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 / Autumn 2009 / Issue 56(originally published by Booz & Company)


Rising to the Corporate Education Challenge

Amid layoffs and restructuring, many companies are rethinking, not discarding, their efforts to build worker capabilities.

Had the current economic crisis occurred in the mid-1990s, it would surely have been followed by severe cutbacks in corporate education programs. During difficult periods in the past, worker training and development initiatives were typically seen as little more than a pricey luxury. Today, however, amid layoffs and restructuring, many companies are rethinking, rather than discarding, their efforts to build worker capabilities. The notion that human capital management — and particularly employee learning — can create competitive advantage and support corporate agendas has never been more compelling.

There are several reasons for this trend. First, downsizing necessitates retraining. Add to this the related strategic changes: the acceleration of organic growth initiatives, movements into new and adjacent markets, and adoption of new business or operating models, such as increased offshoring and outsourcing. Learning programs can also help improve morale by sending a signal that the company plans to be around for the long haul; otherwise, why train workers and managers for the future?

And beyond the crisis, the strategic importance of corporate education is driven by broader trends. The rise of the service economy has made work more complex; employees are increasingly called on to solve problems, as opposed to performing rote tasks. Global economic liberalization, new regulatory requirements, and other changes in the world at large require employees to be sufficiently knowledgeable to perform a variety of tasks. Technological changes have forced workers to stay up-to-date on increasingly advanced equipment and practices. And the brain drain brought about by the retirement of the baby boom generation is shrinking the available talent pool, propelling an influx of new, undertrained employees. (See “The Talent Innovation Imperative,” by DeAnne Aguirre, Laird Post, and Sylvia Ann Hewlett, s+b, Autumn 2009.)

To explore how companies are addressing these challenges, in late 2008 Booz & Company conducted more than 40 interviews with senior corporate learning managers at Fortune 1000 businesses in the United States. Although all of the companies surveyed are making changes to their learning programs in response to the downturn and new business realities, some are taking a more sophisticated approach. They are seeking to maximize the value of these efforts, rather than simply reduce their costs. The core principle is alignment: explicitly ensuring that all corporate learning is tailored to match strategic business priorities. As they find ways to do this, these companies are redefining the role that corporate learning plays in their companies. 

Because of their large workforces and highly competitive environments, Fortune 1000 companies are among the most committed to learning programs. Indeed, they account for almost half of all corporate education spending in the United States, despite representing only 1 percent of businesses. Many of the interviewed executives believe that much value can be gained from a more strategic approach to learning, and that they have not yet made enough progress toward this goal. Nonetheless, through their experience in implementing learning initiatives, a set of principles is emerging, each with its own best practices.

Align Learning with Strategy

Which learning programs should be implemented?

Identify critical learning requirements for the enterprise. In many companies today, decisions about spending on learning are highly fragmented and difficult to trace. Thus, many companies simply do not know whether this spending is applied to the most strategic learning challenges. Executives should begin by engaging leaders throughout the business in an explicit discussion about the company’s corporate, business, functional, and talent strategies. These strategies should then be translated into a set of learning priorities and investments.

Anticipate the retirement of existing employees by creating an explicit plan for knowledge transfer and managerial development. In most companies, programs to develop executives and line managers do not exist or are inadequate. For example, fewer than three in 10 organizations currently make knowledge transfer a core part of these programs, according to the American Society for Training and Development (ASTD). Meanwhile, demographic shifts, including the aging of the workforce, are adding to the difficulties many companies face as they try to fill their skill gaps.

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