Supplies for attendees
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Welfare Cost
Transportation Hostel Uniform Medical Group Insurance Allowances - Car, Petrol, etc Family Day / Annual Dinner Sport Club
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General Estimating Policies

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How Much should be invested in T&D activities by Organization? For normal operations 1.5% to 2.5% of the total employee salary cost to T&D. T&D Director is a Strategic planner.

T&D helps to reduce Estimation Fluctuation

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Needs to educate more to its own staff and some times its take time because of work load. People with T&D experience can be rotated into managerial positions and at peak they can be reassigned to T&D project.

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T&D helps to reduce Estimation Fluctuation cont.

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Outside Resources can be hired during heavy workload. Temporary staff member can be employed for single or a limited number of projects which will lighten the workload

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Computing the cost of Performance Deficiencies

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Determine the unit. Determine the cost of that unit.

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Cost Estimation
Auditor time Supervisory time Clerk time

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Three elements for Cost Estimation

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Performance Error Estimation

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Per day 20 errors Annual days 365 Annual mistakes(20*365)=7300

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Calculation
Multiply the unit cost to the number of defective units

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Review of steps

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Identify single unit of defective performance. Calculate cost of unit. Calculate number of defective units. Multiply the units cost to defective units.

Computing The Cost Of Training

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Other solutions for performance problem instead of training: Feedback (Low cost solution) Job Aids (Guidance for the performer) Job engineering (Expensive but less costly than training) Contingency management (Time consuming) Quality Circles (Involves all levels of management and workers) Organizational Development (Involves top level members which finally avoids future performance problems )
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Cost of Training Cont...

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Training is expensive but the T & D officer has to control the costs. T & D officer must see the training expenditure is appropriate to the contribution in the training program. Support Expense includes staff, equipment, special material & travel expenses

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Cost of Training

Cont....

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Instructors must also prepare to teach. Training programs require a demo class which increases travelling and facilities costs. There is no need for it when feedback mechanism or contingency management are solutions to performance problem. The T & D officers want to charge the salary of trainees to the production costs of the program

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Total Costs Of Training

Divided into three parts Training Production Costs. Training Conducting Costs. Training Evaluating Costs.

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Computing Training Production Costs

Item
Staff Costs:
Salaries Travelling Overhead No. of people *salary *No. Of hours Ticket charges Electricity

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Formula

Total

Material Costs:
Film Video discs 35 mm slides Manuals and materials Special equipments Actual cost if purchased From $ 35,000 to $ 100,000 per hour $15 to $50 per slide Local figures Total purchase price

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Formula of Conducting Training

Trainee Costs:
No. Of trainees * median salary * training hours Travel costs: total from expense reports* No. Of trainees Student material: Unit costs * No. Of trainees Lost production: Value per unit * The No. Of lost units.

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Total

Faculty Costs:
No. Of trainers * No. Of hours * median salary Travelling costs

Special equipment or services:

Rental of equipment: Total charges. If purchased, amortize over 10 years.

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Formula Of Evaluating Training

Item
Salaries:
Design: Selecting criteria Data sources: Interviewers Data analysis Materials: No. Of hours * median salary No. Of hours * median salary No. Of hours * median salary

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Formula

Total

Printing
Mailing Travelling tickets

Actual local costs

Units * two way postage Actual totals 19

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How Budgeting Helps The Go/No-Go Decisions

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Budgeting process is decision making instrument.

How budgeting helps the GO/NO GO Decision

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Yes

Is the problem costly?

No

Yes

Is the solution less costly than the problem?

No

Seek alternative solution

Yes Proceed with solution

Can a cost effective solution be implemented?

No Invest energy in a different performance problem

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Performance Problem

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Is the problem costing a significant amount of dollars? Can we solve the problem by investing fewer dollars than the problem is costing us? The answers sometimes dictates a decision to live with it or to consider best alternative solutions.

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Summary

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Every Process has a budget HR budget encompasses the training costs. Like other calculation performance are to be calculated. Training cost incurred in training production, training conduction and training evaluation. Budgets helps in to go for training decision or for alternates option.
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