Although there seems to be no shortage of bad news in the business world these days, there is a bright spot for learning leaders: Economic downturns often present opportunities to make learning more effective, thereby making organizations more competitive.
When the economy slows, corporations are forced to respond. It’s a simple financial matter: Less money coming in means less money available to spend. Common fiscal belt-tightening techniques include budget cuts, spending and hiring freezes, and reducing the size of the employment base through buyouts, attrition or layoffs.
As organizational leaders weigh tough decisions on where to cut costs, they should ask themselves one simple question: “Do we still want to be in business after the downturn?” If the answer is “yes,” one area in which spending should not be cut without some serious strategic thought is employee learning and development.
True, adjustments may be needed. The learning and development department probably should reduce spending just like everyone else. Instead of cutting all initiatives in equal fashion, smart organizations retain initiatives that are critical to business success and cut back on those that may simply be “nice to do.” Think of it this way: It wouldn’t be prudent for a restaurant kitchen to eliminate fire extinguishers to save costs in lean times, would it?
Canceling an arbitrary portion of training initiatives across the board creates the illusion of savings — some real via eliminated travel expenses and some potential under the assumption that freed-up staff time is put to good use. But without strategic thinking about where cuts should be made, such moves could end up damaging the differentiators responsible for competitive advantage.
Planning to Outlive a Recession
Development is a key factor in ensuring people stay engaged in the organization and continue to have an impact on the company’s bottom line. Giving current and potential leaders the development they need helps a company weather the storm and continue to excel. So how can necessary cuts be made with minimal long-term damage? What can be cut, and what should remain?
To guide the decision-making process, company leaders should sit down with line managers and talent professionals to examine the key factors to business success and which training and development initiatives enhance these factors. Smart companies proceed strategically so that reduced learning and development spending won’t blunt long-term corporate success.
Look at Talent Management as a Response to Economic Downturn
Don’t spread reduced training dollars as if they were peanut butter and you were trying to make 10 sandwiches with only enough available for five. Such a nonstrategic approach simply reduces effectiveness across the board — including in the areas responsible for a firm’s competitive advantages.
Instead, choose more carefully who you need to invest in and which types of behavior you need to impact. This means you have to determine which offerings have the most immediate and direct effect on the business and on customer experience. It also may mean you have to be more selective about who is invited to participate.
Take the example of Company X, which has a significant development initiative for high-potential leaders. This program has shown visible impact for participants and their managers. As the economy enters a soft period, Company X opts to cut spending for the coming year. How will this initiative be changed to compensate for this cut? Should the program be eliminated for a year or two? Should it be adjusted so it’s less intensive? In the end, a decision is made to retain the initiative at its current level of intensity, but to offer it to fewer individuals.
Let’s look at the impact of this decision:
• The nomination criteria for the program are strengthened. This results in more in-depth discussions by senior leaders and managers about who should attend and increases the value of this initiative in the minds of these influential individuals.
• Chosen participants benefit from the same high-quality program as participants from previous years, and any feelings of being cheated by having to settle for a second-rate version are avoided.
• Management takes the opportunity to communicate to those who didn’t make the cut. They’re told of the reduction in slots this year and are reassured they will be reconsidered for participation the following year. They are disappointed they won’t get to attend this year, but are glad that when their turn comes they will not get a second-rate version of a program that has become well-respected.
• Those who did make the cut are told they were among a smaller group chosen, leading to a clear understanding of the company’s desire to retain them over the long term and even more accountability to put what they learn into visible practice.
In this way, a spending cut ends up positioning the company to reinforce its commitment to a development program that really makes a difference. Most companies tell their employees that they are the firm’s most important asset. Company X found a way to walk that talk.
Ensure All Training Efforts Are Critical to Continued Business Success
The key issue here is deciding what behaviors, industry gatherings and activities are truly critical to business success. When budgets are cut, learning and development managers need to ensure a clear line of sight exists between training efforts and the value they provide for the business and its customers. A good example comes from the manufacturing sector: A downturn is not the time to scale back training on quality or safety techniques. Any refinery manager will tell you the same thing in a heartbeat.
On the other hand, an economic downturn probably is a good time for a company expanding in Latin America to limit Spanish-language instruction to only those being deployed there in the near future. Broader training across the talent pipeline in this area can be resumed once the economic storm has passed.
In truth, a time of universal economic contraction may even be a time when expanded training efforts become necessary. Key customer relationships may cool due to less frequent in-person visits and increased reliance on voicemail and e-mail. This may happen at precisely the moment when the customer is looking for its own ways to cut spending.
