10 Steps to reducing your training budget

By May 5, 2017 May 23rd, 2017 Procurement

Investing in good external training can have huge benefits for a business – yet  why is it not usually on the procurement professional’s agenda?

Investing in good external training can have huge benefits for a business – yet  why is it not usually on the procurement professional’s agenda?

Mainly because it is not their area of focus and is typically handled by HR or L&D departments.  It’s a highly-fragmented market and spend with external training providers is notoriously difficult to measure and manage, and it can be both costly and risky if left unmanaged.

But taking the time to develop just a little attention and category-specific know-how can lead to significant cost savings, improved contractual protection and more quantifiable business benefits – fast.

With this in mind, we’ve pulled together a comprehensive, jargon-free three-part guide to training procurement best practice. First up, we’re focusing on how to effectively manage the training category.

Know your market

Comparing like-for-like training courses and suppliers can be bewildering. There may be specific reasons why a certain course or supplier is suitable for a particular audience, but it can be hard to know when it’s truly justifiable to add a new candidate to an existing preferred list. The first step is to develop a better knowledge of the training market (either internal or external), and here’s where a close relationship with your L&D team can really help.

Thanks to a lack of formal regulations, the outsourced training market is highly fragmented – there are more than 25,000 training organisations and associate trainers in the UK alone. Run a spend analysis for a large company, and you’ll often find that they’ve used more than 500 suppliers in the last year; run one for a global organisation, and it’s likely be in the thousands. As a procurement specialist, your first task is to understand the reasons why this long tail of suppliers may legitimately exist (such as location and/or niche specialism) and to identify why standard rationalisation approaches may be inappropriate.

10 cost-saving steps

Conducting a benchmarking analysis of trainer day rates and course costs, both within and without the organisation, is an obvious way to identify immediate opportunities for price negotiations and savings. However, if you want to achieve really impressive cost reductions, there are ten further steps you need to take.

 1. Establish clear spend control and authorisation processes for the review and approval of all learning requests. Such processes should be linked into wider organisational spend control processes to ensure spend doesn’t get pushed underground, such as being hidden via expenses, or buried in different cost centres such as consulting. This also ensures maximum utilisation of existing materials, e-learning licenses or in-house expertise before approval of new external spend – helping ensure that L&D is seen as thinking commercially as well as capability. 

2. Control the type of training courses purchased. For the cost of sending two or three delegates to a public course (an open course delivered at the external training company’s venue) it’s often possible to run a much more efficient, effective and tailored course in-house for up to 12 people.

3. Maximise the ‘fill’ rates on in-company courses. Work with L&D to schedule the optimal number of events and to improve delegate attendance, which can drastically reduce the overall cost per head.

4. Source the correct ‘blend’ of training, from online self-study to traditional classroom learning. Rather than treating e-learning and face-to-face training as separate categories, it’s better to design a hybrid of different approaches that will achieve greatest value for the learner and best fit with corporate strategy.

5. Monitor the quality of training delivery and phase out ineffective interventions. Consider implementing ongoing benchmarking and supplier relationship matrix grids – this will help you better understand how well your go-to partners and suppliers are meeting your transactional and strategic requirements, but it’ll also help you identify where you need to introduce specific sourcing strategies because you don’t know the market well enough.

6. Put in place policies for attending external events and conferences. All too often this spend goes under the radar by being reclaimed through expenses, so clear policies can help save thousands every year – as well as ensuring that attendees maximise team learning by sharing their knowledge post-event.

7. Extract, categorise and analyse periodic spend data – preferably categorising at point of booking, and analysing the previous 12 or 6 months. This will allow you to identify spend trends, so that you can support strategic saving opportunities, improve future demand/spend planning and reduce wastage. For example, if you’re spending thousands on learner re-sits for financial or project management courses, this will help you work out whether there’s an issue with the supplier, or whether the supplier can support you in reducing costs and improving capability.

8. Provide a clear engagement process for internal and key stakeholders. This should include a user-friendly online toolkit or technological sourcing process; regular scheduled updates on new policies and processes, as well as any preferred supplier status decisions or restrictions; and regular feedback on results.

9. Create engagement strategies for your partners and suppliers. Sure, these organisations want your business, but you also need their expertise, so it pays to collaborate!  Hold regular one-to-one meetings or open days to discuss how you can support one another on upsell and saving opportunities, innovations, efficiencies and award entries. It’ll also foster a positive, creative relationship rather than a purely transactional one (although that can be okay, as long as it’s clearly agreed to be what you both need and prefer). And don’t forget to monitor how suppliers are representing your brand and your values within assignments, or as resellers – you want them to be passionate on-message ambassadors.

10. If you outsource the management of your suppliers to a third party, question how well they’re doing on the previous nine steps, and make sure you’re monitoring them effectively, with the right KPIs and SLAs. Be careful to put in place the right measures that drive the right behaviours for your business; for example, strict savings targets or unrealistic sourcing timeframes might drive delivery options that are low-cost but inappropriate, leading to low stakeholder satisfaction and poor ROI.

It takes a bit of work, but once you start consistently and proactively managing the training category, you will soon notice results that more than repay your time.

However, that’s just the beginning. Next, you need to review how you source and select your suppliers. So stay tuned for part two of our training procurement 101.

James Ball is a consultant at Retearn and has extensive procurement, supply chain and operational experience across learning and development, IT and healthcare industries.

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