University Health System in San Antonio symbolizes how training organizations are struggling to do more with less. The hospital system, with a workforce of 5,000, last year slashed its training budget by 5 percent to just under $1 million. Not surprisingly, new budget requests are receiving far greater scrutiny than they did during boom times.
“We use zero-based budgeting, so we have to justify any new requests for spending. We can’t have everything, so we have to be more creative” about delivering training, says Jacqueline Burandt, the hospital’s administrative director for staff development.
Burandt’s organization has plenty of company. According to a soon-to-be-released report from the American Society for Training and Development, organizations spent an estimated $125.9 billion on employee learning and development in 2009, a one-year drop of 6.1 percent.
Organizations pared their learning staffs and overhead while increasing their reliance on technology-based learning, according to ASTD’s 2010 State of the Industry Report. The Alexandria, Virginia-based trade group culled the responses of 304 companies and large public-sector organizations, including University Health System.
Although overall spending declined 6.1 percent, ASTD says the average learning expenditure per employee actually rose slightly to $1,083 compared with $1,068 the previous year. The increase underscores the fact that corporate learning departments served fewer employees on average in 2009, as companies downsized amid the recession.
In general, companies hunkered down and waited for the economic storm to pass, says Pat Galagan, ASTD’s executive editor. “No training function was let off the hook. Companies took steps to become more efficient in how they delivered learning.”
That budget-conscious approach was reflected in smaller course catalogs and more selective training targeted at high-value business needs.
Still, as a percentage of corporate profits, direct learning expenditures increased to nearly 11 percent, up from 8.8 percent in 2008, according to ASTD.
“It’s becoming more apparent—and the recession showed this—that companies believe learning is a competitive advantage” that will help them weather the harsh economic climate, Galagan says.
Of the cumulative $125.9 billion worth of expenditures, ASTD says nearly two-thirds ($78.6 billion) was spent on internal learning functions. The remaining $47.3 billion was allotted for external services and products, such as vendors and consultants.
Outsourcing—which includes spending on consultants and outside providers of workshops and training sessions—is on the rise. It accounted for roughly 27 percent of total learning spending in 2009. That’s up from 22 percent the previous year and marks the first spike in outsourcing expenditures since 2004, according to ASTD.
Also, for the first time in four years, the ratio of employees to learning staff decreased, further evidence that training departments served a shrinking number of workers. In 2009, each learning staff professional was responsible for an average of 240 employees, down from 253 in 2008.
Some companies managed to increase employee learning despite rocky business conditions. Deloitte Inc., a professional services firm based in New York City, delivered 2.7 million hours cumulatively to U.S. employees, nearly a 10 percent year-over-year increase from the 2.4 million hours it averaged prior to the recession.
“We didn’t back away from investments in learning just because the economy was down. Our clients still demand world-class professionals. You can’t deliver world-class service if you cut training,” says Deloitte’s Bill Pelster, a managing principal for talent development.
Deloitte, which like University Health System participated in ASTD’s report, stepped up learning hours even as it sought to reduce delivery costs. It did so by shifting more of its training to virtual environments and cutting back on pricey “live” learning events requiring travel and overnight accommodations.
Historically, such events accounted for about 80 percent of Deloitte’s pre-recession training for U.S. professionals. The costs involved in those programs, such as renting conference centers, paying for employees’ travel and lodging, and content development, prompted the consulting firm to rethink its approach, Pelster says.
In 2009, only 40 percent of Deloitte’s training was delivered at conferences and other expensive “live” events. At the same time, Deloitte doubled the share of learning delivered virtually to 40 percent from 20 percent. The remaining 20 percent is training done at local Deloitte offices.
“We were fortunate that we had a structure in place that allowed us to pivot very quickly to an alternative delivery mechanism when the economy demanded we do so,” Pelster says.
In fact, the percentage of learning hours delivered through technology jumped to 36.5 percent at U.S. firms in 2009–the highest level since ASTD began tracking it 14 years ago. It marked a return to normalcy of sorts: technology-based learning had increased steadily for five years before tapering off to 31.4 percent in 2008.
E-learning continued to garner support, accounting for fully three-quarters of all technology-based methods in 2009. At University Health, mandatory compliance training now is delivered solely through e-learning modules, Burandt says.
Emphasis on learning content showed little variation from prior years’ research, Galagan says. Industry-and profession-specific training accounted for more than 17 percent of all formal learning hours, a figure that has been holding steady. This refers to training that helps professionals pursue continuing education, earn certifications or stay abreast of changes within their industries.
Organizations slowly are beginning to allocate more money for “speed to readiness,” Galagan says. New-employee orientation training accounted for nearly 7 percent of learning content, up from 5.4 percent in 2008. Meanwhile, programs to develop executive talent accounted for 4.4 percent of all learning content in 2009, up from 3.7 percent in 2008.
“Companies are working very hard to get people to be more productive in a shorter amount of time,” Galagan says.
The economic hardships that have curtailed training budgets may have a silver lining. Organizations are paying more attention to getting the best return on their training investments, Galagan says. Having realized efficiency gains, they aren’t likely to revert to outsize course catalogs or bloated training budgets.
“It’s the counterpoint to the old assumption that training is the first thing to cut when times get tough,” Galagan says. “Companies learned a lot about how to better spend their money. When things improve, companies now will be much better informed about how to invest their learning dollars.”
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