Training and Development in Economic Recessions

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The Case for Investing in Employee Training During an Economic Recession

When companies struggle through economic downturns, much like the one we are experiencing now, the first instinct is to start slashing the operating budget. Managers and employees are asked to do more with fewer resources.

The economic outlook for the foreseeable future in our country shows businesses will continue to cut costs and make tough choices in order to survive and stay competitive. While the belt tightening continues, so too will the temptation to cut training budgets or eliminate them all together.

It’s been my experience that one of the areas hit hardest by budget cuts is the training function. Training, in some instances, is often thought of at times as a luxury or “nice to have” in organizations. It is an expense worth paying for when times are good, but an easy target for elimination when times are bad.

Companies who have established formal training departments, however, see the benefit to operating an education arm of their organization because they understand how training maintains or increases performance in their employees. They understand there is a science behind training and adult earning. In order for it to be effective, training must be built on sound instructional design and administered accordingly. After all, it is the employees that help make the organization run. Poor performance on their part could mean poor performance for the organization as a whole.

I’m here to argue that if you are thinking of cutting back on your training budget just to save money and ride out our current economic storm, you are actually doing more harm than good to your organization’s bottom line. In fact, shifting funding or resources to your training function and adapting the way you create and deliver training may save you more money in the long-term and create a sustainable business that can weather any negative economic condition.

The Cost of Employee Turnover Due to Poor Training

Cuts to employee training, or poor training for that matter, results in higher costs to employers. These costs are due to employee turnover. According to Deloitte’s 2010 Ethics & Workplace Survey, one-third of employed Americans plan to leave their current job and look for a different job or career once the economy gets better. The main reason as to why they choose to leave their current position is due to lack of trust and clear, consistent communication from their employer.

Add to this poor training or lack of training opportunities where employees can enhance or develop their skills.

The Center for Workplace Excellence has compiled data on how companies who under-train or poorly train their employees suffer from costly high turnover rates. Costs associated to replacing (or failing to replace) those lost through turnover far out outweigh the costs in further investment in training.

Consider the following:

  • In companies where training is considered good, 12% of employees are considering leaving to find new employment or changing careers.
  • In companies where training is rated poor (or severely lacking), 41% of employees are planning on leaving.
  • The average cost of replacing an employee making approximately $60,000 per year is more than half that person’s salary – almost $38,000. The average across the country is $17,000 in recruiting, screening, interviewing and onboarding costs.

Using these figures, it becomes apparent that these costs add up when you have many employees who depart a company whether due to layoffs or voluntary departure, depending on the size of company.

Compare this to the costs of regular, ongoing training efforts to maintain performance or develop employees. The average cost of training per employee according to the American Society for Training & Development (ASTD) and Society for Human Resource Management (SHRM) between 2004 and 2008, is between $1,000 and $1,100 annually. Training magazine in 2003 estimates training costs are approximately 2.5% of an employee’s wages.

Clearly from these statistics, the costs of funding ongoing training per employee is far less than the replacement cost of an employee.

Action Plan to Improve Training under Tight Budgets

If you have arrived at the decision to focus on training to maintain performance or retain your employees, here is a five part action plan to support your current training under difficult economic conditions.

Part 1 – Communication

Remember, according to Deloitte’s 2010 Ethics & Workplace Survey, one-third of employed Americans are planning to leave their current job to look for a different employer or make a career change once the economy gets better. This is largely due to lack of trust and clear, consistent communication from their employer.

Communication should occur at all levels of the organization, from top-down and the bottom-up. How will employees know what is available to them for personal and professional development? More importantly, do they know the benefit toward devoting time to their own personal and professional development?

People in organizations who are responsible for training and development must actively communicate the value of learning to senior executives. Likewise, they must promote the benefit of training among employees and encourage greater use of informal, short learning sessions. This is finding opportunities for learning in as many situations as possible. Take the learning outcomes and find ways to share discoveries with other parts of the organization that will benefit.

