training during a recession

8/6/2019 Training During a Recession

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Cncelled leadership classes,travel restrictions, and brokenlinks on the online universitysite are the training professionals worst

fears during an economic downturn.

The current climate is causing

many training leaders to step back,

if not cut back, and rethink how they

deliver training. Travel reductions

are an obvious first step, followed by

increased online offerings. Panic has

not set in inside training departments,

and most organizations report

pressure to do more with the same

budget without being asked to reduce

expenditures outright.

No workplace analyst believes that

times are as severe as the downturn

earlier this decade. Tom Starr, leader of

learning and employee development

at Booz & Company consultancy, clas-

sifies the current climate as status quo,

with selective cuts to programs. He

recalls darker days in the 1990s when

DuPont placed a two-year moratorium

on training. Nothing in the current

climate resembles such a drastic step.

Maybe struggling business units are

making cuts, but theres no corporate or

enterprisewide moratorium, Starr says.

Even if training budgets are spared

now, decisions about training purchases

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are being delayed until the end of the

year, according to Rommin Adl, a vice

president with BTS, a management

consultancy. Classroom time is be-

ing shortened, and organizations are

exploring ways to do more teaching

online. Adl says one client in chemical

manufacturing is currently working

to pare down the number of vendors

it employs in training from 125 to 25.

Other organizations are attempting to

renegotiate training contracts or put

out projects for bidding.

Watchful eyesThere is greater scrutiny on training

budgets just as there is with spend-

ing in all departments, but learning

officials no longer discuss strategy

with senior executives from a position

of weakness. Smart organizations, in

fields as diverse as the financial sector

and construction, integrate training

into daily performance and maintain it

as a development resource, not simplya shield against attrition.

Whats different now from eight

years ago is that learning organiza-

tions are better prepared to tell their

stories, says Bill Pelster, leader of

Deloittes human capital training and

development practice.

Where many training organiza-

tions are scrambling to demonstrate

value in terms of skills acquired

versus dollars spent, Pelster believes

such calculations are a waste of

time. The need to prove some kind

of metric for trainings value is a red

herringa clear sign that the train-

ing department lacks confidence in

its ability to illustrate how training

aided the organization.

Should the economy worsen, Pel-

ster believes that it usually takes two

years from the time a recession hits for

training budgets to return to previous

levels. Training budgets are a lagging

indicator, he says. They come back in

increments, not in one fell swoop.

If reductions are mandated,

learning officials should consider

cofunded training among multiple

teams to reduce travel and

registration. Heidi Spirgi, president

of Knowledge Infusion, noted that

large organizations have multiple

vendor contracts for training, which

limits their ability to receive volume

discounts. She advises that learning

departments consider consolidationinto a single contract. Any kind

of single-user licensing fee for

applications should be renegotiated.

Sharp cutsVulnerable sectors, notably retail and

the government, are cutting back on

training. Susan Varnadoe, president of

Ninth House, says businesses with nar-

row margins cut training entirely, even

if they already possess an online learn-

ing curriculum. New hires are simplypushed onto the sales floor and told to

follow the lead of a current employee.

Likewise, government agencies and

technology companies are beginning

to conserve resources.

A government agency told me they

are too busy buying gasoline and bul-

lets, Varnadoe says. Its all they can

afford to do.

Varnadoe is confident that govern-

ment agencies will restore their training

budgets to prerecession levels, as will

technology and telecommunications

businesses. Throughout the long-term,

the recession is accelerating a change

in training delivery, whereby organiza-

tions move from site-based training to a

mobile, technology-enabled classroom.

One large healthcare provider that

formerly conducted training at the

hospital level worked with Varnadoe to

develop more online offerings, specifi-

cally in management and leadership

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AuguSt 2008 | T+D | 47

development. An online performance

management suite was developed

consisting of three-minute segments

that are tailored to physicians and

other healthcare workers whose time

away from the hospital floor is limited.

