This is bad news for organisations that place inordinate emphasis on the negative impacts on their future financial position. Chances are these businesses are already reviewing where they can adjust, reallocate or cut costs, and which expenses and benefits can be trimmed. Travel, team building, incentives and Learning and Development (L&D) budgets are, very likely, all under the microscope.
While prudent financial stewardship is always a good thing, taking a razor to activities that upskill, develop and motivate employees is not one but two things: it is penny wise and pound foolish. That’s because such action—even the rumour it’s being considered by senior management—creates fear and uncertainty in the hearts and minds of even the most loyal employees.
During taxing times, organisations that treat employees like disposable assets rather than their most valuable one inevitably suffer across the spectrum of retention, recruitment, productivity, customer service, brand reputation—and profits.
Helen Blunden, a leading Australian social learning and performance consultant, explains why: “The financial need to cut costs by withholding from employees the opportunity for their professional development, whether it’s denying them the time away from their job or the funding, creates a Catch-22. It may meet the immediate need to save money, but it sends mixed messages to employees about their value to management.
“This in turn may create feelings of resentment and disengagement at a time when the organisation desperately needs new ideas and employees who are strong advocates for the organisation.”
Chairman of the UK-based Learning and Performance Institute and renowned writer, organiser and speaker Donald H. Taylor says budget cuts are simply counter-productive for the organisation. “When an organisation takes 20 percent away from the training budget, and still requires more activity, everybody who's left in the L&D department is doing one and a half jobs. The result? The only focus is delivery and getting the course out next week,” he says.
“The focus is no longer on learning.”
A cost of doing business
Australian coach and facilitator Martine Barclay says smart leaders know that when the market slows it’s the best time to develop staff. “How organisations treat staff during quiet times impacts how they feel about the organisation—and whether they’re inclined to tough it out with them,” Martine says.
“Top talent that organisations can never afford to lose always have multiple options, but having properly trained staff across the organisation is one of the costs of doing business. There are always more effective places where costs can be cut first.”
Jeremy Blain, Regional Managing Director of Cegos Asia Pacific, agrees. “Cutting L&D budgets might appear an easy economy,” he says, “but many leaders now recognise that the cost to the business of doing nothing far outweighs the cost of investment.”
Adding to Martine’s earlier point, Jeremy says, “As employees increasingly take more control over their own development, they are prepared to look elsewhere if their development needs are not being met.”
Louis D. LoPraeste, a US-based global strategic consultant and advisor to Fortune 500 companies, takes a similar view of cost cutting, recommending that today’s business leaders consider a human-centric approach that puts the needs of employees, and their well-being, before profit.
LoPraeste writes: “Radical transformation of this nature is often the catalyst for tough assessments and decisions. These, in turn, become the crucibles from which the realignment of skills and re-organization are born.
“If profitability is the one and only core principle in your management acumen, if you are yet another person chanting, ‘ROI! ROI! ROI!’, then I can assure you that the very real and impactful nuances that your people bring to work every single day are most likely going to get lost—taking your precious ROI right out the door with it.”
More, not less
Tough business conditions are not bad news for everyone, however. Opportunity positively abounds for organisations that commit to investing more, not less than their competitors do in their people during hard times. Research from the International Business Center at the USA’s Michigan State University backs this up. It shows that an organisation’s fate is, to a great extent, self-determined—a reality that’s markedly more evident in a sluggish economy.
And there are two components to this capability. The first is strong leadership, which becomes increasingly more important when an organisation is under stress and its employees seek certainty in uncertain times. Here the essential leadership abilities include being able to articulate clear goals, organise and direct concerted efforts, set the emotional tone that inspires, and keep everyone “on message.”
As Doug Conant of Campbell’s Soup famously said, “To win in the marketplace you must first win in the workplace.” Successful CEOs who’ve led businesses through recessions and depressions invariably report that good employees and a strong, people-focused culture helped them endure the hard times. Also, that when the organisation was under pressure, it was essential that culture was not sacrificed. Instead, these leaders evoked their culture, and by doing so strengthened it.
