Why Does Learning Matter?

Today, executive management understands that organizational learning enables organizational performance. It enables agility, change and growth. Because it is the centerpiece of the strategy to recruit, retain and leverage the most talented people, learnin

Today, executive management understands that organizational learning enables organizational performance. It enables agility, change and growth. Because it is the centerpiece of the strategy to recruit, retain and leverage the most talented people, learning is how you cause their value to appreciate.

What questions should presidents and chief learning officers be asking about the current state of training and organizational learning in their companies?

How Much Are We Spending on Training, and What Is Our Return?

Industry studies show that companies are spending $2,000 per employee annually on training. For a relatively small company, this represents a multimillion-dollar investment. For a Fortune 500 firm, it may reach a quarter of a billion dollars. In many corporations, training has surpassed all other areas of HR spending, and executives are demanding an equal level of attention to managing costs.

An astonishing number of companies today cannot even quantify, with any confidence, what they spend on training–let alone where, why and how effectively it is being spent. Many are undertaking benchmarking projects to document current training costs and practices, as a means of credibly explaining what they are investing in training and the value achieved.

Because training is so decentralized, the accountability for spending is broadly distributed and hard to control. Processes for budgeting, capturing and recovering costs vary widely. Companies rely heavily on outside providers—committing 25 percent to 75 percent of their budgets to third-party vendors—and with the recent influx of technology and service providers for training, an already fragmented supply chain continues to mushroom and splinter. Even if executives have not yet quantified the opportunity, most understand that the current system is costly and inefficient.

Is Training Getting to the Right Places and People?

While U.S. companies continue to focus growth strategies globally, studies show that employees outside North America receive only 15 percent to 25 percent of the training opportunities available to employees within the United States. This should be an important goal for U.S.-based multinationals: Increase by a factor of five to 10 the availability of training to non-North American populations.

Even within the United States, service levels may vary dramatically between business units. Annual investment in training at a company recently studied ranged across business units from a low of $940 per employee to a high of $3,490. This same company discovered that it was committing 64 percent of all training days to new hires. The study was able to tie the lack of continuing education for experienced employees to declines in retention.

The overarching issue for corporations is availability and accessibility of training. Companies need to reach the employees at the edges of the enterprise and improve the volume of training opportunities offered to everyone.

Is Training Connected With the Needs and Strategies of the Business? Is It Focused on the Skills of the Future?

During the early and middle 1990s, executives began to question the value of “training for training’s sake” and demand that training and development connect more closely with the strategic agenda of the corporation. A 1997 survey found 17 training and human resource services firms with the value proposition “linking human capabilities with business strategy,” “connecting people and strategy” or similar variants.

Today’s training organization is set up to deliver on this business partner role–at least on paper. Training in most corporations sits as “close to the business” as possible, under the assumption that local training functions meet the needs of the business better than a dominant corporate organization. This approach has worked well in many companies, but has often come at the expense of efficiency, standardization and cost management.

In addition, studies show that local training groups have become so burdened with administrative responsibilities–often consuming as much as 30 percent of their time–that their ability to deliver on the business partner role is compromised. Many companies are looking to outsource more administrative tasks and free up training staff to focus on more value-adding, business-impacting responsibilities.

Are We Organized in the Right Way to Deliver?

In many companies, training is a highly decentralized, even fragmented function that has evolved over a history of corporate restructurings, mergers and acquisitions, and local ad hoc needs. From 50 percent to 80 percent of training may live in business units and functions “outside of HR,” and people, processes and technologies are duplicated many times over. This is a costly and inefficient approach that works against the sharing of services or best practices, as well as working against any kind of shared enterprise strategy or agenda for training.

Under the insistence of executive management, organization design principles, which have been applied to the human resources function by David Ulrich and others, are now being directed toward training:

  • What should be owned and delivered at the corporate or enterprise level?
  • What should be owned and delivered at the business-unit level?
  • What can be delivered via technology and self-service?
  • How should training be organized to share services and best practices across the enterprise?
  • What can be outsourced?

Key trends emerging from this inquiry include:

  • Training generalists, either owned by or sourced from the business units, focus on aligning training with local business objectives.
  • Corporate learning functions as a center of excellence responsible for providing training strategies, frameworks and programs that cut across the organization.
  • Scale-driven administrative, transactional and technological operations related to training are being aggregated and centralized to create leverage and eliminate duplication.
  • New technologies are driving self-managed learning, self-service processing and automation of traditionally manual processes.

