Training Budgets - How Much is Enough?

Training spending per employee is a question that every mortgage company owner wrestles with. How does one balance the amount spent and how does it correspond to the value obtained?

This might help put things into perspective. It is from the Besin Study "Bersin & Associates Announce Comprehensive Research Study of U.S. Corporate Learning Market":

"Spending per employee varies widely, depending on industry sector and the company size. The spectrum ranges from $4,000 per employee in business services to $200 in retail. The average per learner expenditure is $1,412."

While this provides a 'snapshot' of what training expenditures are average, the larger more important question is; does the training that is paid for actually translate into value for the company? Is there research that compares an organization with no training support versus another that has workplace training programs in place? If so, what is the comparison in job performance?

Think about that is being asked, there are two Loan Officers (I am writing the article and get to choose the position) doing the same job. One Loan Officer is trained properly and the other is not.

It is believable that a person is capable of doing a particular job after training. Doing the job with little or no training, now that is a stretch to believe. Unless the job is so simple that it does not require training. I personally cannot imagine that a Loan Officer could reliably perform their job, where 'training is required', with zero training.

How many within the mortgage and real estate industry get their training in this fashion: 'follow Charlie, our Loan Officer de Jour, around and do what he does'. We often refer to this as OTJ, or on-the-job-training.

This type of training results in two primary outcomes:

First, we must assume that 'Charlie' may be (but we are not sure) fully versed in the position skills and will share a comprehensive presentation of what is required to correctly be a Loan Officer. What more like is the situation, the trainee is provided a set of Loan Officer experiences by Charlie, without structure, and whatever is learned is 'at best' incomplete. OTJ training also reinforces habits that may be counter-productive to business processes. Charlie says that 'you don't need to learn that or do that because Processor Jane will fix whatever you failed to provide'. The cost for the mortgage company could now be that they have two Loan Officers incapable of properly performing their job. We also now have bad Loan Officer habits, not being done by one but by two, and compounding these bad habits with each new hire.

A second outcome is that 'Charlie" becomes distracted in performing his job, while he attempts to teach the new employee how to do it. This business costs for this situation is lower revenue production for 'Charlie'. Worse, the new employee is frustrated by the learning experience, is incapable of performing in the position, and is left with unanswered questions on what the job is and the requirements necessary to actually perform in the position. The time of this training is never determined and there is no method as to testing for the new skill set. The business cost here is that both perform poorly during the period of training, and afterwards the new hire remains as a poor performer due to the inability to do the job. This disruption to the company's pipeline can only be estimated.

Contrast that with a real trainer. The new Loan Officer is provided with a structured learning course, where all of the elements necessary to perform the job are taught. The learning is confirmed via testing. The speed at which the training occurs is shortened. Ideally, the coursework is reviewable, so that the new Loan Officer can refer back to it to insure accurate performance of their position. The business's cost is that the new staff member is fully trained, capable of correctly performing in their position and the business process remains streamlined.

How would an owner calculate the costs associated with both styles?

What does the OTJ cost the business in terms of the possibly immediate disruption to revenue. Longer term, what does the incomplete training cost the company when you compound the disruption to the loan process while others (the loan processors) fix or perform the Loan Officer's job to complete the file. I encourage any owner to estimate what this cost is.

Conversely, a mortgage company with a training system and budget, might have (choosing the medium training cost) a cost of $1,412 that results in the new Loan Officer being fully trained. Capable of originating a complete loan. Properly pre-qualifying the client and obtaining the correct documentation, prior to submission to processing. The loans submitted are streamlined and the processors are capable of processing the loan quickly and professionally.

Ronald Jacobs at Ohio State University cites his own research on structured training: "Employees who learn tasks thorough structured training make fewer quality errors than employees who learn through unstructured OTJ. The reduction in errors had been shown to have a substantial financial impact on organizations...... In addition, employees achieve training objectives faster and more completely through structured OJT that though unstructured OTJ. The increased efficiency and thoroughness have been shown to have financial benefits. For example, and organization that increased training efficiency by a factor of five times thought the use of structured training received twice the financial benefits in terms of employee productivity."

So how much then should a mortgage company budget for training?

* Each company must analyze their training processes.

* Determine the economic impact that their decisions have on their business operations.


* Compare that with the benefits by having a fully and properly trained staff.

Then the answer is simple. A company should spend as much as necessary to properly train your staff so that the return on your 'training investment' translates into measurable increases in revenue.

Copyright 2007-2008 Bryant Nielson. All Rights Reserved.

Bryant Nielson - Managing Director and National Sales Trainer - assists executives, business owners, and top performing sales executives in taking the leap from the ordinary to extraordinary. Bryant is a trainer, business & leadership coach, and strategic planner for sales organizations.Bryant's 27 year business career has been based on his results-oriented style of empowering.

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