The State of Training and Development: More Spending, More Scrutiny

    Jack Kramer, vice president of global alliances for SumTotal Systems of Mountain View, California, says that every training effort--from the most sophisticated leadership course to the most basic regulatory compliance training module--is being rigorously vetted for more than just content.

    "They want to know, ‘What is the financial impact?’ " Kramer says. " ‘Have you cut costs? Have you solved compliance issues? Have you assimilated learning into company operations?’ "

    Yet despite the focus on efficiency and cost control, overall spending on training and development continues to rise, a reflection of the fact that companies are ratcheting up the amount of training they require of their workers in the ceaseless drive for a competitive edge. Companies clearly subscribe to the belief that smarter, better-trained workers increase chances for success.

    "We are seeing spending continue to rise," says Pat Galagan, vice president of content for the American Society for Training & Development. "The thing we are noticing is that companies are working to get more efficiency, more effectiveness and better alignment out of training. It means they are doing an enterprise accounting of learning expenditures."

    ASTD’s tracking of expenditures shows that the push toward more spending on training and development has been consistent throughout this decade. According to ASTD’s latest "State of the Industry Report," issued in December, annual spending on training and development by companies and other organizations rose to $955 per employee in 2004 and was projected to reach $1,000 in 2005. In 2000, the total stood at $649. The average number of annual learning hours per employee, which was 24 in 2000, reached 32 in 2004 and was projected to hit 34 in 2005. Training and development budgets now gobble up anywhere from 2.25 percent to 3 percent of payrolls.

    Where is that money being spent? Despite the rise of outside vendors who promise to deliver training modules more cheaply, the bulk of training is still done in-house.

    "Organizations tend to outsource things that can be standardized and keep inside things that are special, unique or have a competitive advantage," ASTD’s Galagan says. "Definitely most training is still internal."

    Still, the amount of training that can be outsourced has yet to peak, thanks in part to the ever-changing and rising need to meet mandates for training in subjects like worker safety or financial reporting. Vendors predict that their businesses will enjoy years of continued growth.

    According to the ASTD report, in-house training and development is still by far the place where the most dollars are spent. But it commands a shrinking share. In-house spending declined from 66.8 percent of total spending in 2000 to a projected 57.4 percent for 2005. At the same time, outsourcing rose from 22.2 percent of total spending in 2000 to a projected 29.1 percent in 2005. (Tuition reimbursement, the other major use of training and development money, rose modestly, from 11 percent in 2000 to 13.5 percent in 2005.)

What's the return?
    One constant in the equation is the demand from corporate executives for proof that their training dollars produce results. They want evidence that workers are not just being trained and managers developed, but that what they learn produces value for the corporation or organization. In short, that the training advances an overall strategy, enhances shareholder value or produces a better product.

    "The rhetoric is red hot," says Roger Kaufman, author and professor emeritus of educational psychology and learning systems at Florida State University. "I think people are talking more about performance and results and consequences." But, he adds, "they are not necessarily doing more about it."

    Still, it is clear that training and development as a corporate function is undergoing careful and thoughtful examination. Corporations, particularly large ones, are struggling to justify spending increases on training and development at a time when outsourcing and e-learning are supposed to be cutting costs.

    Will Hipwell, vice president of marketing for GeoLearning Inc., a learning solutions company based in Des Moines, Iowa, says the demand for demonstrable returns is often tough to meet. "Gone are the days when we said, ‘We reduced cost, therefore we have a return on investment.’ Who’s to say if you put that money somewhere else, you wouldn’t get a better return?"

    The hunt for a more strategic view of training and development has led many companies to hire chief learning officers. A novelty just a decade ago, the chief learning officer is now a standard feature at many large corporations. The University of Pennsylvania is planning to launch a new doctorate for the specialty.

    Doug Lynch, vice dean of the Graduate School of Education at the University of Pennsylvania, who is spearheading the drive for the new doctoral program, co-authored a study of chief learning officers. He says the increasingly rigorous demands put on training and development are a reflection of the complex, rapidly changing and global nature of today’s corporate world.

    "If you think about the way the world used to be when Henry Ford was king, it was, you glue A to B. Once I teach you how to glue A to B, I am done," Lynch says. "Now it is all about the ability of people to be flexible and adaptable, to solve problems. The people who are responsible for recruiting and developing matter more."

    The increasing emphasis on training is clearly evident at Wal-Mart, where a complete overhaul of its massive training and development operation is under way. Even the tightfisted retail giant has found that its training and development operation needed a sharper focus on results and the bottom line.

    "We are building learning solutions so we can measure knowledge gain, service improvement, customer satisfaction," says John E. DiBenedetto, Wal-Mart’s vice president of learning and development. "We want to prove to naysayers that learning isn’t soft, that it should be perceived as an investment versus an expense."

Foreign translation
    Wal-Mart’s reforms are aimed at its domestic operations. Ultimately, though, it will also have to address how it trains workers in its global operations. As Wal-Mart and other American multinationals spread operations around the globe, they often find that even highly effective and efficient domestic training programs need help when delivered overseas.

    A company with operations in Bangor and Beijing probably needs assistance in China when it comes to translating its training programs into Chinese and making sure local customs and regulations are followed. Some experts figure that globalization means more work for outside vendors with broad international expertise.

    "When you are spread across eight or nine major countries in Asia or Europe, there will be language issues, culture issues," says Andrew Kris, the Belgium-based chairman of the Shared Business Process Outsourcing Association and executive director of the Human Resources Outsourcing Association of Europe. "Chances are you will go to a local vendor, or someone who has local facilities, and will train workers in the local language."

    Understanding cultural differences is a subject American companies already understand in their domestic operations. But those considerations become magnified in the international sphere. "The way you behave in Korea, compared to China, to Japan, is substantially different," Kris says. "Understanding that is critical to a large corporation."

    Globalization affects not just training overseas, but domestic programs as well. When a company shifts some work to another country, it usually cuts jobs at home, and those that remain may have to change. Training serves a vital role in dealing with the transition.

    And it’s not just globalization that is changing the workplace. Technology, market forces, an aging workforce and a host of other influences affect the way organizations work. The result is continuously updated training and development programs.

    "You have to be looking at not just training for jobs that exist, but to make sure the jobs are ones that you will be doing in the future," Florida State’s Kaufman says. "The nature of work is changing. Why keep training for jobs that won’t be there tomorrow?"

Workforce Management, May 22, 2006, pp. 25-26 -- Subscribe Now!