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Downturn Prompts a Change in Learning Initiatives

October 27, 2009
Related Topics: Behavioral Training, Basic Skills Training, Training Technology

Faced with shrinking budgets and deep cuts of their training staffs, companies in 2009 continue to scrutinize employee training offerings more carefully, reducing open enrollment and devoting scarce resources to high-impact learning initiatives. Despite the short-term pain, those steps should help companies by strengthening their competitive positions once the economy brightens.

Those are among key findings of a 2009 study by Bersin & Associates, an Oakland, California-based research firm that specializes in enterprise learning and talent management. The research for the Corporate Learning Factbook 2010 was conducted this year in conjunction with Workforce Management. It culled online responses from U.S.-based organizations with 100 or more employees, including for the first time agencies of state, local and federal governments. More than 1,400 organizations participated in the survey.

The study also found that following a decline in spending on leadership programs in 2008, companies once again are allocating resources to nurture their managers, supervisors and executives—a sign that the economy may be turning a corner, albeit slowly.

“A lot of good can come out of this recession if companies become more efficient by focusing on high-value learning programs. That’s the silver lining in the clouds,” says Karen O’Leonard, a principal analyst with Bersin & Associates and author of the report.

More on this study
Attend a special webcast on November 10, 2009, to hear Bersin & Associates analyst Karen O’Leonard discuss corporate training budgets, spending, delivery, staffing and trends.

Nevertheless, there’s no getting around the fact that 2009 was a brutal year for training. For the second straight year, companies sliced their spending on learning and development by 11 percent—to $714 per learner. Large companies, which are those with 10,000 or more employees, scaled back the most, by 12 percent. But smaller companies did not escape the budget knife. Small firms, which employ 100 to 999 employees, cut training budgets by 10 percent. Midsize firms, employing 1,000 to 9,999 workers, cut by 11 percent.

Large companies tend to have large training and development functions, and they typically expand their training offerings rapidly during economic boom times. And although they are often slower to curtail training expenditures during a recession, they are assessing—and cutting—now.

“Larger companies have a lot more fat to cut. As they started to tighten their belts, a lot of large companies we talked with have begun using scorecards for their training programs. What they found is that a lot of training was not valuable,” O’Leonard says.

Large companies also are centralizing more of their training using a shared services model. The structure can be especially effective for companies that span multiple lines of business and need to deliver learning to different business units.

“Centralization is another trend we’re seeing with large businesses, to bring resources together to save money but also make sure the most valuable programs are being delivered,” O’Leonard says.

Training priorities change

Gone are massive course libraries and unfettered open enrollment. They are being replaced with a more prescriptive approach that seeks to match high-potential employees with development initiatives that tackle strategic business issues. O’Leonard says companies are more selective about which employees will participate in development programs. Employees on average received 13 hours of formal training in 2009, down from 17.2 in 2008 and nearly half the 25 hours offered to employees two years ago.

Learning organizations also shed jobs in 2009. Median learning staff fell from seven per 1,000 employees in 2008 to 6.2 staff per 1,000 employees in 2009, according to Bersin’s research. Small companies reduced the size of their training staffs by 4 percent, midsize firms cut 5 percent and large companies cut 8 percent of their learning professionals.

The steady erosion of training budgets naturally is affecting spending on training-related products and services, which totaled $48.2 billion in 2009—a slide of 14 percent from last year’s $56.2 billion and the lowest ever recorded in Bersin’s annual report. Payroll for training staff, which accounted for $27.5 billion of all training spending this year, plummeted 18 percent. Nearly $14 billion was spent on training products, consultants and other services, but that represents a one-year drop of 10 percent.

On an optimistic note, it appears companies have begun preparing for life after recession. Leadership development consumed 24 percent of training dollars in 2009, an increase from 17 percent of training dollars in 2008. That indicates companies are beginning to look ahead and getting beyond the “crisis management” stage, O’Leonard says. Bersin estimates that approximately $10 billion is spent on leadership development annually.

Another good sign was the use of online training. Roughly one-third of formal learning was delivered online, up from 24 percent in 2008. Twenty percent of learning occurred via online self-study, up from 16 percent in 2008.

Meanwhile, companies slowly are adapting newer technologies for skills development. In 2009, 13 percent of formal training was delivered through “virtual” classrooms, including technology that enables instructors to present coursework using live remote broadcasts or video. By contrast, 8 percent of formal learning was delivered using virtual classrooms in 2008. The virtual tools can help companies better manage travel and associated costs.

Despite the uptick in online delivery, nearly 60 percent of employee learning took place in traditional instructor-led physical classrooms in 2009. That is down from 67 percent in 2008 but nonetheless remains the dominant training method, O’Leonard says.

Several learning technology trends also bear continued watching. O’Leonard says more and more companies are turning to collaborative online tools, particularly for project work and knowledge sharing across dispersed workforces.

The collaborative technologies enable subject-matter experts and other knowledgeable workers to produce learning material that can be easily shared and disseminated at relatively low cost.

“Collaborative tools that facilitate learning have really taken off. It’s the hottest thing in learning and development,” O’Leonard says.

Wikis and blogs are gaining traction as learning tools, with each being used by 14 percent of the surveyed organizations. Similarly, nearly one-quarter of companies report using “communities of practice” to promote collaborative learning and knowledge sharing.

Many turned to outside vendors to supply their needs as they dispensed with in-house training staff. Nearly two-thirds of organizations used outside professionals for instruction, and 51 percent did so for course development.

Still, with economic conditions bleak for the near term, companies were selective about how they spent their available training dollars. Among small businesses, use of learning management systems fell to its lowest level since 2007 as revenue-constrained companies canceled service contracts. Conversely, nearly four in 10 large companies outsourced learning-support functions to compensate for staff cuts, representing a substantial increase from the 23 percent that outsourced those functions in 2008.

Workforce Management Online, October 2009 -- Register Now!

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