Learning and development incurs direct and indirect costs for employers. The costing and benchmarking process seeks to calculate these costs, comparing and ranking the different metrics associated with learning and training provision. Benchmarking, in the case of learning and development, involves comparisons and rankings of measures associated with learning and training provision.
This factsheet examines the relationship between costing and benchmarking and learning and development, looking at the reasons for costing and benchmarking learning and training and the challenges of measuring learning. It provides guidance on how to cost learning and development activities. It gives information on how to benchmark those activities and concludes with a brief look at the strengths and weaknesses of benchmarking.
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What are 'costing' and 'benchmarking' in relation to learning and development?
What is costing learning and development?
Costing learning and development (L&D) is based on calculating direct financial costs incurred (for example, content production and external deliverers), sometimes together with assessing or estimating indirect costs involved (such as management time spent on coaching or employee time participating in L&D events).
What is benchmarking learning and development?
Benchmarking L&D involves comparisons and rankings of various measures, or metrics, associated with learning and training provision - typically including the financial costs incurred but also other aspects that may be measured (such as the benefits/outputs gained as a result of learning interventions).
The value of learning and development
The development of employees’ skills is essential for organisational success. Together with any costing exercise, it’s vital to ensure that learning interventions are aligned with strategic business objectives and are evaluated accordingly..
Challenges of measuring informal learning
One consequence of changing business and learning delivery models has been a shift in focus from training to learning, from formal to informal, and embracing a wider definition of those terms to include social and digital learning. This variety brings challenges around cost, benchmarking, measurement and progress, as it’s often more difficult to measure or estimate these costs using traditional key performance indicators or other methods.
Reasons for costing and benchmarking learning and training
Costing and benchmarking L&D activity may be undertaken for a range of specific objectives, including:
- Preparing and prioritising learning plans and budgets.
- Assessing value for money.
- Choosing to outsource or buy in resources, or provide them in-house.
- Comparing the costs of achieving the same outcomes via different methods.
- Calculating the impact of learning interventions.
- Investing in technology.
- Providing evidence to use curated resources.
The learning and development specialist knowledge in our Profession Map includes calls to focus on impact, engagement and transfer of any learning provision. This area supports costing and benchmarking L&D activities.
How to cost learning and development activities
While a wide range of definitions and interpretations exist around learning and training interventions, one key distinction in respect of costing is whether provision is external or internal.
This is relatively easy to cost as there will be a charge per person plus any associated travel, accommodation and subsistence costs. Similarly, when digital content is created or provided externally, the costs are calculated per project or per licence/user. External consultants costs are easily identified by their fee. However, sometimes internal teams of learning professionals and specialist managers design the programmes and in these cases development costs should be fully recorded by noting all the time spent on design.
Costing tends to be rather more complex in the case of internal provisions, with a number of factors to be considered. These could be one-off costs that include:
- Designing the best methods and materials to meet learning objectives.
- Curating content, including hosting costs.
- Preparing evaluation tools.
The internal route is often assumed to be the low-cost option, although a clear cost analysis is needed as consultants may in certain circumstances be more cost-effective because of their experience in development work, their existing portfolios, speed of production, availability and contacts.
For formal learning programmes, the cost of a pilot course may be considered as a development cost, although if it's successful, the organisation has the benefit of one group of trained delegates.
The costs of delivering a developed course are compiled per programme, and include (for a blended learning example):
Costs of facilitator(s) - these may be consultant fees or the costs of using internal training staff.
Hosting costs for a platform for online content, forums or community, plus costs and time to facilitate an online learning community.
Venue costs - charges from a hotel or training centre, or the costs for using internal facilities:
- accommodation, if relevant
Printing costs of all learning materials, plus any takeaways such as USB memory sticks.
- Administrative costs involved with making the arrangements for the programme and the delegates.
Informal learning interventions
Providing informal learning also incurs cost. For example, running an in-house coaching programme with line managers can incur significant costs including:
- Initial coaching programmes for managers to learn how to coach.
- Managers' time in going to sessions.
- Providing supervision to the manager coaches.
E-learning is often introduced for cost-saving purposes, although it can be a false economy if the learning is not effective or relevant. It’s also necessary to calculate the initial cost of buying or designing any technology-based learning, plus the cost of maintaining content and facilities.
It’s essential to measure the take up of such provision to ensure that the costs are being spread over actual learners rather than the predicted take up. Our Learning and skills at work report discusses the impact of technology on learning and shows improved organisational performance where there’s technology-enabled learning. See more in our digital learning factsheet.
Costs of learners’ time
Regardless of the type on learning intervention, there are costs associated with delegates' time away from work. It may be straightforward to identify the costs if temporary staff are brought in or if overtime payments are made. While it's less easy to calculate the cost of losing employees’ time on day-to-day work duties, these costs are usually estimated as:
Cost/day = (salary ÷ number of working days) + overheads. (In the UK, the number of working days is often taken as 228 per year.)
Overheads are often calculated as between 30% and 50% of salary costs. In some organisations a loss of profit is included, making the calculation complex.
The cost of delegates' time away from work will not usually be part of calculations comparing different types of training intervention (unless the options are of different durations), but they need to form part of any assessment of the overall cost. The increased productivity for that employee as a result of taking time out for learning could also be factored into overall cost/benefit analysis, as could employee engagement ‘feel good’ factors resulting from feeling more equipped and competent.
