HR Outsourcing: The Impact on Corporate Learning

Corporate learning has always been the poor relation of all the management disciplines. Some corporations simply don’t believe in it, preferring to buy knowledge and skills when needed. Others have a large training department for internal courses and a si

In fact, according to recent Accenture research, only 13 percent of the senior executives responding said they were “very satisfied” that their training and development organizations were providing “timely, relevant and cost-effective services for employees.” Only 18 percent said they received either weekly or monthly evaluations of the effectiveness of the corporate training and development programs.

Worse, while two-thirds of respondents claimed they measured how their human resources (HR) and training initiatives affected customer satisfaction, only 13 percent of “C-level” executives (from the CEO downward) were “very satisfied” with the results and the overall performance of the HR organization.

These findings have a significance that extends beyond the training department. There is now a well-proven connection between a committed, highly trained workforce backed by ample resources of knowledge and experience and the financial performance of the company. The better the training and commitment, the better the customer satisfaction, the better the competitiveness, the better the bottom line. Yet 70 percent of workers, according to Gallup’s U.S. research, “Proving That a More Engaged Employee Is a More Profitable Employee” (The Journal of Applied Psychology, April 2002), do not have that commitment or engagement, so unless their managers are prepared to make radical improvements in their training and education processes, their companies are likely to stay in the second division.

Clear Advantages

Radical improvement of the learning function is difficult, however, especially when top executives focus (as they should) on driving the business forward. Outsourcing has much to offer: It’s long been common for IT and chores like payroll and tax, but it’s now popular in HR—and a growing feature on the learning front. In the Accenture study, 57 percent of companies had some HR functions among the activities they outsourced, and most of these deals included some elements of training and development.

Even then, training and development seldom receive the attention they deserve. A large HR outsourcing contract may focus on the need for efficient delivery—maintaining HR records, pension and tax administration, hiring and firing procedures and so on. Learning, too, must be delivered efficiently, but it must never be allowed to become a routine process. Its essence (and value) lies in quality and effectiveness, and it reaches into the heart of the organization in terms of culture as well as strategy.

Culture is critical as always, as much for the informal learning processes as the formal ones. The more successful salespeople, for example, need to pass on their hard-earned knowledge to the less successful, without fear of losing status and commission, and senior managers need time to guide and monitor junior managers without fear of being thought unproductive. Knowledge is a vital resource in the modern company, and if it’s wasted, competitiveness will suffer.

The more effective the formal learning processes, the more they’ll contribute to the learning culture and the informal learning between individuals. Indeed, we’ve all been to courses where we’ve learned more from the other students than from the lecturer. For two companies in particular, BT and Avaya, the development of that internal climate of learning has been as valuable as the more formal training that they outsource.

Two Examples

BT is the U.K.’s largest telecom company, with revenues of $34 billion. Like Avaya, the $4.3 billion Lucent Technologies spin-off, it had large, fragmented training operations struggling to cope with a major learning demand as its technological and market positions faced—and still face—radical change. Both companies, too, still bear traces of the previous ownership—the British government in BT’s case, and (before Lucent) AT&T in Avaya’s. Their learning requirements, therefore, do not stop at technology courses or improving sales performance. Instead, both try to build the commitment and competitive culture that a high-performance company must have, but that can take years to develop.

In the late 1990s, neither BT nor Avaya had the time or spare resources to affect the necessary changes, although they both had something to bring to the party. BT had a large and effective HR operation that had seen employee numbers fall by some two-thirds of their peak levels of a decade earlier. The newly independent Avaya had its own corporate university, but a series of acquisitions had resulted in a geographically fragmented internal learning organization. Additionally, a shortage of funds, experienced managers and staff hampered the university from fulfilling its many corporate learning needs. Further, like BT, it faced the challenge of introducing effective e-learning techniques that would be vital to cope with technology and cultural changes on a global basis.

According to Mick Taylor, People Development Services for BT Major Business, the company wanted to ensure that its employees understood the importance and the benefits of learning. “It was important to get learning to people and market it in such a way that they could understand the importance and benefit to them of actually doing it,” he said. He emphasized that the credibility of the company putting together the training—whether face-to-face or e-learning—was a critical factor in BT’s selection of a consultant.

Outsourcing offered obvious attractions, both in terms of significant cost savings (although that is never outsourcing’s main justification) and in the potential for more effective processes that flex with the business and meet its global strategic needs.

The Starting Point: Assessment

The starting point has to be the company’s existing training processes. In general, learning is disconnected from the business, and the learning staff is not accustomed to business disciplines. Many managers claim they do all the right things and have even installed a learning management system, but often none of it relates directly to business priorities. The system contains plenty of material, but it’s put there in the vague hope that people will use it.

