With global economic recovery well under way, senior training and development professionals are more optimistic in their outlook for the future. However, they are still under the gun to make investments that both deliver value immediately (if not sooner) and prepare the organization to generate shareholder returns over the long run.
Every other month, we administer a brief Web-based survey to CLO magazine’s Business Intelligence Board (BIB) on a variety of topics to gauge the issues, opportunities and attitudes that make up the diverse role of a senior training executive. For this month’s installment, respondents shared their thoughts on how much money their organizations are spending on employee development relative to the recent past. In addition, they indicated how they intend to invest these funds. Topics covered included organizational spending on employee development covering the years 2002 to 2004, where they are expanding their efforts and their sourcing approaches. An analysis of IDC’s survey of the BIB suggests renewed optimism in economic growth, changes to the training and development profession and the use of technology in earnest.
The Earnings Train Is Making Stops for Organizational Development
Watchers of the corporate scoreboard over the past 15 months have seen a surge in corporate profits globally. Figure 1 shows that nearly one-half of BIB members indicated that more of these dollars have found their way into training and development budgets in 2003 than in 2002. Moreover, 47 percent indicated that they would spend more in 2004 than in 2003. Figure 1 also shows that the percentage of organizations cutting their spending has fallen this year compared to last. Over the past two quarters, profit growth across many industries is coming not only by way of cost-cutting measures and productivity squeezes, but by surging revenues as well. An associated sense of optimism will drive more reinvestment of profits in workforce development and management throughout the rest of this year and beyond.
So where will chief learning officers be spending their money with the hope of payoffs through improved organizational performance? BIB members indicate they will take a somewhat diversified approach (see Figure 2):
Portfolios will become more heavily weighted in technology. When asked the question, “Over the next two years, what portion(s) of your training investment ‘portfolio’ do you believe will grow significantly (i.e., by 15 percent or more),” learning technologies was far and away the most popular answer, chosen by 59 percent of the BIB. Training and development executives are spending a lot of their time thinking about how IT will support their business strategies. These results suggest that they are becoming more aggressive in leveraging technologies (e.g., learning management systems, content management, simulations, content builders and virtual classrooms) to train and support both their immediate and extended enterprises. They are seeking tools to enable remote collaboration, contextual and targeted delivery of content, interactive learning experiences and measurement of learner performance. Despite the disillusionment of many early adopters of e-learning, technology will continue to augment, replace and improve facilities-based instruction.
Many organizations are stacking chips inside. “Insourcing” is not a term grabbing many headlines these days. However, every organization weighing the costs and benefits of turning to an external provider to fulfill a particular process or function also considers those areas they would like to keep in-house. Although Figure 2 indicates that external providers of different sorts will play a growing role in workforce development, 27 percent of CLOs report that they intend to significantly increase spending on the development of their own staff. This spending is being driven by greater availability of cash and the need to prepare training personnel for the intense changes they will continue to face in delivering value to the organization. Development efforts will likely be concentrated on improving performance consulting skills, leveraging technology when developing and delivering training, applying management accounting principles and perhaps, better managing vendor relationships. In addition, 23 percent of the BIB indicated they will spend significantly more on recruiting new talent to handle their expanding workloads. This should send a signal to senior training managers – make sure your most talented people are happy.
Sourcing to third parties will become more common for many. Some 38 percent of BIB members indicate significant growth in their use of training and e-learning vendors over the next two years. Despite growing optimism, many organizations are hesitant to take on the fixed costs related to adding headcount. Therefore, they will leverage the expertise of third parties to deliver on-demand (aka, just-in-time) services when they are needed. In addition, learning and development executives will turn to vendors to access their IT infrastructure, to help with blended learning deployments and to fulfill non-core activities. Colleges and universities will also benefit from increased investments in workforce education – 17 percent of BIB members said they would pay out at least 15 percent more in tuition dollars over the next two years.
With more than one-third of the BIB planning to significantly increase cost allocation to learning and development vendors, a logical question to ask is, “For what?” Figure 3 depicts survey results for the three areas most frequently cited for expected increases. Clearly, this group of senior training professionals wants access to infrastructure and e-learning expertise. Like so many areas of our personal and professional lives, Web technologies, PCs and mobile-access devices have had a disruptive effect on corporate training, increasing technology’s role in the way training is created, delivered and managed. Technology will continue to play a bigger part in employee development, yet many organizations do not have the capabilities or resources to build, deploy and maintain blended learning programs that include online elements on their own. Because building the necessary technologies and instructional design expertise in-house to administer blended learning programs on an enterprise-wide scale can be cost-prohibitive, many will continue to turn to external providers for assistance and to gain access to their infrastructure:
- Accessing IT as a service. Capital investment and risk avoidance along with a lack of IT personnel to manage e-learning systems are prompting many organizations to embrace hosted models. Forty percent of the BIB indicate that they will increase their use of hosting providers. Only 5 percent plan to decrease spending on hosting.
- Seeking development expertise. Some 37 percent of BIB members plan to increase external spending on content development, while only 3 percent plan to decrease. A combination of rising demand for custom solutions, a sustainable economic recovery and falling prices is driving this trend.
- Expertise will not be limited to e-learning. There will be a net increase of dollars earmarked for classroom-based training providers with 23 percent of the BIB planning to spend more money and 11 percent planning to pull back. Based on recent IDC research, organizations will turn to classroom providers for courses in both technical and non-technical areas.
Investing Wisely for the Future
Asset allocation is about managing the relationship between the expected risk and return of the different investments in a given portfolio. While the data presented in this column does not paint a complete picture, it is safe to say that technology and strategic sourcing will continue to impact the ways in which corporate training and development dollars are invested. At the same time, they will effect a re-invention of how corporate training professionals enable the performance of their respective organizations.
Michael Brennan is program manager of learning services research at IDC, a global market intelligence and advisory firm. You can email Michael at firstname.lastname@example.org.