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

46 | T+D | AuguSt 2008

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Throughout the long-term. even if they already possess an online learning curriculum. technology-enabled classroom. which limits their ability to receive volume discounts. By using technology wisely. taped all of the sessions. a management consultancy. 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. says businesses with narrow margins cut training entirely. One large healthcare provider that formerly conducted training at the hospital level worked with Varnadoe to develop more online offerings. Classroom time is being shortened. Pelster believes such calculations are a waste of time.” Varnadoe says.htm AuguSt 2008 | T+D | 47 . Where many training organizations are scrambling to demonstrate value in terms of skills acquired versus dollars spent. Any kind of single-user licensing fee for applications should be renegotiated. management wanted to cut costs without sacrificing the quality of what became a tradition.are being delayed until the end of the year. government agencies and technology companies are beginning to conserve resources. not in one fell swoop.” he says. “A government agency told me they are too busy buying gasoline and bullets. new product knowledge and instruction on how to sell the product would receive greater priority over soft skills. noted that large organizations have multiple vendor contracts for training. Watchful eyes There is greater scrutiny on training budgets just as there is with spending in all departments. Sharp cuts Vulnerable sectors. says that if organizations were to rank training based on priority. Other organizations are attempting to renegotiate training contracts or put out projects for bidding. “They come back in increments. according to Rommin Adl. 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. New hires are simply pushed onto the sales floor and told to follow the lead of a current employee. Pelster believes that it usually takes two years from the time a recession hits for training budgets to return to previous levels. Because the material was available online. but learning officials no longer discuss strategy with senior executives from a position of weakness. integrate training into daily performance and maintain it as a development resource. Heidi Spirgi. All of the material was condensed from three weeks of learning to one week. the recession is accelerating a change in training delivery. When NetApp scheduled its annual “Fall Classic” training seminar for sales staff.000. president of Ninth House. “It’s all they can afford to do. as will technology and telecommunications businesses. not simply a shield against attrition. Smart organizations. and provided the entire seminar online with search capability to locate particular seminars based on specific words spoken by each presenter. Likewise. Only 1.000 sales staff members attend the event. learning officials should consider cofunded training among multiple teams to reduce travel and registration. leader of Deloitte’s human capital training and development practice. Susan Varnadoe. Altus sent a production team to the site. The harsh reality is that training with a direct financial return will take precedence over intangible development skills. notably retail and the government. Production costs totaled $150. 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. Typically.500 attendees were present for 2006. in fields as diverse as the financial sector and construction. chief operating officer of Altus Corporation. a vice president with Grady suggests that chief learning officers create a balance sheet with an Listen to this feature at www. are cutting back on training. Should the economy worsen. watered-down version. “Training budgets are a lagging indicator. “What’s different now from eight years ago is that learning organizations are better prepared to tell their stories. The company saved $1 million.” Varnadoe is confident that government agencies will restore their training budgets to prerecession levels. president of Knowledge Infusion.” says Bill Pelster.astd. the material can be captured and distributed to a wider audience at a reduced cost.” If reductions are mandated. specifically in management and leadership development. Sebastian Grady. Spending less on training delivery does not necessarily mean offering a cheaper. and organizations are exploring ways to do more teaching online. attendees could listen to the presenters without having to take copious notes. whereby organizations move from site-based training to a mobile. 3. She advises that learning departments consider consolidation into a single contract.

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

What Do You think? T+D welcomes your comments. 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. For larger organizations. “For years there has been talk about blended learning where people work in teams with inhouse trainers. training officials face the same prospects as their colleagues. they’re destroying your brand.” he says. whereby training Sea change With the expectation that more training is delivered through online or social networking tools.” says Kerry Patterson. includes a 2.” Smith says. Classrooms and a big university are one of the first things they build into a company. “A lot of companies are nervous about ceding too much authority to a supplier. Among a staff of 1. managing director of talent and organization performance at Accenture. one company that relies heavily on development is taking the opposite tack. or any article that appears in T+D.” Against the grain While several organizations made the transition to outsourcing. Organizations committed to ongoing development with an integrated training regimen no longer debate whether training yields any kind of tangible return. compares the current climate with the annual expectations in manufacturing where greater productivity is expected without increased investment in resources. Organizations have a long history of sending people to training.” the current climate is causing many training leaders to step back.” T+D Michael Laff is senior associate editor of T+D. “After a year. “They don’t think it will work. says the job rotation program is a major enticement for graduates. is linked to an overall talent management strategy. However. cofounder of VitalSmarts.” Day says. two of whom are responsible for curriculum planning. The company decided to contract with a vendor. Instead of forecasting their own demise.” Thompson says. Responses sent to the mailbox are considered available for publication and may be edited for length and clarity. and 15 percent are actively disengaged. Starr recalls pitching a financial services client a contract whereby the client would reduce its annual training budget of $120 million by 25 percent. if not cut back. and development programs are the easiest to cut and the most difficult to rebuild. and estimator to teach new hires the entire business. “The biggest effect training has is to reduce turnover. He noted no significant cuts in training budgets as of yet. some working part-time for just one hour per week. AuguSt 2008 | T+D | 49 . “Companies that cut human capital aggressively in the early 2000s caught the last wave to shore when other companies were thriving. they can meet the needs of the new workforce. but that’s business. Suffolk employs eight full-time trainers. proponents argue that turnover is bound to rise. a corporate training consultancy. If organizations take a flexible approach to provide training using other mediums. wholesale cuts carry a much greater risk. though few organizations are following this path.” Steep cuts may change the entire dynamic in the workplace. and that’s what chief financial officers are doing.” Starr says. To meet the needs of the millennial generation. you go from being a company that offers training to one that doesn’t.500–square-foot training center. some pressure has hit learning departments. For others. Five years ago. discussion is heating up. using 20 people working full-time.000. but it introduces a host of unanswered questions. The training regimen has helped build the company’s reputation. and no one has done it. “If all of a sudden you reduce sales training or management training or cancel classes. set to open this fall. The younger generation is “omnivorous” regarding how they learn. All of the 80 training courses are reviewed annually. including project management. specifically about who owns training. They hate the idea of not using them. believing that outsourcing the division would be disruptive. outsourcing seems a logical step. David Smith. Suffolk offers an eightmonth rotation in each business unit. director of training at Suffolk. They’re telling customers and colleagues how bad the company is. “They are being asked to do more with Training departments asked to be treated like a business unit. Smith believes training officials need to undergo training themselves to become more familiar with the new delivery systems. It’s the devil that they know. Organizations employ staff with years of experience and the desire to teach. specific jobs. The company balked. If you would like to respond to this article. Starr believes that cuts to the corporate training catalog or e-learning can be made without harm to the Individuals identified as candidates for promotion or who possess special skills may latch on to another opportunity. “Yes. and rethink how they deliver training. “The only pressure we faced was to cut travel.” Thompson says. A new facility in Florida. Suffolk Construction brought all of its training in-house. Johnson recalls working with a hardware manufacturer that counted 500 people in the training department. Fred Day. Piecemeal cuts to training do not need to be painful. Online resources can capture such expertise so the individual need not present training anew. mlaff@astd.Training administration is another expense under the microscope. that sends an alarm through the organization. field operations. please send your feedback to mailbox@astd. “If 55 percent of your employees are not engaged. Staff expenses. Absent any training and development.

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