The number of a company’s suppliers can easily reach 2,000, and in BT’s case, which is by no means atypical, there were 5,000 to 6,000 current training products, such as courses, modules, manuals etc, including 16 on presentation skills alone. All had to be judged on whether they were good in themselves, and whether they fit BT’s requirements. The management burden of such a portfolio is obvious, as is the confusion usually created among staff.

Taylor explained that having a consultant to handle some of the training functions takes the pressure off. “They understand what we are as a customer and a client, and they take over,” he said. “They know what to do when it needs doing, and they do it in the right way to help us meet our goals.”

A thorough assessment process of the existing training material and its suppliers is the first step. Companies should undertake detailed research to establish the costs of time off the job, transport and accommodation, etc., as well as suppliers’ fees and the expected and achieved results. As our research has shown, few companies do this in any rigorous way, but it’s essential if learning processes are to meet corporate priorities.

With data that show the relative merits of the training program and how large an investment the company is making, senior management can concentrate on the returns and their core business priorities. It’s notable that at all levels, the more information of this kind that a company receives, the greater the awareness of both training throughout the organization and the benefits to the business and individuals. When BT outsourced training, only a quarter of the staff had access to it. Now, three years later, all BT staff has access to training, thanks largely to e-learning initiatives. Furthermore, they regard learning as a key component of BT’s corporate agenda.

Once the assessment is complete (and, in fact, every year thereafter), the outsourcer and management should agree on the training priorities and programs that best support the corporate strategy. Additionally, the contract should specify the overall budget. Some outsourcers are able to achieve a 15 percent to 20 percent savings, but, even so, a “best fit” has to be found between needs and resources.

Strategic Control Throughout Implementation

Once a company enters the implementation phase, it should maintain responsibility for the strategy. Managers tend to have an underlying fear that they will lose control when an outsourcer arrives. A clear protocol, backed by reliable and up-to-date management information, is therefore in everyone’s interest and can help avoid disputes over responsibilities. In practice, managers’ control is often actually greater with an outsourcer’s involvement than it was prior to the beginning of the contract.

Even then, communication between the two parties needs constant attention. At the beginning of the BT contract, Accenture had three or four middle managers looking after it, but today, 10 or 12 director-level people are involved. As long as communication remains at a high level, the measurement process can be simplified. At the beginning of the relationship, assessments at the end of each course provide an objective base for discussion, whereas later, a few representative measures are better than a flood of figures.

For most companies, a combination of e-learning with face-to-face teaching works best—and allows considerable savings in costs. In many companies that outsource learning, the proportion of instructor learning is falling, from about 70 percent to around 30 percent to 40 percent, depending on the content. Obviously, senior management topics have different requirements from sales or technical training, but even there, the best results often come from e-learning modules followed by face-to-face discussions and exercises.

But e-learning has high, initial fixed costs, which explains why companies are slow to introduce it. The scarcity of both software and hardware in some companies and the difficulty staff may have in deriving the benefit from the courses may slow its introduction and endanger the whole project. Here, a key measure is the time to proficiency, and curriculum restructuring at Avaya has reduced time to proficiency by as much as 63 percent in certain courses.

A Variety of Considerations

For executives deciding whether to outsource their company’s learning, the following questions can help them determine both whether learning is part of their company’s problem or part of the solution—and the best approach:

  • What is the total expenditure on learning, including indirect costs and the percentage it represents of relevant operating expenses? Is it more or less than 1 percent? Does it get cut when times are tough?
  • Is learning measured as a key contributor to the bottom line, or as an intangible overhead?
  • Does the company consider learning a support for corporate strategy and performance? In close support—or is it largely irrelevant?
  • Is it driven by business demand or individual choice from a catalog?
  • Is it perceived in the organization as a vital change agent or a non-value-adding luxury?
  • Does learning spread knowledge and best practice as a central objective or an incidental plus?
  • Does the HR department view learning as an integral part of the business, or its own private fiefdom?

When evaluating partners, Taylor said learning executives should establish their needs up front. “Make sure you know the people you want to work with,” he said. “Make sure you know what you want from them, and make sure they can give you what you need.”

Once these questions and needs are addressed, executives should consider how learning can be transformed into a principal source of competitive advantage and added value—and whether outsourcing it to an expert provider as BT and Avaya did could offer a way forward. If the answer is yes, the priority for both parties must be the quality and efficiency of the learning process. They are the prerequisites for outstanding corporate performance, and in the modern world, nothing less than that will do.

Jonathan S. Andrews is a partner in Accenture Learning. He can be reached at

February 2004 Table of Contents