Calculate upskilling investment

- Every day, there are new skills emerging and others sunsetting, especially in fast-paced industries undergoing transformations, such as automation. It is impossible to keep up to date. So, how does a company decide when to develop an in-demand skill internally, versus when to hire for a specific skill? Whilst it is always a gamble, it does help to apply some cost and resource estimates to help you make the decision. This is a calculation we use to work with stakeholders to help prioritize investments in upskilling. The first step in the calculation is to determine how much time and cost will be required if you decide to upskill an employee. Now, this has to include everything. Of course, there are the normal costs, such as using a learning experience designer, QA, maybe translation, and even the time of an LMS administrator. Then there are the costs you might not normally factor in, such as subject matter expert reviews and the cost of each learner's time. This is usually based on the average hourly salary of the intended audience multiplied by the hours required for upskilling. How to calculate this will really depend on your organization. Basically, you want to have a general idea of how much it costs to build the learning, whatever it is, virtual, blended, classroom, et cetera. Then, you need to look at the anticipated return on investment. If one person acquires the targeted skill, would it impact how the company makes money or saves money? Would it accelerate innovation or increase sales? Multiply this individual calculation across how many people need to be upskilled. Again, this isn't a science, but you are looking for an estimate. Now, subtract the anticipated ROI from the time plus cost invested. Basically, would the cost of the upskilling be more or less than how much ROI might be generated? Sometimes the cost might be higher and you need to consider a different learning solution or move on to part B of the equation, which is the cost of doing nothing. This means, if the decision was made not to invest in upskilling, what would it mean to the business balance sheet? Would it prevent certain tasks from being completed? Would it impact customer retention? Could it result in possible fines by regulatory bodies? All of these factors need to be considered. Now, working with talent acquisition, determine how much it would cost to hire the number of people needed with the targeted skill. Would it be expensive? Are there even people available with the skill or is it still quite niche? Does the business have the time to hire for the skill? Finally, compare each of these estimates, and this should give you the answer as to whether it makes sense to develop a skill internally or to hire for it externally. Again, this is not a scientific calculation. Likewise, many of these estimates could be hard to quantify. You might prefer to separate out time from hard costs. What this evaluation does is simply add some context to a complicated decision. And remember, we cannot forget people. Many times, intangibles such as potential and tacit knowledge are impossible to measure. Even though there isn't a number attached to them, they still should be given a massive amount of consideration. All too often, decisions about upskilling are made at the start of annual planning or based on the loudest business partner in the room. We can no longer afford that. Just applying even a modicum of analysis in this process can yield better outcomes for everyone.