ROI for a Skillfully Designed and Executed Training Program

Training is a better investment than recruiting. Training a new manager is only 33% of the cost of paying a recruiter to find you that new manager. Recruiters typically charge 30% of a candidate’s first-year compensation. In the case of a manager who makes a $100,000 salary, recruiting would cost you $30,000. Sometimes, outside hires are needed to bolster the skill mix or experience pool on the team. But it takes at least 3-6 months to fill a vacancy. And then you have the onboarding process which takes months for the recruit to get up to speed. 

In that same six months, you could significantly uplevel the skills of one or more potential internal candidates for that role. A group training program will cost roughly ⅓ of the recruiter’s fee, about  $10,000. There is no onboarding, trial, or get-to-know-you needed. By investing in team members with leadership potential, you save on recruiting and avoid the time costs and risks of onboarding outsiders.

If every time you invest $10,000 in the development of a key leader, you save $20,000, that means your ROI is 200%. 

Retention through training is a better investment than paying to replace team members. 

The cost of replacing an employee varies widely, from ⅓ of their compensation to a factor of 2.5x their annual package. Factors baked into replacement costs include recruiting (see above), productivity lost in the gap between an exit and fully onboarded replacement, and the costs associated with aligning a new team member to the whole. As a desired benefit for 84% of workers, a well-designed and executed learning and development program enables you to save lots of money.

Back to our generic $100,000 per year employee. Retaining them saves you between $33,000 to $250,000. The $10,000 invested in their training and development each year is netting you a 2.3x to 24x return on the per-person capital devoted to their development.

Home-growing your leaders is a better investment than the risk profile of outside hires.

Why do great companies like Apple, Deloitte, and Google have proprietary leadership universities? Because they recognize that growing up an internally sourced core of executive talent is a competitive advantage. Executive function and career advancement are never left to chance at these top-performing firms. They have recognized the value of providing in-house learning and development that reflects their unique cultures and goals. They attract and develop the kind of talent that will fuel their forward progress. They maximize that talent by sending them off to the company-owned school. 

They have discerned that the cost of a misaligned external employee (think recruiting, onboarding, and their compensation for the entire period where fit is questioned) is much higher than a proactive investment in excellent training. 

IQ Compounding is a better investment than untapped innovation and efficiencies created by silos.

Many of the firms we work with are 1) trying to improve their internal processes so that their operational functions improve their client-facing execution, and 2) looking for innovative ways to outpace their competitors or increase their impact. Many CEOs observe pockets of efficiency and innovation, yet they want to see process improvement and breakout ideas arise more broadly. Investing in effective learning and development builds the cross-divisional / cross-business connectivity that fosters these bottom-line enhancing collaborations.

On the execution and operations side, best practice sharing occurs when peers are brought together for business-results-focused training. A well-designed training mixes formal and informal, aspirational and practical blocks so that plenty of efficiency-enhancing mixing can take place. It’s not uncommon for there to be high levels of technology redundancy in growth firms. Well-facilitated L&D experiences can help leaders learn from each other and simplify their operations and tech. This leads to greater efficiency and more team member agility across different areas of the firm.

On the innovation tact, we’ve seen cross-department mixing at effective training events lead to new product innovations. The collaborative build and delivery of these products lead to long-term cross-department collaborations for the growth of the business. Training and development that leverages product development projects of cross-department or division teams can accelerate this process. 

An interactive, business outcomes-focused L&D program leads to IQ Compounding. IQ Compounding is the synergy that comes from a business culture that gets the best ideas out of the table for increasing efficiency and delivering clients’ solutions at healthy margins. 

Plenty of upside

Well-conceived and delivered learning and development initiatives can drive long-term company success–attracting talent, saving on recruiting and replacement costs, and bringing fresh approaches to efficiency challenges and client solutions. With a trusted partner and a bit of forethought, people development can be a growth driver for your firm. 

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Build, retain, and invest in a team that contributes to business growth by employee RKE Partner’s executive development training. Schedule a consultation today.