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Steady Under PreSSUre

dUring a reCeSSion
By Michael Laff


recession fears shake training budgets and rouse new ways to cope.


ancelled leadership classes, travel restrictions, and broken links on the online university site are the training professional’s 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, classifies 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 there’s no corporate or enterprisewide moratorium,” Starr says. Even if training budgets are spared now, decisions about training purchases

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Spending less on training delivery does not necessarily mean offering a cheaper. even if they already possess an online learning curriculum. The need to prove some kind of metric for training’s value is a “red herring”—a clear sign that the training department lacks confidence in its ability to illustrate how training aided the organization. learning officials should consider cofunded training among multiple teams to reduce travel and registration. not simply a shield against attrition. One large healthcare provider that formerly conducted training at the hospital level worked with Varnadoe to develop more online offerings.” Varnadoe is confident that government agencies will restore their training budgets to prerecession levels. according to Rommin Adl. specifically in management and leadership development. “What’s different now from eight years ago is that learning organizations are better prepared to tell their stories. Grady suggests that chief learning officers create a balance sheet with an Listen to this feature at www. a management consultancy. attendees could listen to the presenters without having to take copious notes. president of Knowledge Infusion.” Varnadoe says. says that if organizations were to rank training based on priority. Throughout the long-term. says businesses with narrow margins cut training entirely.000 sales staff members attend the event.” he says.500 attendees were present for 2006. leader of Deloitte’s human capital training and development practice. Pelster believes such calculations are a waste of time. in fields as diverse as the financial sector and construction. noted that large organizations have multiple vendor contracts for training. the recession is accelerating a change in training delivery. Production costs totaled $150. By using technology wisely. Altus sent a production team to the site. Sharp cuts Vulnerable sectors.are being delayed until the end of the year. Other organizations are attempting to renegotiate training contracts or put out projects for bidding.000. 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. taped all of the sessions. Watchful eyes There is greater scrutiny on training budgets just as there is with spending in all departments. Sebastian Grady. New hires are simply pushed onto the sales floor and told to follow the lead of a current employee. Likewise. Should the economy worsen. Susan Varnadoe. “Training budgets are a lagging 3. Typically. Any kind of single-user licensing fee for applications should be renegotiated. new product knowledge and instruction on how to sell the product would receive greater priority over soft skills. 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. not in one fell swoop. integrate training into daily performance and maintain it as a development resource. Because the material was available online. Smart organizations. “It’s all they can afford to do.htm AuguSt 2008 | T+D | 47 . Where many training organizations are scrambling to demonstrate value in terms of skills acquired versus dollars spent.” If reductions are mandated. The company saved $1 million. and organizations are exploring ways to do more teaching online. She advises that learning departments consider consolidation into a single contract. notably retail and the government. president of Ninth House. whereby organizations move from site-based training to a mobile.” says Bill Pelster. management wanted to cut costs without sacrificing the quality of what became a tradition. “They come back in increments. Pelster believes that it usually takes two years from the time a recession hits for training budgets to return to previous levels. technology-enabled classroom. are cutting back on training. The harsh reality is that training with a direct financial return will take precedence over intangible development skills. the material can be captured and distributed to a wider audience at a reduced cost. Only 1. and provided the entire seminar online with search capability to locate particular seminars based on specific words spoken by each presenter. a vice president with BTS. but learning officials no longer discuss strategy with senior executives from a position of weakness. All of the material was condensed from three weeks of learning to one week. as will technology and telecommunications businesses. chief operating officer of Altus Corporation. “A government agency told me they are too busy buying gasoline and bullets.astd. Classroom time is being shortened. which limits their ability to receive volume discounts. Heidi Spirgi. government agencies and technology companies are beginning to conserve resources. When NetApp scheduled its annual “Fall Classic” training seminar for sales staff. watered-down version.

conflict resolution. or teaching managers to delegate. “Don’t spread training dollars thin just to say that you touched everybody.” says Gordon Johnson. Training analysts have long debated the merits of return-on-investment and other measures to demonstrate a financial yield for training new leaders. The internal leadership development program is essential. are also potential candidates for cuts. the company chose to develop a smaller group of individuals. but with tighter budgets. The lack of interest in leadership development is costing organizations greatly. vice president of marketing for Expertus. outlining the “must have” programs—ones that can Steep cuts may change the entire dynamic in the workplace. be delayed for a year—and potential cuts to incremental programs. You measure what you can. One company in the oil sector is preparing for the retirement of a generation of managers. Narrowing focus Following such strict financial calculations. “The biggest need in corporate America is leadership development. Long-term priorities for closing the talent and leadership gap are among the first casualties in a downturn. they have to help the business improve.” he says. It’s always the first to go.” Sokol says. analysts believe that technical means influenced by the investment community and that are used to prove training dollars are well spent. according to Rich Thompson. individuals identified as candidates for promotion or who possess special skills may latch on to another opportunity. not justify their existence. Especially in the wake of corporate financial scandals. Any improvements in intangible skills are unlikely to be reflected on the balance sheet. He believes organizations could be more selective about who receives training instead of debating whether to slash programs. communicating with colleagues. or novice software application tools. You just can’t do it. vice president of training and development at Adecco. however. vice president of Personnel Decisions International.” At a time when travel. curriculum-based instruction dependent on enrollment is an obvious candidate for cuts. “But it’s not considered among the hard skills. “There is no good answer. and address difficult questions about whether a particular offering contributes to revenue. can undermine future development initiatives.itemized list of all content. guest instructors. New initiatives should be avoided. “A lot of people have tried to answer that question. will fall on deaf ears. the next generation needs to learn how to steer an organization responsibly without focusing exclusively on inflating the company’s stock price. Any kind of off-the-shelf. “Training departments don’t have to show value. such as finance for nonfinancial managers.” Thompson says.” Thompson suggests that training officers prepare a list of priorities during budget 48 | T+D | AuguSt 2008 .” Experts agree that in the current environment. general development courses. according to Marc Sokol. shrinking the class size offers another approach. Then calculate the cost per hour of each course. and class registration fees are under scrutiny. “They should be proactive and be able to validate. If internal programs are already small. so it never gets off the ground. Photo by iStockphoto.

