The current economic client makes it difficult for training departments to obtain any extra funds, much less normal operating funds. Many times departments must “make do” with the budget they’ve been handed. But once you have a budget, no matter how large or how small, you should have an idea of what costs are fixed and what costs are variable.
Fixed training costs are simply the ones you can count on at any point. You’ll budget for these costs and be able to rely on the fact that they will most likely stay the same. For example, the salaries of the training staff are relatively fixed. When you work on your budget, for whatever time period, you know if you’ll be able to add staff, which we will discuss in a moment. You’ll also know how much to budget for increases based on the average from the last year. But altogether, you’ll be able to count on salary as a fixed item.
The equipment you use routinely for training is also a fixed cost. In fact, much of the equipment training departments use is bought and paid for at one time. These items are every day use items such as copiers, computers, laptops, overhead projectors, LCD’s, screens, automatic whiteboards, and any other equipment that is routinely used in the classroom or in the administrative office. But don’t forget that you’ll need to fix the cost of the upkeep on these items. Light bulbs for overheads and LCD’s are fairly expensive, and must be replaced with an item that is approved by the manufacturer. One way to fix these costs is to know how long these items last and plan for their replacements accordingly. One of the biggest shocks to a training budget is when all of the LCD’s burn out at one time, leading to an expense item that can add up to thousands of dollars.
Overhead is also a fixed expense. As a training manager, you know how much it costs to maintain your location or locations. These costs include the rent or mortgage payment, the expenses that accompany the locations, such as office supplies and paper, and also any income that comes in from other departments or companies renting space in an owned building. You can also include utility costs as fixed overhead, but be careful when the weather becomes extremely hot or extremely cold – one way to do this is to ensure that engineering installs timed thermostats. Many organizations waste overhead money heating and cooling spaces that are empty overnight or over a weekend, so the training department can continue to prove its worth by turning off the utilities when they are not in use.
Finally, fixed or planned programs are also fixed costs. For example, if you know how many people will be in leadership development over the budget period, you can plan for the materials and outsourcing costs right away. The best thing to do with planned programs is stick to them unless changes become absolutely necessary.
On the other side of the budget, variable costs are the ones you’ll need to plan for more carefully. Do you pay usage fees for bandwidth or online courses based on the number of users? If so, this is a variable cost. You can look at average usage from the previous year, or you can simply purchase an advanced number of users for online courses in order to manage this cost. But don’t end up in the position of turning people away.
Your materials costs can also be variable. Think about which programs are not “fixed”, such as new hire training. You know what the organization’s turnover is, but can you anticipate large jumps in turnover? You also know the organization’s vision and business plan, so use that to plan your materials cost. One of the best ways to deal with this cost is to purchase materials as needed and plan as you go. There’s nothing worse than ending up with boxes of an outdated manual.
Finally, large variable costs can include mergers, acquisitions, expansions, and reductions. You should have an idea of where the organization is headed as far as mergers or acquisitions – and plan the budget accordingly. But there could be unexpected changes such as reductions or expansions that cause you to have to fork over money for space reconfiguration or additions to staff.
The management of variable items depends in a large part on the kind of budgeting system your organization uses. If budgets are fixed, there is not much leeway. But if budgets are “rolling” budgets or “pro-forma” style budgets, you can manage money a little easier as the variable costs swing from one side to the other. For fixed budgets, the best way to handle variable expenses is to look for ways to pay for them out of fixed costs. When variables come your way, find out how the organizational budget is handled and ask for help from the financial managers.
Now that you know which training costs are fixed and which are variable, you’ll be better prepared to manage the money as issues arise.