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Training costs: Less is more

The Globe and Mail interviews ORCHANGO’s Edmond Mellina for an article on training budgets.

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Source: The Globe and Mail

Report on Business | WEEKEND WORKOUT

TRAINING COSTS: LESS IS MORE

After previous recessions, companies boosted spending on training to help downsized work forces. This time, it’s a different story.

WALLACE IMMEN | January 16, 2010

In years past, Ernst & Young LLP would invite as many as 250 employees at a time to take a week away from the office and gather in a luxury resort in northern Ontario’s cottage country. They would get daily seminars to update their skills, and their room, board and transportation expenses were paid by the company.

But that was so pre-recession. This year, employees will come to the company’s downtown Toronto office on days they are slated for training and go to a newly built dedicated learning centre. It’s classrooms are equipped with the latest high-tech video presentation equipment, so that training can include video seminars where the trainer needn’t be in the same city as the students.

“We probably cut our out-of-pocket training costs by close to half by reducing travel and outside-the-office training locations, and doing more by remote technologies such as webcasts,” says Karen Wensley vice-president human resources of Ernst & Young in Toronto.

Severe pruning widespread! E&Y is hardly alone in looking for innovative ways to continue training in the midst of austerity. For the first time in 20 years, more than half of Canadian employers are planning to trim their employee training budgets, according to a survey of 218 employers by the Conference Board of Canada. Some are talking of cuts of as much as 50 per cent.

The findings mark a significant break from company responses in past recessions, when many organizations actually boosted spending on training, says Alison Campbell, principal researcher for the Conference Board in Ottawa.

The highest per capita spending on training over the last two decades occurred in the aftermath of the recession in the early 1990s. The reason, the Conference Board concluded at the time, was that after organizations were downsized the remaining employees needed extra training to take on expanded responsibilities, Ms. Campbell says.

The same kind of restructuring has hit many companies in the past year, “so you would expect to see an increase in this downturn. Instead, we are surprised that organizations are telling us they are cutting back their investments in training,” she says.

Finding and filling gaps

The cutbacks are not a cause for panic, though, as the world is much more wired than in the past and employers are increasingly looking to supplement classroom lessons with less expensive online learning. As well, much more instruction is being done informally on the job, says Lynn Johnston, CAE, president of the Canadian Society for Training and Development in Toronto.

“We’re seeing an increase in informal learning, mentoring, job-sharing and observation, and in-house meetings and discussions. Because there has been downsizing, there has to be cross-functional training but a lot of that is being dong informally, with mentoring by senior managers, job-sharing, job shadowing and in-house group problem-solving discussions.”

Over all, e-learning has grown to represent 24 per cent of all employee training hours and there has been an increase of at least 10 per cent in the past year in the amount of learning being done informally and through social networking, according to California-based talent management consultancy Bersin & Associates.

However, there is also a trend in limiting who receives training, Ms. Johnston says. “Companies are also being more strategic in aligning the kinds of teaching they do to the immediate goals of the business,” she notes.

If, for instance, they want to drive down their accident rate or drive up their customer satisfaction rate, they look at providing the best specific training and they don’t give it to everyone, only those who are most likely to benefit from it, Ms. Johnston says.

If you don’t receive, ask

Employees who are not receiving the training they think they need should ask for it, advises Elizabeth Stephenson, managing director of management consultancy Verity International Ltd. in Toronto.

“Don’t count on the management or your boss to identify development opportunities for you, or suddenly deciding to reward you with training; it won’t happen in this economy,” she says.

“Employees should ask themselves: ‘What do I need to make my performance and potential higher?’ Be able to clearly articulate to your manager how the company’s support of your development will add value to the organization,” Ms. Stephenson advises.

A silver lining?

The need to cut training budgets might be a good thing in disguise, says Edmond Mellina, president of Toronto-based Transitus Management Consulting Inc. and its training company, Orchango Change Management. “It may open the eyes of employers that the traditional classroom approach is not as effective as it needs to be and does not return a good return on investment.”

Most companies have relied on a traditional, standalone classroom approach to developing managerial skills, but “action learning,” in which people share in small “solve and learn” sessions about how they have handled actual challenges on the job can teach lessons just as well, and save time and training dollars, he says.

