The world has never experienced a recession like the one we recently entered. Still, we know that in a recession, the learning and development function tends to experience one of the bumpiest rides of all business units. Recent recessions reveal the extremity with which learning and development resources wax and wane proportionate to business and economic health. Such variability is shown most clearly through resource allocation at the level of the individual learner. When entering a recession, companies invest less money per learner while providing fewer overall learning opportunities. So what will happen to training and development in the coming months?
Most noticeably, companies will cut training investment. According to Workforce.com, investment in employee training and development during the 2008 recession contracted by over 10%. The US corporate training market reduced per-employee training expenditures from $1,202 in 2007 to $1,075 in 2008.
The 2013 ATD State of the Industry Report found that businesses cut training expenditures by an average of 18% during the 2008 Great Recession, with reductions bottoming out in 2010. If such trends carry over into future disruptions, companies will soon start asking talent developers to achieve their results on 80% of their standard operating budgets. If you’re anything like me, thinking about sustaining learning programs with one-fifth less budget causes natural knots in your stomach. A one-fifth reduction won’t just mean fewer courses, printouts, and learner materials. A one-fifth reduction means far less travel, considerably less time with learners, and perhaps even fewer people on learning and development teams.
Budget reduction was not the only effect that the 2008 recession had on training and development. With business leaders regarding training as “the most expensive activity with regard to employee management,” some companies ventured as far as to completely eliminate their professional development budgets. As cuts in expenditures and enrollments accelerated, many executives lamented the appearance of critical skill gaps within their organizations. Still, most businesses slashed travel opportunities for training delivery and facilitation, moving courses online and cancelling programs. Companies were especially likely to reduce investment in programs for “intangible” skills (critical thinking and change management, for example), and to tighten their control over training participation. Some companies even put a two-year moratorium on all learning initiatives.
Exacerbating these difficulties is the perception that training budgets are a “lagging indicator” of an organization’s fiscal health. As businesses recovered from 2008, investment in training sputtered with meager year over year increases. ATD’s 2019 State of the Industry Report found that as companies recovered from the Great Recession, growth in training expenditures hovered near two percent annually, lagging the pace of inflation until 2017.
But not every study of training during crises or recessions concluded that budget cuts were inevitable. It's possible that the coming months will create drastic change for talent developers, but may not lead to immediate resource reductions. A report from the UK Commission for Employment and Skills concluded that “institutional support for training activity… changed little between 2005 and 2011 – a period which spanned the 2008-09 recession.”
Their report, “Training in Recession: The impact of the 2008-2009 recession on training at work,” suggests that per-employee investment in training within the United Kingdom was declining for approximately ten years before the recession. According to their analysis, the effect of the 2008 recession on training investment was either neutral or ambiguous. Their findings suggest that the need to see more productivity and innovation out of a smaller employee base created more training opportunities. These data should reassure those who work in talent development. Not every company will slash its investment in training; not every talent developer will be asked to more with less.
Author Elaine Biech, who has written over 80 books on training and development, concurs with the data from the United Kingdom. Her recent works include The Art and Science of Training and The New Business of Consulting, both of which received considerable acclaim, and both of which I highly recommend reading. I sat down with Elaine for a Zoom conversation shortly into the COVID-19 lockdown for a discussion about the future of training in a time of uncertainty. Biech, who is the founder of the L&D consulting firm ebb associates, expressed a welcome note of optimism about the direction of learning relative to the course of the economy. Biech suggested that economic uncertainty previously led to cuts in training, but as training departments have proven their worth, they’ve buffered themselves from the worst effects of cutbacks.
“Every time something like this has happened in my over-forty years of working in this industry, whether it was a political crisis, changes in the labor market, or an economic recession, it hits L&D a little less hard,” she told me. “Every year, organizations see a little more value in training, and investment increases. Today’s executives know that skill gaps exist. They need strong L&D teams who can identify and act on those gaps. They need L&D teams who can serve as trusted advisors. Whether or not this (COVID-19) leads to a prolonged recession, this time will be more positive (for talent development professionals) than the last.”
Whatever our predictions, we also know for certain that disruption, volatility, and economic recessions are always temporary. Investment comes back. Learning hours go back up. Though it took until four years after the 2008 recession, per-employee learning hours eventually hit a new record high in 2012, at 57.7 hours per employee. As businesses recovered from 2008, they did eventually re-invest resources in the form of employee time, as they sought to close the skill gaps widened by the recession.
With so much uncertainty, how can talent developers keep their organizations focused on learning in the recession to come?
In the coming blog posts, we'll construct a blueprint for talent developers looking to build capacity in the most uncertain of times. Each week, we'll publish a post on how talent developers can train in turbulence. Each post features ideas from training thought leaders, data on how training has navigated past disruptions, and concrete ideas that share a commitment to lightweight implementation. Each post explores this challenge through the lenses of micro-learning, nudges, and communities of practice, three tools that can be deployed under limited resources and significant time constraints. The challenge facing our organizations is truly unprecedented. The need for impactful learning and development has never been greater.
@ryanpanzer is an instructional designer at Zendesk and a member of the ATD-Madison Area Chapter board of directors.