The harsh reality is that training

with a direct financial return will take

precedence over intangible develop-

ment skills. Sebastian Grady, chief

operating officer of Altus Corpora-

tion, says that if organizations were to

rank training based on priority, newproduct knowledge and instruction on

how to sell the product would receive

greater priority over soft skills.

Spending less on training delivery

does not necessarily mean offering a

cheaper, watered-down version. By us-

ing technology wisely, the material can

be captured and distributed to a wider

audience at a reduced cost.

When NetApp scheduled its annual

Fall Classic training seminar for sales

staff, management wanted to cut costswithout sacrificing the quality of what

became a tradition. Typically, 3,000

sales staff members attend the event.

Altus sent a production team to the

site, taped all of the sessions, and pro-

vided the entire seminar online with

search capability to locate particular

seminars based on specific words spo-

ken by each presenter.

Only 1,500 attendees were present

for 2006. All of the material was

condensed from three weeks of

learning to one week. Production costs

totaled $150,000. The company saved

$1 million. Because the material was

available online, attendees could listen

to the presenters without having to

take copious notes.

Grady suggests that chief learning

officers create a balance sheet with an


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itemized list of all content. Then calcu-

late the cost per hour of each course,

and address difficult questions about

whether a particular offering contrib-

utes to revenue.

Narrowing focusFollowing such strict financial calcula-

tions, however, can undermine future

development initiatives. Long-term

priorities for closing the talent and

leadership gap are among the first

casualties in a downturn, according

to Rich Thompson, vice president of

training and development at Adecco.

Especially in the wake of corporate

financial scandals, the next generation

needs to learn how to steer an organi-

zation responsibly without focusing

exclusively on inflating the companys

stock price.

The biggest need in corporate

America is leadership development,

Thompson says. But its not considered

among the hard skills, so it never gets off

the ground. Its always the first to go. The

lack of interest in leadership develop-

ment is costing organizations greatly.

Thompson suggests that training

officers prepare a list of priorities

during budget season, outlining the

must have programsones that can

be delayed for a yearand potential

cuts to incremental programs. New

initiatives should be avoided.

Training departments dont have to

show value; they have to help the busi-

ness improve, he says. They should

be proactive and be able to validate,

not justify their existence.

At a time when travel, guest instruc-

tors, and class registration fees are

under scrutiny, analysts believe that

technical means influenced by the

investment community and that are

used to prove training dollars are well

spent, will fall on deaf ears.

Training analysts have long debated

the merits of return-on-investment

and other measures to demonstrate a

financial yield for training new leaderscommunicating with colleagues, or

teaching managers to delegate. Any

improvements in intangible skills

are unlikely to be reflected on the

balance sheet.

A lot of people have tried to answer

that question, says Gordon Johnson,

vice president of marketing for Exper-

tus. There is no good answer. You just

cant do it. You measure what you can.

Experts agree that in the current

environment, curriculum-basedinstruction dependent on enrollment

is an obvious candidate for cuts.

Any kind of off-the-shelf, general

development courses, such as

finance for nonfinancial managers,

conflict resolution, or novice software

application tools, are also potential

candidates for cuts.

If internal programs are already

small, shrinking the class size offers

another approach. One company in the

oil sector is preparing for the retirement

of a generation of managers. The inter-

nal leadership development program is

essential, but with tighter budgets, the

company chose to develop a smaller

group of individuals, according to

Marc Sokol, vice president of Person-

nel Decisions International. He believes

organizations could be more selective

about who receives training instead of

debating whether to slash programs.

Dont spread training dollars thin

just to say that you touched every-

body, Sokol says.

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Training administration is an-

other expense under the microscope.

Johnson recalls working with a hard-

ware manufacturer that counted 500

people in the training department,

some working part-time for just one

hour per week. The company decided

to contract with a vendor, using 20

people working full-time.

