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.
In the near term, these problems will affect only a few labor-intensive industries, such as agriculture, mining, transportation, and utilities. But over time, all industries will face the challenges of an aging workforce: transferring retiring workers’ knowledge to newcomers, developing executive talent, closing skill gaps, and retaining high-potential people. One leading retailer has aimed its learning programs at existing talent, a break from the past, when its development efforts were concentrated on recruiting new employees. By instituting a comprehensive executive coaching program — including individualized development plans and periodic checkups — the retailer reduced executive turnover to 14 percent in 2008 from 26 percent in 2006.
• Develop a plan for better use of general education programs. Most large companies offer tuition assistance to help workers fund their education or take courses for personal enrichment. Unfortunately, many companies treat these programs as recruitment or retention benefits, not as a learning tool. This is a wasteful approach. To make sure that these funding programs support corporate learning and career development, companies should track expenditures, counsel employees on the education they should pursue, and make advancement contingent on the completion of degrees or coursework that the company sees as strategic.
• Get senior leadership actively involved. In many companies today, top executives are involved in generating business and functional strategies, but then delegate implementation to support functions or middle management. As a result, there is little institutional awareness at the senior level of the impact of corporate learning. Programs don’t receive the resources they need to be effective, and without executive involvement, accountability for the programs can also become highly fragmented.
It isn’t feasible for a senior executive team to get involved in every aspect of the corporate education curriculum. But top leaders can participate in the development of learning programs and the tracking of results. At one food manufacturer, the senior leadership signaled its commitment by funding a corporate university; this also helped recruit people to its rural headquarters location.
Build Broad Capabilities
Which skills and organizational models must the company pursue?
• Create a balance between local and global learning efforts. At large companies, tension often exists between specialized, local learning campaigns that serve the needs of business units and standardized, central resources designed to achieve organizational knowledge transfer and scale. Several companies have successfully addressed this tension through a federated model, in which centralized learning resources coordinate individual efforts and focus on methodologies, tools, metrics, and learning frameworks. Local learning managers then adapt these resources to address their specific business needs. In some cases, local managers may be allowed to develop their own training materials, but they must be certain that similar content has not already been created in the organization and they must make their materials available for company-wide distribution.
• Retain strategically important training in-house, and outsource more “generic” learning. Companies often gravitate to one of two unfortunate extremes when they create content for learning initiatives. At one extreme, they make the mistake of developing original content when perfectly good off-the-shelf modules are available. At the other extreme, companies outsource the development of all their learning content. In so doing, they miss opportunities to generate intellectual capital that could be used to create a competitive advantage, and they run the risk that their most valuable coursework will be resold to others.
The best approach strikes a balance: Those in charge of corporate education should create content that relates to core company competencies and outsource content creation (or buy off-the-shelf modules) for learning needs that are more generic, such as understanding a company’s rules of behavior or performance assessment program.
How should learning programs be adopted?
• Embrace technology innovations and increase the emphasis on “peer-to-peer” learning. Information technology can bring down the cost of corporate learning, increase its effectiveness, and make it more appealing to younger workers. For example, companies that adopt online training can reduce travel expenses for trainees. And these programs let employees do required coursework when their schedules allow, minimizing potentially costly disruptions to business.
Younger workers, who tend to be up to speed on the latest communication and collaboration technologies, have different learning needs and preferences. This generation has grown up with the idea that content should be available on demand, that data should be accessible anywhere, and that the best information is often provided, Wikipedia-like, by peers.
One software company surveyed by Booz & Company has created a knowledge exchange in which its workers are expected to post their own educational content. Face-to-face training has become the exception rather than the rule. This has led to a new role for the company’s learning officers, who are now accountable for fostering learning inside and outside the classroom.
• Work closely with content and delivery partners to improve the efficiency and effectiveness of joint learning programs. The days are numbered for outside educational vendors to push a one-size-fits-all product on corporate learning departments. To extract greater value without greater outlays, learning departments increasingly require that these companies be true long-term partners.
A global magazine publisher, for example, recently mandated that training vendors must offer customized programs based on the publisher’s business model and they must share with the publisher ownership of the content they create.
• Ensure a close fit between the corporate culture and learning and development programs. For example, ask executives to be directly involved in curriculum development and to teach courses or deliver talks themselves. This allows them to craft some of the company’s strategic messages and to get to know high-potential attendees. At some companies, hands-on teaching experience is essential for aspiring executives, alongside international experience and responsibility for a P&L.
Which metrics are most telling?
• Foster accountability through transparent measurement. The return on investment in corporate learning is notoriously hard to measure. The most salient approach is to establish visible guidelines to determine if programs are having the desired outcomes. These may include basic metrics for delivery, such as participation and completion levels; self-reported or observed changes in behavior on the job; and estimates by participants (or their bosses) about the impact of learning programs on the business.
Some metrics can be directly tied to results. For example, a training initiative’s efficacy can be measured by whether workers complete a process (such as new customer enrollment) more quickly after taking the course. Or the success of a learning program can be assessed by an analysis of annual retention figures.
Although the practices described here offer guidance on successful initiatives, they cannot give the whole answer. For that, leadership teams must fully understand the challenges facing their organizations, in terms of both strategic priorities and the requirements of a dynamically changing workforce. This is not a time for playing it safe. The ground is shifting, and executives must use corporate education to put their companies in a better position.
- Thomas Ripsam is a partner with Booz & Company based in Florham Park, N.J. He focuses on the consumer and media industries, specializing in developing and implementing strategies to improve sales and marketing effectiveness and organizational efficiency.
- Edward C. Landry is a partner with Booz & Company based in New York. He focuses on strategy development, business transformation, and sales and marketing effectiveness across a broad range of consumer businesses, and is coauthor (with Leslie H. Moeller) of The Four Pillars of Profit-Driven Marketing: How to Maximize Creativity, Profitability, and ROI (McGraw-Hill, 2009).
- Bradley Fusco is an associate with Booz & Company based in New York.