Conversations about a global recession keep getting louder, but there’s still a lot of speculation around it. Nevertheless, how should companies respond to the current economic environment? Postponing new projects, freezing the hiring process, and reducing other expenditures such as marketing, research, and training are decisions many businesses make in an attempt to prepare for the upcoming storm.
Yes, Learning and Development (L&D) budgets have suffered from economic downturns in the past. In fact, at the beginning of the pandemic, training became the first victim of budget cuts. But then, the labor shortage came in and pushed HR managers to adjust their talent management towards a multi-skilling approach.
If we’ve learned anything from previous recessions, it’s that they’re typically short-lived and followed by long periods of growth. According to a Harvard Business Review article, the period after World War II is one of the greatest expansionary phases in modern times. It was also the case for the Gulf War recession (1990 to 1991), the dot-com bubble (2000 to 2002), and the Great Recession (2008 to 2009).
Now, the same dilemma comes into the picture in the face of the looming downturn. Is cutting your L&D budgets a smart move during an economic downturn, or should HR managers invest in training and skilling talent?
Let’s explore the reasons for and benefits of investing in training during tough times and what the future holds in the L&D field.
Reasons for Investing in Development Programs
A group of panelists from the Forbes "Building The Workforce of the Future" virtual event talked about the 'skill-first culture,' and how learning and development helps companies to do more with the team they already have.
Despite the never-ending discussion about budget constraints, especially when a recession is around the corner, they listed some reasons to keep investing in your most important asset, your people.
Retaining your best talent becomes particularly relevant when you may be limited in resources but still need to drive results to survive hard times. A study by TalentLMS and The Society for Human Resource Management (SHRM) shows that 76% of employees agree that they are more likely to stay with a company that offers continuous training.
When your high-performing employees stop receiving those benefits because of budget cuts, they won't find the same value and motivation in their jobs as they did before, and loyalty can be affected. As a consequence, they could leave the company during the economic downturn or when the job market becomes competitive again.
Losing your top talent and highly-driven employees significantly impacts your bottom line. SHRM estimates that replacing an employee costs, on average, 6 to 9 months of their salary. "For an employee making $60,000 per year, that comes out to $30,000 - $45,000 in recruiting and training costs."
The question here is if it's worth it to take short-term measures that will heavily impact the bottom line in the long term.
Benefits of Investing in Training
The same study yielded some interesting findings about HR managers' take on L&D programs and their respective budgets in their organizations. It also gives us a bigger picture of how employees perceive these benefits and how that affects their commitment, performance, and motivation.
Here are the positive findings of the study:
And here's what HR leaders said about the positive impact of training in different areas of their organization. It's a powerful tool to improve performance, productivity, and engagement and also to build a healthy company culture and employee loyalty.
But If Budget Cuts Are a Must…
We’ve seen all the data that confirms how beneficial it is to invest in training during a downturn. However, some businesses will need to make some cuts to recession-proof their operations and survive the post-recession period.
If you’re faced with this decision, you can still take some actions to avoid the long-term impacts of cutting back on your learning and development programs, courtesy of the Association for Talent Development.
What the future holds for L&D
I think we can all agree that the pandemic accelerates changes in different areas of our lives. We witnessed big transformations in organizations, and the way businesses are run. And L&D plays a big role in those changes.
The TalentLMS and SHRM survey asked HR leaders how they expect training programs to evolve in the next five years, and these are the areas they see big changes happening.
Adapting to change, responding to demands, and increasing the expertise and knowledge of your team doesn't necessarily mean expending lots of money. New training methods can bring down expenses, and e-learning is just one good example. Once you understand that development programs impact your bottom line, you'll treat training as an investment rather than an expense.
The Girard Training Solutions team includes experts in Learning and Development, Management Development, Facilitation, Learning Experience Design, Project Management, and Graphic Design.