For larger organizations,

outsourcing seems a logical step, but

it introduces a host of unanswered

questions, specifically about who

owns training. Starr recalls pitching

a financial services client a contract

whereby the client would reduce its

annual training budget of $120 million

by 25 percent. The company balked,

believing that outsourcing the divisionwould be disruptive.

A lot of companies are nervous

about ceding too much authority to a

supplier, Starr says.

Against the grainWhile several organizations made the

transition to outsourcing, one company

that relies heavily on development is

taking the opposite tack. Five years

ago, Suffolk Construction brought all

of its training in-house. A new facilityin Florida, set to open this fall, includes

a 2,500square-foot training center.

Among a staff of 1,000, Suffolk employs

eight full-time trainers, two of whom

are responsible for curriculum plan-

ning. All of the 80 training courses are

reviewed annually.

To meet the needs of the millennial

generation, Suffolk offers an eight-

month rotation in each business unit,

including project management, field

operations, and estimator to teach

new hires the entire business. Fred

Day, director of training at Suffolk, says

the job rotation program is a major

enticement for graduates. The training

regimen has helped build the compa-

nys reputation. The only pressure we

faced was to cut travel, Day says.

Organizations committed to ongo-

ing development with an integrated

training regimen no longer debate

whether training yields any kind of

tangible return. For others, discus-

sion is heating up, whereby training

is linked to an overall talent manage-

ment strategy. Absent any training and

development, proponents argue that

turnover is bound to rise.

The biggest effect training has is to

reduce turnover, Thompson says. If

55 percent of your employees are not

engaged, and 15 percent are actively

disengaged, theyre destroying your

brand. Theyre telling customers and

colleagues how bad the company is.

Instead of forecasting their own

demise, training officials face the same

prospects as their colleagues. David

Smith, managing director of talent and

organization performance at Accenture,

compares the current climate with the

annual expectations in manufacturing

where greater productivity is expected

without increased investment in

resources. He noted no significant cutsin training budgets as of yet.

Yes, some pressure has hit learning

departments, Smith says. They are

being asked to do more with less, but

thats business. Training departments

asked to be treated like a business unit,

and thats what chief financial officers

are doing.

Sea changeWith the expectation that more train-

ing is delivered through online or

social networking tools, Smith believes

training officials need to undergo

training themselves to become more

familiar with the new delivery systems.

Piecemeal cuts to training do not

need to be painful. Starr believes

that cuts to the corporate training

catalog or e-learning can be made

without harm to the environment.

However, wholesale cuts carry a much

greater risk.

If all of a sudden you reduce sales

training or management training or

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AuguSt 2008 | T+D | 49

cancel classes, that sends an alarm

through the organization, he says.

After a year, you go from being a

company that offers training to one

that doesnt.

Steep cuts may change the entire

dynamic in the workplace. Individuals

identified as candidates for promotion

or who possess special skills may latch

on to another opportunity. Staff ex-

penses, specific jobs, and development

programs are the easiest to cut and the

most difficult to rebuild.

Companies that cut human capital

aggressively in the early 2000s caught

the last wave to shore when other com-

panies were thriving, Thompson says.

If organizations take a flexible ap-

proach to provide training using othermediums, they can meet the needs of

the new workforce. The younger gen-

eration is omnivorous regarding how

they learn. Organizations employ staff

with years of experience and the desire

to teach. Online resources can capture

such expertise so the individual need

not present training anew, though few

organizations are following this path.

One analyst believes that the transi-

tion from instruction based on class-

rooms and materials to one relyingentirely on expertise has yet to occur

in a meaningful way. For years there

has been talk about blended learning

where people work in teams with in-

house trainers, and no one has done

it, says Kerry Patterson, cofounder of

VitalSmarts, a corporate training con-

sultancy. They dont think it will work.

Organizations have a long history of

sending people to training. Classrooms

and a big university are one of the first

things they build into a company. They

hate the idea of not using them. Its the

devil that they know. T+D

Michael Laffis senior associate editor of

T+D; [email protected].

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training during a recession

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