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e-Learning in the new economy

By Dr Amy Finn, Chief Learning Officer, Centra Software

Traditional training and learning initiatives within companies have focused on time consuming and costly classroom-based models of tuition. As such, training becomes an immediate and obvious target for cost cutting in times of recession, even though such cuts are a false economy long term. The availability of collaborative eLearning technologies revolutionises both traditional training practices, but also reaches out into the wider business strategy to change the way entire organisations work.

Part 1: The Cinderella factor

It's with good reason that corporate training budgets have been described as the Cinderella of the IT world. Last to be considered in boom times when funding is being allocated, they find themselves at the head of the queue when it comes to finding things to cut back on during the lean times.

In the post dot com and 9/11 slump and with the long term financial impact on the global markets of corporate scandals in the US still uncertain, organisations around the world have begun the 21st century feeling the pinch. As a result companies across all business sectors have had to find ways to operate more efficiently and the training budget has once again caught the cost cutting attention of senior management.

Training and skill development is a so-called soft target. There are clearly quantified hard costs associated with traditional classroom-based training in terms of travel and lodging expenses, tuition fees and lost productivity from having employees away from their revenue-generating day-to-day activities even for a short period of time.

US consulting company Watson Wyatt's annual survey of more than 600 companies from 16 countries confirms yet again that for many senior managers the attitude towards trainings is that the main impact of training costs, contractors and "excessive paternalism" is to hit profits.

In contrast, the return on investment (ROI) from investing in training is not so easily quantified in hard cash terms and is more dependent on qualitative assessments. So training and travel budgets are the first to be cut back because an immediate positive impact can be seen on the bottom line.

But cutting back on training expenditure is a false economy. There may be a short-term effect on profit, but the impact on long term revenue is unlikely to be spectacular or sustainable. What may be sustainable will be the negative message that is sent to employees.

A recent survey of staff at 800 companies found that almost 80 per cent of respondents felt their employers do not provide them with enough training to perform their current job most effectively or to support their career development ambitions.

Staff are prone to feel that the company doesn't have their best interests at heart. Talented candidates might be persuaded to apply for work elsewhere. Despite the downturn in the economy it is not be any easier to hold on to the most valuable staff. While firms are able to deliver hard figures on the cash savings from cutting training and travel costs, few can provide similar numbers to indicate the cost of replacing intellectual capital in the form of a skilled workforce.

There is considerable research to suggest that the critical deciding factor in determining whether people change jobs is often less about salary and more because staff are unhappy with senior management and corporate culture. A recent study commissioned by KnowledgePool showed that 74 per cent of employees in the UK rate training to be as important as a better financial package, while 53 per cent believe it is as important as private healthcare and 55 per cent put it on par with a shorter working week.

In fact during an economic downturn, companies should be looking for ways to be more productive. They should be developing strategies for getting more from their people. In this context, training is an investment that can pay dividends beyond the immediate boost in performance, through increased loyalty and reduced staff turnover. Rather than being the first candidate for cutbacks, training should be considered out of bounds to the cost-cutters.

Back to Top > Part 2   

© 2004 Centra Software. Reproduced with permission. Any opinions or views contained in this article are solely those of the author and do not necessarily represent those of Training Reference.

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