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Performance Reviews >> Time for Scheduled Maintenance

As a learning and performance consultant, I get asked this question a lot “What’s the appropriate annual per person budget for training and development?” and because I’m a consultant, I respond with a counter question: “How much would you budget for service and maintenance of a piece of production machinery, let’s say a CNC Router, that has a purchase price of $1M?”

Since most knowledge intensive industries and corporations proclaim that “their people are their greatest asset” it makes tremendous sense to draw the parallel with production machinery.

In other words, what’s the Total Cost of Ownership (TCO) of this machine? Not just the sticker price, but what does it cost to keep it running smoothly for say - the next 10 years? The answer a plant manager, or manufacturing engineer, is likely to give, is “between 4 and 8% annually”. So the maintenance budget needs to be an average of $4 - $8K per machine, per year. This is starting to make the discussion nice and simple - not easy, but simple.

Now picture a specialist or a manager, earning an annual salary, bonus and benefits of $70K. Or a CEO, earning $300K. To keep them running smoothly from year to year, the budget for preventative and scheduled maintenance should probably be in the same range, don’t you think? In fact, in my experience, an average of 5% is usually sufficient, except perhaps for highly specialized technical workers.

It also makes sense to put in a minimum and maximum for the individual maintenance budget; after all an executive making $300K is not going to need up to $15,000 annually for development and training. Correspondingly, your entry level clerk, making $24K, may need a little more than $1,200.

It’s also important to discuss what exactly gets covered by the maintenance budget. My recommendation is “tuition and directly related learning expenses ONLY”.
So, if you send someone to a 3-day conference, the registration fee is of course covered by the training budget, as well as the purchase of any books or materials required to participate at the conference. Ditto for a 2-day off-site application course for the new ERP system. But travel and accommodation are not covered by a training budget. How could they be? Think of those costs as similar to the cost of flying in a mechanic to fix your CNC Router. Your Finance Department would not assign that expense as a capital cost to the TCO of the machine; they would book it to Operating Expenses.

The good news: People actually require less preventative maintenance than machines, and respond to the maintenance (=learning and development opportunities) with greater productivity and higher quality output than before the scheduled maintenance. In this respect they are much, much better than machines!

Think of how much learning and performance improvement we could achieve if companies finally budgeted for human maintenance appropriately?

Last updated on Apr 28, 2009 at 12:41 PM
Category: Training and Instructional Design Retaining & Motivating
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