proponents argue that turnover is bound to rise. and 15 percent are actively disengaged. two of whom are responsible for curriculum planning. If you would like to respond to this article. What Do You think? T+D welcomes your comments. some working part-time for just one hour per week. “The only pressure we faced was to cut travel. whereby training Sea change With the expectation that more training is delivered through online or social networking tools. includes a 2. David Smith. “A lot of companies are nervous about ceding too much authority to a supplier. AuguSt 2008 | T+D | 49 . Organizations have a long history of sending people to training. managing director of talent and organization performance at Accenture. For larger organizations. and no one has done it. “For years there has been talk about blended learning where people work in teams with inhouse trainers. The company balked. Responses sent to the mailbox are considered available for publication and may be edited for length and clarity. Johnson recalls working with a hardware manufacturer that counted 500 people in the training department.” Smith says. However. Five years ago. including project management. Starr believes that cuts to the corporate training catalog or e-learning can be made without harm to the environment.” he says. mlaff@astd. they can meet the needs of the new workforce. or any article that appears in T+D. Online resources can capture such expertise so the individual need not present training anew.” Starr says. To meet the needs of the millennial generation. Absent any training and development. Individuals identified as candidates for promotion or who possess special skills may latch on to another opportunity. wholesale cuts carry a much greater risk.” Thompson says. They hate the idea of not using them. field operations. The training regimen has helped build the company’s reputation. He noted no significant cuts in training budgets as of yet. Instead of forecasting their own demise. Organizations employ staff with years of experience and the desire to teach.” Day says.500–square-foot training center. specifically about who owns training. “Companies that cut human capital aggressively in the early 2000s caught the last wave to shore when other companies were thriving.” T+D Michael Laff is senior associate editor of T+D. If organizations take a flexible approach to provide training using other mediums. It’s the devil that they know. one company that relies heavily on development is taking the opposite tack. but it introduces a host of unanswered questions. you go from being a company that offers training to one that doesn’t. outsourcing seems a logical step.” Against the grain While several organizations made the transition to outsourcing. they’re destroying your brand. and development programs are the easiest to cut and the most difficult to rebuild. Staff expenses. “The biggest effect training has is to reduce turnover. using 20 people working full-time. some pressure has hit learning departments. Suffolk employs eight full-time trainers. and rethink how they deliver training. Among a staff of 1. For others.” Steep cuts may change the entire dynamic in the workplace. says the job rotation program is a major enticement for graduates. Fred Day. set to open this fall. They’re telling customers and colleagues how bad the company is. Suffolk Construction brought all of its training in-house. A new facility in Florida. Classrooms and a big university are one of the first things they build into a company.Training administration is another expense under the microscope. compares the current climate with the annual expectations in manufacturing where greater productivity is expected without increased investment in resources. “If 55 percent of your employees are not engaged. specific jobs. and that’s what chief financial officers are doing. is linked to an overall talent management strategy.” Thompson says. 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 current climate is causing many training leaders to step back. Piecemeal cuts to training do not need to be painful. The younger generation is “omnivorous” regarding how they learn. director of training at Suffolk. “After a year. please send your feedback to mailbox@astd. that sends an alarm through the organization.” says Kerry Patterson. but that’s business. though few organizations are following this path. believing that outsourcing the division would be disruptive. and estimator to teach new hires the entire business. training officials face the same prospects as their colleagues. “If all of a sudden you reduce sales training or management training or cancel classes. “They are being asked to do more with One analyst believes that the transition from instruction based on classrooms and materials to one relying entirely on expertise has yet to occur in a meaningful way. “Yes. “They don’t think it will work. cofounder of VitalSmarts. if not cut back. Smith believes training officials need to undergo training themselves to become more familiar with the new delivery systems.000. Training departments asked to be treated like a business unit. a corporate training consultancy. discussion is heating up. The company decided to contract with a vendor. All of the 80 training courses are reviewed annually. Organizations committed to ongoing development with an integrated training regimen no longer debate whether training yields any kind of tangible Suffolk offers an eightmonth rotation in each business unit.