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How Much Should You Invest In Your People?

Start Your Business
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4 Min Read

If you’re a business leader, figuring out how much to invest in your people is a big decision. You want to make sure that you put sufficient resources aside to ensure they can do their work to the highest standard. 

Contents
Factors Affecting How Much You Should Invest In Your PeopleHow To Calculate Whether You Should Invest In Your People

People are the lifeblood of modern organizations. If they’re not at their best, your brand will suffer. 

But how much should you invest in your team? That’s a question of balance we address here. 

Factors Affecting How Much You Should Invest In Your People

No enterprise is the same. That’s why each must consider the individual pros and cons of investing in their people. Some factors will influence how much you spend, including:-

  • Your business goals and strategy, including the various skills, competencies, and tactics you need to execute your business plan
  • Your industry and the competitive landscape. More competitive industries tend to require more investment in staff and training
  • Your organization’s culture and values. Some companies believe in training their people to a high standard and strive for excellence
  • Your current and future workforce. You may need to train people for those who will leave in the near future
  • Your budget and resources. How much training and staff development you can afford will depend on your revenues and the amount of money you have in the pot right now. 

How To Calculate Whether You Should Invest In Your People

If the return on staff investment is not a metric that concerns you, then you can skip this section. Some organizations don’t focus on ROI when it comes to development because they don’t need to. 

Most others, though, need to ensure they make a sound business decision. They must ensure the return on investment is positive, or put the business at risk. 

Multiple studies show that investing in your people can have numerous positive outcomes. Besides higher performance and productivity, absenteeism might be lower, customers may feel more satisfied, and the business could become more creative. It could also grow faster if your people are at the top of their game. 

The main way to calculate the ROI of investments is to compare the returns to costs. 

ROI = (Benefits – Costs) / Costs x 100%

The problem, of course, is figuring out what those benefits are. And that can be tricky in some industries. 

The trick is to capture the hidden variables. Let’s say you invest in IOSH courses and productivity goes up 50 percent. By tracking all relevant variables, you can figure out how much of that has to do with the course, and how much it has to do with other aspects of your operations.

Another approach is to observe the industry average returns discovered in rigorous research and compare that to your business’s performance. It won’t tell you the specific ROI in your enterprise, but it will show you roughly what you can expect. 

Another approach is to take the industry average return. Again, other companies may publish this data and you can assume it is also true for your firm.

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Start Your Business May 11, 2023
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