Growth in learning budgets has slowed, probably as a result of lower profits. Areas in which companies are investing are carefully chosen, and they reflect the priorities and aspirations for the greatest opportunity. The learning management system (LMS) remains a popular and powerful choice to help companies achieve their objectives. Companies also are leveraging external providers in order to maximize benefits. For the last several years, members of the Chief Learning Officer magazine Business Intelligence Board (BIB) have been asked to provide annual insight into their investment choices. Every other month, IDC surveys BIB members on a variety of topics to gauge the issues, opportunities and attitudes that concern senior learning executives.
In the September issue, we examined the evolution of training outsourcing. This month, we look at how companies will be investing their learning dollars and how these investments differ by company size.
Learning Budget Growth Slows in 2007
Learning budgets have been growing only slightly for many years. This year, that growth, like corporate profits, is even lower. Although most companies (60 percent) either increased their learning budgets, or their budgets remained flat compared to last year, more learning budgets declined in 2007 (40 percent in 2007, up from 20 percent in 2006). The average increase in budget was slightly more than 5 percent, and the average declining budget was reduced nearly 10 percent.
Smaller companies are increasing their budgets nearly twice as often as larger companies. Smaller companies have performed better during the last 12 to 18 months and have continued their growth in learning expenditures.
Key Investment Areas: E-Learning, Leadership and Performance Management
With the learning budget not growing as quickly, companies are continuing to invest in areas of importance, such as projects that turn stand-alone projects into holistic learning solutions. Chief learning officers are carefully investing their budgets in areas where there are rapid, visible results. E-learning, leadership training and performance management were the most commonly selected priorities.
• E-learning: With key advantages such as flexibility and convenience, e-learning is one of CLOs’ key investment areas. Simulations and the use of gaming environments are stimulating increased investment in a broad range of e-learning-related investments.
• Leadership and executive development: As baby boomers retire, learning and development professionals must continue to prepare the next generation of executives to succeed the departing leaders. Leadership training (the core component of executive development) increasingly is becoming an investment priority for larger companies. Combined with mentoring and job rotations, leadership development increases retention among mid- and senior-level executives, and it helps enterprises ensure the talent and experience they require will be available when its needed.
• Workforce performance management (WPM): Because company executives recognize learning is a key enabler of all corporate strategy, organizations use performance management technologies and activities to integrate targeted and relevant learning with business objectives.
Knowledge management is another investment priority that responds to the challenges aging baby boomers present. Knowledge management systems and processes are used to capture processes, skills and context often lost when experienced employees retire.
Despite Saturation, LMS is Still a Key Investment
The LMS remains the single most important technology investment for companies. Nearly 50 percent companies will continue to invest in their LMS. Homegrown or manual systems remain a source of frustration for companies of all sizes: “We’re carving tracking data into a rock with a piece of dinosaur bone at the moment … we need [an LMS].”
Even companies that already have an LMS plan to upgrade capabilities, consolidate into one enterprisewide system, integrate with other HR software or include more employees on the current system. Companies that already have an LMS installed continue to look for additional functionality and improved flexibility. Companies are seeking greater benefit for their learning dollars, whether that comes from investing in more modules or new releases of their systems.
Some companies are budgeting for and installing a companywide LMS, replacing the three, four or even five installed systems they already have. Companies cite synergies, economies of scale and cost savings for consolidating their systems. Global competition in both the marketplace and for talent increasingly seems to justify consolidating all solutions into a single LMS.
Many companies are looking to integrate LMS with learning content management system (LCMS) and talent management suites in 2007 and 2008. Organizations realize how powerful it can be to have learning technologies talk to one another and complement one another’s functionalities.
For example, although the capability of an LMS to track learning completed is significant, it is doubly valuable when integrated with a WPM system to compare performance levels of those who have participated in learning with those who have not.
Learning Services Led by Content Development Technical Services
CLOs increasingly are spending on learning services such as custom content development and learning-related technical services.
Although many companies are investing in custom content-development services, they are spending somewhat less than last year. At the same time, CLOs are spending more on learning-related technical services as a result of spending more on learning-related technologies in general. Nearly every technology purchase includes IT consulting and system-integration services to ensure a smooth rollout and end-user adoption.
Reliance on External Providers
A majority of organizations (56 percent) plan to increase reliance on external service and content vendors to help reduce costs. Companies expect to increase their use of hosting services and custom content development in 2008.
These two areas have been the most popular uses for external vendors for the past several years. Compared with last year, more companies indicate there will be no change in their use of external providers, which suggests enterprises are finding the right balance between internal and external services.
If Money Were No Object …
In spite of the slowing growth in budgets, CLOs don’t appear to be particularly needy: “Even if money were no object, we are looking for learning-related service(s) and technology that best fit the needs of the organization.” CLOs and business leaders fight with “the speed of change, and new initiatives changing the business is where we have to slow down — too much change, too fast.”
Learning leaders think technology and integration are their best hopes for achieving business impact. “A killer LMS,” along with “an integrated competency management, talent management, performance management, learning management suite,” are the best approaches to cost-effectively increase the organization’s ability to learn and change.
Independent of economic conditions, learning professionals are conservative when managing their learning budgets. They prioritize and identify the “best” technologies and services that will yield the maximum benefit to the company in both the short and long term.
Because organizations differ, CLOs attempt to provide development opportunities by aligning offerings with corporate strategy and working with experienced vendors to determine that perfect investment portfolio for their own company. What they have in common is a sense of obligation to maximize the benefit they provide their organizations and commitment to improving their offering to increase relevance and value.