One of the most important (yet often least respected) parts of business is corporate training. U.S. businesses spend on average over $60 billion per year in this area supporting an industry that includes hundreds of thousands of training professionals, content and tools providers, and technologies.
Well this year, driven by the tremendous need for workforce skills, spending has exploded. As the chart below indicates, U.S. spending on corporate training grew by 12% in 2012, the highest growth rate since we started our research. (Source: The Corporate Learning Factbook®, Bersin by Deloitte).
Fig 1: Changes in corporate L&D spending since 2006
This increase likely reflects three major forces shaping the US workforce:
- The need for specialized skills is increasing. Today, the top sought-after positions require extensive preparation and education to achieve company goals, reflecting the tremendous need for skills. Many high-value jobs (IT, manufacturing, sales, marketing, finance, etc.) require deeper and deeper levels of skills, and more than 60% of U.S. business value now comes from “intangible assets” – intellectual value.
- Workforce education and skills have atrophied. Employers tell us that despite the high level of unemployment in the U.S., nearly one-third of young candidates do not have the core reading, writing, and problem solving skills they need to be productive on day one. Many new hires need skills development in order to achieve their goals.
- Leadership development and succession management have become critical business needs. When we ask top HR executives to rank their top challenges, the #1 cited problem is “gaps in the global leadership pipeline.” Businesses have watched their workforce shift from baby boomers to younger workers and now should rebuild their leadership capacity. Such effort takes formal and informal training.
Shift toward Informal Training
As technology becomes widespread around the world, corporate training has shifted . This year companies grew their “informal learning” spending by 39%, demonstrating a steady shift toward social learning tools, knowledge sharing, expert directories, and other forms of information sharing. Mobile learning is now becoming mainstream.
As this shift has occurred, the instructor led training industry has also evolved. Today, companies spend only about 30% of their total L&D spending on instructor-led programs and this level has flattened off. The early promise of “all online training” has not proved to work in many cases, and companies have settled into a world of one-third instructor-led and two-thirds technology enabled training.
Many High-Impact Organizations Spend More
In last 2012, Bersin launched our High-Impact Learning Organization Maturity Model®. This model breaks all training functions into four levels of maturity, using more than 10 years of research and studies of thousands of organizations.
Our research shows that the high-impact organizations (those at levels 3 and 4) deliver significantly greater business outcomes than those at level 2, and more than 50% greater outcomes than those at level 1. This year’s Factbook, for the first time ever, breaks down detailed benchmarks by maturity level.
While many organizations view corporate training and development as an expense, clearly the high-impact organizations see it differently. Companies at levels 3 and 4 actually spend 34% more money per employee than those at levels 1 and 2, showing that “reducing the cost of training” is not a sound strategy. Many high-impact organizations spend more, measure the impact of training more broadly, and get far more benefit. In fact our research shows that these companies not only perform at higher levels, they have higher levels of engagement, retention, and employee and customer satisfaction.
The New Era of Global Skills Imbalances
Today’s business climate is one of global skills gaps. New technology, shifting markets, and changing demographics mean that manufacturers, service providers, telecommunications companies, technology companies, healthcare providers, and many other industries live and die by their skills. As companies globalize their businesses, the ability to build skills has become a deep competitive advantage.
The global economy may not be in full recovery, but the world of corporate training is. We believe this dramatic increase in spending demonstrates improved business confidence and the clear gaps in the workforce. Now is the time to revamp your L&D organization, and we are here to help you.
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