Are We Leveraging Our Resources and Our Spending?

An emerging number of companies, following the lead of HR, are creating shared-service functions for training that are responsible for providing infrastructure and transaction-based services that are common to all businesses across the corporation, improving the service level and managing down the cost. This strategy is built upon a single principal: leverage. Leveraging resources, leveraging buying power, leveraging best practices and leveraging intellectual capital and expertise.

For training, these services typically include class enrollment and scheduling, print and fulfillment, facilities management, vendor management, management of the technology platform for training and management of “generic” programs or curricula. The trend toward shared training services will continue as clients discover how many non-strategic, non-proprietary programs, vendors, activities and staff are duplicated across the training enterprise–and the resulting cost.

Should We Outsource?

In training, “outsourcing” historically has been defined as hiring external providers for course development or delivery. More recently, the trend in finance, IT and human resources has been to outsource at the strategic level, where entire processes and organizational functions are managed externally–often termed “business process outsourcing,” or BPO. An increasing number of companies are exploring this approach for training and development, given its rising cost and complexity.

The benefits of the BPO approach are clear. It allows the company to focus strategically on its core business. It reduces the capital intensity of the remaining business and transfers more risk to suppliers. It upgrades the service provided to best-in-class levels. It addresses a shortage of skilled managers and labor.

Today’s training organization supports a significant infrastructure of staff, real estate, vendor and technology resources for the purpose of delivering training services. By leveraging the supplier’s investment in infrastructure, BPO allows a company to recognize value by the re-use or elimination of such resource commitments. This approach also shifts largely fixed costs to variable, and allows companies to convert capital investments in technology to operating expenses distributed over the life of the outsourcing contract. The experience of early adopters suggests that training BPO may result in direct cost savings of 25 percent to 35 percent per year.

Are We Taking Advantage of Technology?

CEOs across the globe are demanding that every function in the business aggressively look for ways to leverage technology for increased efficiencies, effectiveness and responsiveness. Companies that want to establish themselves as leaders on the Internet want their employees to understand and use the same kind of Web and interactive technologies they are asking their customers to use.

During the past five years, scalable, enterprise-level technologies have emerged that enable more effective creation, delivery and management of learning across the corporation. They are changing the face of training and development in several ways:

  • Employees are given control of their own data and are able to initiate and manage their own learning. From their personalized dashboard, they can see their skill profile, assess gaps, receive targeted training recommendations, register for programs and launch online courses. Portals, combined with data-mining technologies, now allow for the creation of a “market size of one,” whereby a training offering can be targeted proactively at specific employees based on their individual needs.
  • Manual processes such as course enrollment, scheduling and fulfillment are automated, reducing the administrative burden on the training function by as much as 50 percent.
  • Financial transparency is increased, and data management is centralized. This gives training management access to financial and activity-level data that never before existed, allowing them to better quantify the size and scope of training, better manage costs and, therefore, play a more credible role at the strategy table.

How Should We Measure the Impact of Training?

There is a vast and highly respected body of literature on assessing the impact and effectiveness of training. So why aren’t more companies doing it?

Paradoxically, we find that many of the top training organizations are rarely required to justify the impact of their work. Top training organizations closely link their efforts to the needs and strategies of the business, and gain the support of senior management who see the inherent value of training to organizational performance and alignment.

Less-able training organizations feel compelled to justify the value of their work. Instead of searching for models to measure the relevance of what they do, their challenge must to link their efforts more closely to the business drivers so that their value will not continually be under question.

Since measuring the business impact or ROI of training is complex, time-consuming and costly–another reason it rarely gets done–a measurement strategy that makes sense for training and development is to focus on a very small number of mission-critical projects. These projects are often enabling key business strategies, such as revenue growth, globalization or continuous improvement, so the time and effort required to set up control groups and measure the outcomes of these efforts provide valuable management information.

Tom Starr is a senior principal of learning services for Convergys Employee Care. Convergys has been providing managed learning services for more than a decade, with a mission to help clients reduce costs, while improving the quality and availability of learning across the global enterprise. For more information, see www.convergys.com.

September 2004 Table of Contents