I always preach: procurement training is an investment, not an expense.
Expenses represent payments for goods and services where the organization does not realize a profit improvement as a result. Investments represent payments for goods and services that result in a financial benefit to the organization through increased sales and/or decreased costs.
Procurement training is one of those rare investments that will pay for itself many, many times over.
However, there is a common question among procurement leaders: “How do you measure the impact of training?”
They spent the money. How do they know what they are getting back?
There are three common measurement methods.
- Before & After: As a leader, you should be tracking metrics for each employee as well as the overall procurement department. Compare each trained employees metrics in the period (e.g., year) before training was attended and the period after training was attended. You should see an improvement and can determine how much of that improvement was due to training. Ideally, your metrics can be translated into monetary terms. For example, let’s say that an employee saved $250,000 in the year prior to training and $600,000 in the year after training. Demand and prices were stable and neither responsibilities nor management changed. Then, you can attribute a performance improvement valued at $350,000 to training.
- Cost Savings Reporting Integration: Each procurement team member should record his/her cost savings into a shared database (or at least a spreadsheet). Of course, there will be a field for cost savings. There can also be a field for “Cost Savings Attributable To Training.” In this field, the procurement team member can enter the amount of the cost savings that would not have been achieved were it not for something learned in training. For example, perhaps they used a new procurement negotiation technique that resulted in the supplier reducing its price. Then, the procurement leader can see, on an instance by instance basis, how training has impacted performance.
- Performance Appraisal Integration: It is common for the performance appraisal process to begin with a self-assessment. In this self-assessment, the procurement team member can be asked to identify what training s/he had attended during the year and how it has improved his/her performance, preferably in measurable terms, ideally in monetary terms. The manager can also be required to comment on the impact training has made on the employee’s performance.
So, you can see, the impact of procurement training doesn’t have to be a mystery.
Unfortunately, unlike a financial securities investment, you don’t get automated quarterly statements showing how much money your training investment gained or lost. It takes a little effort but, when you think about it, the effort described above is very little indeed. When you think about procurement training producing returns tens or hundreds of times that of your investment, the time spent documenting it is well worth it.
If you’re interested in learning more about the concept of return on investment in procurement training, download the free whitepaper “Procurement Skills & Profit: The Correlation.”
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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