In other words, create a culture of learning in the organization. In training circles this is widely known as building a learning organization where learning and the sharing of findings to spread throughout.

Part 2 – Review Budgets

With reduced training budgets, training managers must do more with less while still being charged with maintaining employee performance and accountability.

The best way to optimize a training budget is to review all available programs and prioritize them based on current company objectives. Drop or archive the programs that are deemed as “nice to have” and focus your resources on the training that produces results. Ideally, you want to place emphasis on training programs that will result in making money or saving money for the company.

Also, change your mindset regarding your training. The content created can be recycled or reused in other training modules. Be mindful of updating it and placing it in context of the subject matter. It’s not necessary to rewrite content if it has already been created. Development costs add up and if you can reuse content, you can quickly and efficiently build effective training and reduce your costs.

Part 3 – Leverage Available Technology

According to ASTD’s State of the Industry Report, 70% of all training time spent by employees in organizations is with instructor-led training. E-learning or learning in virtual classrooms makes up the other 30% of training time.

Instructor-led training typically comes with a high price tag due to logistical costs. With tight training budgets more and more common over these past few years, leveraging technology to deliver training (such as e-learning) is becoming increasingly popular. It creates greater accessibility, wider distribution and reuse of content for employees. While upfront costs to implement e-learning can be expensive, the savings are realized quickly with long-term benefits.

Technology also affords opportunities for collaboration. As mentioned earlier, organizations should look to informal learning opportunities and short learning sessions to create a learning culture. Free or low-cost tools such as blogs and wikis can allow employees to collaborate, report discoveries and discuss ways to improve performance or support one another in their respective efforts.

Part 4 – Leverage Existing Talent

The top performers in your organization are key to maintaining performance in your organization. Top performers, the best of the best at what they do, can lead others and serve as role models. Take advantage of their knowledge and expertise by helping them become trainers, coaches or mentors for your organization. They can facilitate the suggested informal learning sessions as outlined in Part 1 of this 5 part plan.

Another way to leverage your existing talent pool is to cross-train your employees. Due to the economy forcing organization to lay off workers, and little or no hiring going on to replace those lost jobs, those left behind are asked to do more outside of their normal job roles. To avoid burnout or leaving employees unprepared to take on new tasks, train people in other job roles to facilitate the changes that occur.

Part 5 – Link Learning Programs to Business Goals and Objectives

Last, but not least, make sure any and all training is tied back to company goals and objectives, both short-term and long-term. This is true whether or not an organization is operating within an economic recession. All training should be positioned to either support employees in generating revenue for the company or helping to lower costs. By linking to goals and objectives, you give purpose to the training program and justifying its existence.

Conclusion

Good training that is objective and performance-based will empower employees to perform to expectations, supporting defined business goals and objectives. When the economy is down, training is more important than ever. Layoffs and job restructuring shift new duties and tasks to those remaining in an organization’s workforce. That alone prompts evaluation of current training programs and new training needs that must be met. Times like these are an opportunity to ensure that the existing workforce still engages and continues to work toward meeting an organization’s goals.

Before the urge to cut training programs takes hold, think about which training programs work and are effective for your organization. Do they produce the intended results? What knowledge, skills and behaviors needed for top performance out of any employee are present in the current training programs? More importantly, do the programs make money or save money for the company? Find ways to evaluate the current training programs by measuring and quantifying results that tie back to the organization’s business objectives.

Despite the negative impact of economic downturns on our businesses, somewhere within the challenges we face are opportunities for creativity and new solutions to emerge. Training is one of them. There are many alternative methods in presenting training to support your business that are efficient and cost effective, such as e-learning. Many of the resources at the disposal of most companies can be leveraged to provide learning experiences that keep your workforce active and engaged staying productive to emerge from the recession we are currently in.

“Our people are our best asset” has become a business cliche, but in this case it is absolutely true. If you value your employees and trust they will be the ones who can help keep your organization a float and successful during these tough economic times, you are already further ahead than most organizations who have decided to take a different path all together by cutting their training programs.