Which is precisely the leadership style Louis D. LoPraeste extols: “Namely, thinking creatively, embracing change and not only advocating but actually pursuing continuous education…preparing your people with the appropriate emotional tools to effectively deal with business challenges and excel in their roles.”
The second piece of the capability puzzle during difficult times is the extent to which an organisation is able to improve efficiencies in its workplace. This is a capability that may be driven and directed by leaders, but it’s largely fuelled by the attitudes and skills of rank-and-file workers.
Leaders can, to begin with, use slowing market conditions to re-examine how resources are being used to support learning at work. This is the view of international consultant and speaker Harold Jarche.
“Depending on how effective the L&D budget is being used in tough times, using the 70:20:10 lens, for example, and shifting the focus from pushing courses to supporting learning in the workflow can actually save the organisation money,” Harold says.
Delivering L&D initiatives in clever ways is important too, according to noted digital and future learning strategist Cheryle Walker. However, she stresses that the quality of learning is much more important than how it is delivered or the dollars spent. “By measuring and promoting mature learning behaviours, successful organisations can extract much more value from internal and external learning systems and networks,” she counsels.
“And this doesn’t have to involve changing delivery channels or developing new programs— some effort on defining, articulating and promoting productive learning behaviours can reap more value from what is already in place.
“In fact, an organisation that doesn't focus on how learning really occurs within their culture could be wasting their time and money," says Cheryle.
All the right skills
At the end of the day, improving efficiencies in the workplace comes down to the readiness of employees to follow their leader. To paraphrase leadership guru Jack Welch, energised employees who believe in the mission and understand how to achieve it are fundamental to customer satisfaction and cash flow.
Once employees believe in management’s vision, being able to achieve the mission is the next step. For this, staff need the technical skills to get the most out of their organisation’s tools, systems and equipment. True. But they also need the so-called “soft skills”—in times of stress more than ever—that help them cope with that stress and also communicate, innovate, motivate and lead.
Cegos’s Jeremy Blain believes many companies fall into the trap of slashing spending on professional development, such as improving negotiation or communication skills, in favour of technical, product and compliance or legislation-related training. “Technical, product and compliance training are of course very important,” he says, “but in hard times organisations must have effective managers, high-performing teams, sales people who have a competitive edge, and employees at every level of the organisation who can communicate clearly.
“To me, these are not ‘soft’ skills but tough skills, indeed critical skills every organisation must have—especially when it’s battling,” Jeremy explains. “Not only do they help employees meet the immediate challenge, they increase their capabilities over the long term. Plus, they bring the added benefit of motivating employees because they feel valued when management invests in their future.
“I think it’s a no-brainer,” says Jeremy. “Organisations that invest in developing core professional skills such as leading change, increasing line manager capability, improving sales and negotiation skills, for example, are more competitive because their employees are ready, willing and prepared to impact organisational key measures.”
True competitive advantage
When it comes to skills, whether technical or inter-personal, it’s wise for senior leaders to remember the words of English author and historian Thomas Fuller: “Tis skill not strength that governs a ship.” Skills and competencies that build workforce resilience, increase productivity and motivate team members are a leader’s ultimate competitive advantage, essential for organisations to survive hard times and emerge from them even stronger.
Each and every training session—whether it’s in a classroom, online, just-in-time, one-on-one or social—is a critically important lever that leaders can pull to ensure their organisation has the capability to grow during boom times and bad. It’s good business sense, not rocket science.
Another thing’s certain, and that’s this: reducing efforts to develop and support your employees because of torpid economic conditions is worse than false economy, it’s the best thing you can do to give aid and comfort—to your competition.
Don't let the economic jitters jeopardise vital learning and development activities. You may be able to do more than you think with your L&D budget. Call us on 1300 768 550 and talk to one of our learning advisors about our blended learning methods and expertise in designing learning programs that are right for your organisation today, and for whatever tomorrow may bring.