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Opening the Books on Training and Development

Training budgets are rising, but HR and chief learning officers still worry that if their companies hit hard times, their training budgets will be the first to get cut. Annual learning reports can demonstrate to top managers why training is important.

August 20, 2007
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Related Topics: Career Development, Basic Skills Training, Employee Career Development
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In what should be cause for celebration in training and development departments, corporate training budgets are on the rise. On average, large organizations, or those with more than 10,000 employees, spent 5 percent more on training and development during the past year compared with the previous year, according to Bersin & Associates, a corporate learning research company based in Oakland, California.

    Despite this trend, training professionals are dogged by what’s happened in the past: If their companies hit hard times, training budgets typically are the first to get cut.

    It’s a worry for heads of HR and chief learning officers, says Markus Simon, director of the virtual campus at Credit Suisse’s headquarters in Zurich, Switzerland. Just when learning could be most important—to develop new products or be used as a tool to retain employees, the budget gets yanked. "It’s like shooting yourself in the foot," he says.

    To make sure top executives understand the importance of an ongoing investment in learning and development, a number of companies, such as banking giant Credit Suisse and Birmingham, Alabama-based Regions Financial, devote several weeks each year to compiling annual learning reports.

    Similar to a corporation’s annual report, these reports are designed to show a company’s top executives and division managers where their training dollars are going, officials say.

    "Too often, executives just see the bottom line," says Mike Pollard, director of organizational development at Regions Financial. "The annual learning report is another way of showing what’s behind those costs."

    Regions spends 2 percent of payroll on training, compared with the financial services industry average of 2.23 percent. But last year, the company delivered 38 hours of training per employee, compared with 26 hours per employee for the industry—a fact highlighted in the company’s annual learning report.

    "We are more efficient than our peers," Pollard says.

    While there’s a marketing aspect to these reports, they are becoming more important, particularly as recruiting new talent becomes increasingly difficult, Simon says.

    "These reports help us understand where we are investing our training dollars and if more needs to be done in certain areas," he says.

    Regions started putting together its reports in 2003 after the company had gone through a series of acquisitions and was left with a number of different training policies and procedures, Pollard says.

    The annual reports help assure that companies’ learning plans are in line with corporate strategy, Pollard says. They also help persuade managers to buy into the importance of these courses.

    "We can do the best job as trainers and maybe impact 25 percent of training, but whether employees apply the training they learn largely depends on the managers," Pollard says. "If managers don’t understand the importance of the training, then they won’t reinforce the importance of it and employees will just go back to their old ways of doing things."

    Regions’ consumer banking division focuses on training its sales associates on how to quickly profile new customers and prospects.

    "This is a learned set of skills," Pollard says. "It’s essential that after the associates learn these skills, their managers can show how to apply them in a real setting."

    Credit Suisse began publishing its annual report in 2004 after launching its business school, a centralized unit that comes out with all of the coursework for Credit Suisse globally.

    The report, which is published in January, consists of two parts: a written description of all the various programs the company launched in that year, and a data section, which analyzes such key statistics as the number of employees in each division who participated in training and the number of trained employees broken down by region and business line.

    "The heads of the business can see how many of their staff in a certain region went through training or how many took a specific course," Simon says.

    The company’s 2006 report ran 14 pages.

    The best annual learning reports use business language and metrics, not training jargon, says Jeanne Meister, a consultant based in New York.

    For example, Regions’ report is data-heavy, breaking out various internal metrics and comparing them with a number of industry benchmarks.

    Deciding which metrics and benchmarks to use is an annual challenge, Pollard says.

    "For the first report we did, we spent a lot of time understanding the various benchmarks out there and which ones we should apply," he says.

    Collecting data and figuring out which metrics to use took several months, Pollard says. Regions ended up pulling benchmark data from a number of sources, including theAmerican Society for Training & Development and the American Bankers Association.

    "Companies need to be prepared for a significant amount of upfront planning if you don’t have the data readily available," Pollard says.

    Regions’ 2006 annual report, which runs 53 pages, describes the various training initiatives throughout the company and offers business managers an array of charts and tables that track program costs and participation.

    For example, the report tracks expenditures per employee for each program and then assesses that spending as a percentage of profit or payroll.

    The report also compares this data with industry benchmarks. Regions’ learning costs per hour were $24.75 last year, compared with an average of $50 for the financial services industry.

    On top of helping managers understand how their training dollars are spent, the reports also help Pollard and his team analyze whether they are spending time and money on a training program that doesn’t necessarily fit into the company’s strategy.

    When Regions issued its initial learning report, managers saw the company was spending a lot of time and money on communications courses.

    "When you jump on the e-learning bandwagon early on, you often can load up on a lot of course offerings just to have something to offer," Pollard says. "That’s not to say that communications courses aren’t valuable, but we had a lot of just general communications courses.

    Specifically, the company had 1,000 communications courses. Today, it has around 180.

    "And every course in there is related to a specific curriculum," Pollard says.

    The learning and development staffs at both Regions and Credit Suisse meet with business division heads after the annual learning reports come out to discuss the data.

    Those discussions often are one of the most valuable results of creating the reports, Pollard says.

    "This provides us with another opportunity to work with management," he says.

    And since the reports explain to managers what exactly their employees are learning, Pollard finds that he and his team are viewed in a different light. "Instead of just viewing us as an expense, they see us as a business partner," he says.

    Even though more CEOs and top executives are getting involved with the creation of annual learning reports at the companies that are doing them, these reports are still rare, even among large organizations, Bersin says.

    If a company doesn’t have an annual learning report, it often means it doesn’t have a learning plan for the organization either. That’s particularly scary, he says, given that most companies are continuing to increase their training budgets.

    "Annual reports are evidence that companies have business plans around their learning initiatives," he says. "But when you consider that anywhere from 1 to 3 percent of payroll is spent on training and that 60 to 70 percent don’t have plans, that’s not a good sign."

    It’s up to HR and chief learning officers to prove their value by running these reports, Meister says. "CEOs don’t know enough now to request them, so it’s up to HR and learning officers to be proactive," she says.

    If for no other reason, HR executives at companies with large training budgets should run these reports as a means of ensuring job security in bad economic times, Meister says. "If you are sitting on a large budget, these reports can provide job protection," she says.

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