A reality check

“Obviously, the economic situation has made most companies look to save costs and, at first glance, the training budget looks like a non-essential expense that can be deferred. But I would caution companies that cutting out training will turn out to be a short-term gain for a long-term pain,” says Antoinette Blunt, president of Ironside Consulting Services Inc. in Sault Ste. Marie, Ont., and current chairperson of the Canadian Human Resources Professionals Association. “If organizations stop training and development now, it will weaken their ability to innovate and effectively recover from the downturn.”

 

TRAINING ON THE FRONT LINES
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JMP Engineering Inc .
London, Ont.
Electrical control developers Employees: 150 Change in training budget: Down by 50 per cent this year from a peak level in 2008.
Changes in training: An internal online training site was set up last year using off-the-shelf training courses and Web-based instruction. Instead of sending an average of four employees to industry conferences, one will go to gather information and post the notes on the company’s in-house website. Employees are also given links to online seminars being offered, which they are encouraged to view before or after work hours on their own time.
Result: As it turns out, a lot of learning material is available for free, as long as the sources are given credit. That becomes a big saving when compared to spending $3,000 a person to send employees to a conference or $1,000 to get someone from a branch office to the London head office for classroom training, says Brian Hughes, vice-president of human resources.
Lesson learned: “Even when things do get better and we have more to spend on training, we will continue to do courses on the Web because it is turning out to be effective. But we also see a team-building value in human interaction, and we will also do formal classroom sessions when we can.”
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Ernst & Young LLP
Employees: 4,000 in Canada Change in training budget: Each department head has been told to trim training expenses this year as much as possible, while still keeping employees up to date with necessary skills.
Changes in training: Reviews have been made to make sure those who get training actually need it. Priority areas have been identified, including updating changes to technical rules, marketing skills, speaking and presentation skills and project management.
Another way the company is saving money this year is by training people closer to the time when they need the skills to do their job, says Karen Wensley, vice-president of human resources for Ernst & Young in Toronto.
“As opposed to saying, let’s train everyone on a new set of rules now, let’s look at those who are going to immediately use it and hold off for those who won’t need it for six months or a year. “If you give people training and it’s not linked directly to what they are doing in their job, they are just going to forget it,” she says.
Result: In addition to savings of 50 per cent on reduced travel costs, the company estimates there will be an overall increase in productivity of about 5 per cent because of cutting the amount of time that people are out of the office in training and not serving clients, Ms. Wensley says.
Lesson learned: It’s easier to be distracted when instruction is given in the office rather than at a corporate retreat. “You’ve got to make sure you tell employees this is not an excuse to run back to your desk to do things in the middle of a lesson,” Ms. Wensley says.
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Rogers Communications Inc .
Employees: 29,000 Change in budget: The company has held the line on training budgets but is trying to provide more hours of learning per employee, says Tara Deakin, vice-president of training.
Changes in training: Instructor-led classroom training will be cut 12 per cent this year and replaced with more online learning. Rogers estimates it can provide nearly 20 per cent more hours of employee training through technology for the same price as it paid in the past. Experienced employees are also being encouraged to become informal in-house trainers in skill development, service delivery, leadership and product knowledge, which were identified as priority areas for training and skills updating.
Result: The cost per learning hour can be cut by more than 10 per cent using e-learning programs. Employee opinion surveys so far show strong positive feedback.
Lesson learned: It’s not just a choice between classroom face-to-face learning and e-learning. “Informal, on-the-job knowledge sharing, in which one person passes on training to other members of the team, can very effectively stretch learning dollars,” Ms. Deakin says.
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BY THE NUMBERS

$787
Average amount companies spent per employee on training and development last year.

51
Percentage of organizations planning to cut training spending this year.

66
Percentage of full-time employees who received training last year.

56
Percentage of employee learning that is now done on the job rather than in a classroom.

20
Number of hours of classroom training the average employee received in 2008.

26
Average hours of classroom training in 2004.

1.5
Percentage of payroll budget the average company allocated for training before recession, down from 2 per cent in the 1990s.

33
Percentage of Canadian employees who said they wanted to further their skills but didn’t last year.

Sources: Conference Board of Canada, Watson Wyatt, Statistics Canada

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As ORCHANGO's editor, I post news and related articles about our firm on both our website and LinkedIn page. I also manage our YouTube channel.

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