During an economic downturn, there’s a domino effect — demand goes down, impacting sales and revenues. In response, organizations look for ways to reduce their operating expenses as the first play in a series of measures to weather the economic storm.
In response to the question, “What can we cut?” there are some quick fixes that hurt less. Training is often at the top of the list because it has an immediate impact on your bottom line but won’t have much of an impact on morale, since you’re not laying off people or calling off projects.
Cut Today, Lose Tomorrow
The problem with this thinking is that it’s shortsighted. You made that training investment today to gain long-term benefits tomorrow — the employees you are training will not only benefit today but for years to come. The training they receive creates a foundation on which they’re going to build their experience.
It might seem counterintuitive, but you should invest more in training during an economic downturn, not less. Training providers are significantly impacted by demand, so you can usually probably get training at a discount or get more value for your training dollar.
Keeping your training commitments is also good for morale and shows your employees you’re thinking about the future, even as you take steps to handle the current challenges.
It’s not just about your employees. The training you plan is targeted to areas that will benefit your organization’s goals in the long run. By cutting training, you’re compromising long-term returns to cut short-term expenses.
The First Cut Usually Isn’t the Deepest
For most organizations, cutting training is the first step during a downturn, but it’s never the last step. If demand for your products and services goes down, you won’t need as many people to support the development of your product. That means layoffs, which results in smaller teams who need to do more work.
Losing team members impacts morale — employees may be concerned that they are next and disturbed by the loss of their colleagues and friends. They may need support to help them adjust to the new realities of their day-to-day working life.
Once cuts in the workforce have been made, those that remain probably need to be able to do more, so you’ll want to invest in training so they can gain new capabilities — to expand from their current silo of specialization into new areas. Giving these team members thorough training is going to be a huge benefit you can’t afford to lose.
When you look at capital versus operating expenses, such as when you build a product, it doesn’t affect your short-term profit and loss (P&L) because it’s a capital expense amortized over time. It affects your cash flow, but it doesn’t affect your profitability, so organizations are less likely to cut those. Whereas training has been deemed by tax authorities as an operating expense that doesn’t yield a long-term asset that you can amortize over time.
Learning and development (L&D) leaders know differently. When we invest in training, we expect to get a long-term return, and as a result, it should be treated like a capital expense and be in sync with your long-term plans for your organization.
Take the Longer View
If you’re going to invest in training, especially during an economic downturn, you should start to favor long-term career paths. If you look at the type of people that you’re training, the tendency is to upskill people for the job that they’re in, which is important. However, you should also start reskilling them for the job that you think they’re going to have or the work they’re going to be doing 12, 24 or 36 months from now.
As a developer, getting training on the latest framework or the latest tools is essential, but it’s also a good idea to invest in training people in leadership or communication skills — things that may be just out of their current scope of work today, but on the cards for the future. Doing so will yield a more strategic return on your training dollar.
Align Your Training Goals With Your Strategic Goals
Your training spend should align with your strategic goals. If you’re undergoing a digital or an organizational transformation, you’re probably not going to put it on hold, so the training and development that supports that transformation can’t stop either, or it will jeopardize the entire process.
Failing to consider the impact of training budget cuts on your strategic initiatives is perilous. Any transformation requires people taking on new roles and responsibilities and learning new skills and tools. Whether you’re looking at training or coaching as a way of developing those skills, they are an essential building block to make that transformation a success. When you cut spending on those essential building blocks, you’re putting the organization’s strategic initiatives at risk. By thinking ahead to when there’s an economic upswing, you’ve got a far better chance of having the team you need to meet the next challenges that come your way.