As L&D evolves and supports increased knowledge sharing, informal and regular short learning interventions such as podcasts or ’lunch & learns‘, any calculations need to reflect this. Bite size learning, which an employee can undertake when needed, meaning workflow is not interrupted and their productivity remains, thus removing the need to factor in the learner’s time. See more on evolving L&D practice.
Benchmarking learning and development activities
A benchmark can be defined as a point of reference or comparison, a standard or criterion. In this context, benchmarking is about comparing the costs and benefits of activities against data obtained from inside or outside the organisation.
Undertaking a benchmarking exercise on training activity and spend can sharpen the focus of an organisation’s L&D effort by highlighting areas where resources are deployed cost-effectively and to the greatest business benefit.
What sort of information?
Using a range of measures enables comparisons across different organisations or within parts of the same organisation. It’s important to be clear about what information you’re seeking, why you’re seeking it and how it will be used.
Some traditional cost activities are listed below. There’s growing debate on the relevance of this type of data used in isolation, as it takes no account of any performance improvement, nor does it mean that every employee has received some formal development.
- Business benefits
- Impact on business metrics, such as staff retention, profit, sales, or productivity.
- Returns on investment and returns on expectation.
- What is the L&D budget (per employee)? Does each person ‘receive’ this?
- What is the actual spend (per employee)? Does each person ‘receive’ this?
- Costs of different types of activity.
- How many employees attend training or engage with other L&D initiatives?
- What is the content of the activity (management/inter-personal skills training, technical, health and safety etc)?
- The number of L&D staff employed compared to the organisation as a whole.
- The range of learning methods used.
A number of these cost activities measure ‘volume’ rather than ‘value’. Our Evaluating learning and development factsheet explores models that allows L&D practitioners to measure value effectively.
Our research report Professionalising learning and development shows that almost all L&D practitioners identified analytics as a priority development area. The research shows a direct link to positive organisational performance when practitioners have a detailed understanding of analytics. But our 2021 Learning and skills at work survey shows that just one in four respondents make recommendations based on their evaluation findings and one in four do not undertake any form of evaluation, let alone costing or benchmarking.
Metrics can be compared across operating units of the business to assess the value and contribution of learning to different units. The advent of 'big data' is enabling greater access to information, leading to more potential for internal analysis and insight. Find out more in our research report Talent analytics and big data. Aligning with key performance indicator owners to share what other departments are measuring is vital to ensure consistency of reporting.
Sources of information for external benchmarking
Some organisations participate in sector-specific initiatives where there’s an agreement between participants to collect data using agreed definitions and to share results on a confidential basis. These initiatives are usually paid for or have a subscription fee.
There are also various sources of published data. Our report The future of technology and learning survey report provides data on current and emerging digital and learning trends and critical considerations for L&D practitioners in the changing learning landscape. It provides figures for the:
- Proportion of budget dedicated to learning technology.
- Proportion of formal learning that is digitally enabled.
- Planned and current uptake of digital tools, highlighting collaborative and mobile learning as key emerging tools.
A number of government publications also provide figures on the proportion of employers that offer training to their employees, the overall cost of training and how they use government or other providers of training and qualifications.
It’s important to be careful in how terms are used when using external benchmarking tools. For example, ‘costs of training’ measures often tend to report on readily available information rather than more difficult-to-measure aspects such as the costs of employee time. Figures on the incidence or extent of L&D may also take a very narrow definition, and often only cover off-the job training, ignoring less formal methods. It’s important to factor in real costs.
It’s also important to consider the learning environment created in the organisation - our report on learning cultures explores this. L&D professionals need to be sure of the environment it creates for learning and what value this adds.
Books and reports
ASSOCIATION FOR TALENT DEVELOPMENT. Annual ‘state of the industry’ report.
BEEVERS, K., REA, A. and HAYDEN, D. (2019) Learning and development practice in the workplace. 4th ed. London: CIPD and Kogan Page.
HOGARTH, T., GAMBIN, L. and WINTERBOTHAM, M.(2012) Employer investment in apprenticeships and workplace learning: the fifth Net Benefits of Training to Employers study. Research paper. London: Department for Business Innovation and Skills.
LANCASTER, A. (2019) Driving performance through learning. London: Kogan Page.
PARRY-SLATER, M. (2020) The learning and development handbook. London: Kogan Page.
TALBOT, J. (2011) Training in organisations: a cost-benefit analysis. Farnham: Gower
Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.
FARAGHER, J. (2020) Why is calculating the ROI of L&D like finding a needle in a haystack? People Management (online). 22 October.
ROSSETT, A. (2010) Metrics matters. T+D. Vol.64, No.3, March. pp65-69.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can see articles on the People Management website.
This factsheet was last updated by David Hayden.
David Hayden: Digital Learning Portfolio Manager, L and D
David is part of the CIPD’s Learning Development team responsible for the digital learning portfolio - he leads the design and delivery of a number of L&D-focused products and keeps his practice up to date by facilitating online events for a range of clients. David began his L&D career after taking responsibility for three Youth Trainees in 1988 as an Operations Manager, and has since gone on to work in, and headed up, a number of corporate L&D teams and HR functions in distribution, retail, financial and public sector organisations. He completed his first Masters degree specialising in CPD and has just completed his second in Online and Distance Education. David also has a background in 'lean' and has worked as a Lean Engineer in a number of manufacturing and food organisations. Passionate about learning and exploiting all aspects of CPD, David’s style is participative and inclusive. As well as authoring the CIPD L&D factsheet series, he co-authored the 4th edition of 'Learning and Development Practice in the Workplace' with Kathy Beevers and Andrew Rea.