Companies in this situation would be wise to invest in new or enhanced targeted sales training to ensure confidence and credibility in dealing with nervous clients. It’s human nature. We all want to affiliate ourselves with the strong, the confident and those who will survive. Customers of organizations are no different. They want to know that the entities they outsource to or buy products from will still be there after an economic downturn has run its course. Such a strategy not only serves an immediate business need but also positions the company well for when the economy regains its health.
Leverage Learning From Work Experience
An economic downturn is a great time for companies to think beyond the traditional workshop format. Much can be learned on the job and in collaborative groups. Simulation-based learning, increased coaching and mentoring, and looking to company leaders to teach others based on their own experiences all can have a deeply positive impact on the leadership pipeline.
Whether the format looks like a community of practice, an action learning team or simply a facilitated discussion group, learning and development leaders can help get people talking with each other about their own experiences and what they have learned.
Look to Technology
Technology-enabled learning can extend development investment when economic times are tight. Similar program content can be delivered without the associated travel costs, and if done well, an atmosphere of engaged group learning can be maintained.
Let’s look at another example, this time from a firm we’ll call Company Y. This organization has professionals based in locations around the globe. These individuals gather in person twice each year to review case studies, swap notes and discuss the latest trends. Company Y anticipates a slowing economy and makes a decision to eliminate these twice-yearly gatherings to save travel and accommodation costs.
But Company Y doesn’t stop there. In fact, its corporate leaders have been researching lower-cost alternatives ever since the meetings’ costs were tagged for discussion. After all, the value of these best-practice exchanges are tangible and are one reason why Company Y’s people are so clued in to the needs of their clients. Although Company Y eliminates the twice-yearly in-person gatherings, a quarterly webinar is instituted in its place to cover the same topics. The employees experience continuity of best-practice information flow. True, employees miss the face time with colleagues, but at least they know their needs for connection and development still matter as Company Y realizes cost savings.
Companies should look to intranets, online chat rooms, SharePoint technology or other existing resources to enable collaboration and idea exchange between teams and colleagues geographically separated from one another.
Move From ‘Training’ to ‘Development That Makes a Difference’
Learning professionals know that, as engaging as any training event can be, the lessons learned quickly can dissipate and fail to translate into meaningful changes on the job without an effort to make the learning “stick.”
To reap full the benefit from resources spent on learning and development, companies need to effectively communicate expectations to the individuals who will be taking part, as well as to their managers. Success is more than just showing up at a training event. Insights must lead to action, and action must translate into practical improvements in performance.
Taking a realistic approach to learning and development means ensuring people know what needs to be improved, they are motivated to improve and they get useful knowledge and tools to address their targeted areas. They also need opportunities to apply what they have learned, and they need to be held accountable for improvement. These strategies can help drive effective integration of new skills. They’re also another example of a reaction to an economic downturn that can have a lasting positive effect on the company long after the economy has improved. Learning professionals can seize the moment to drive best practices into place.
Foster Dialogue About How Competitive Advantage Can Be Maintained or Enhanced
An economic recession is like any other type of organizational change, only this one is imposed from the outside. Employees and management can’t hide their heads in the sand waiting for the recession to pass or for the “other shoe to drop.” The challenge needs to be faced head-on.
Learning and development leaders can help foster dialogue among employees about what the business needs to do to be more competitive than the next company. After all, the whole industry is in the same situation. Issues need to be addressed with emotional engagement, not just a set of dispassionate adjustments. This is the time to increase communication in all directions and encourage employees to respond thoughtfully. Ask them to help prioritize how development dollars get spent. Such discussions often yield surprising and valuable insights.
Set the Stage for Increased Competitive Advantage
Recently, Personnel Decisions International conducted a survey of human resources professionals and other business leaders around the globe to uncover organizational approaches to retention of key employees in the slowed economy and what tactics they have found to be most successful. Among the 530 respondents, 93 percent said retaining key employees is even more important during an economic downturn.
Perhaps counterintuitively, the survey found “accelerating the development of key employees” to be a more effective tactic to retain these individuals than “competitive pay and benefits.” These responses offer real-world evidence that employees want development opportunities and will stay with the company that offers them.
Skillful learning and development leaders can foster a common vision of what it looks like to be successful, even in a recession. Those who do so will mobilize and focus energy across their organizations, both for today and tomorrow, as they become catalysts for action and learning.