Edwards Deming has said it wisely – “Learning is not compulsory but neither is survival.”
Corporate giants with rock solid foundations suddenly find themselves shaky and apprehensive of being sucked into the quagmire of bankruptcy
During economic downturns, healthy companies consolidate their strength to achieve competitive edge through various repositioning strategies which include innovation, upgrading human assets, restructuring of cost base and adopting better operating models.
Experience shows that economic downturns are unavoidable cyclic business phenomena. The current crisis has cast its dark shadow across the globe heralding an atmosphere of gloom and in some cases spelling out the doom. The overall impact as felt by almost all business organizations world over includes dwindling market capital, plummeting share price, credit crunch and restricted fund flow even to sustain the day-to-day business operations. Organizationally the structures, systems, processes, budgets, projects, supply chains and order books take a severe beating. From the customer’s perspectives the debt to disposable income ratio goes on the incline and the Personal Saving Rate on the decline while reluctance for new investments and volatile expectations rule the market. In the employee dimension, mounting anxiety and apprehension as well as slipping morale and motivation directly affect productivity and key talent is ripe for plucking by the competitors. In this article, we will explore what could be the implications for the Learning and Development function.
Maslow’s Model Revisited
If one looks at the well-established ‘Needs Hierarchy Model’ in respect of the individual, the company and the customer, one finds the focus shifting to the bottom of the pyramids. Survival becomes the central focus in these difficult times.
Corporate giants with rock solid foundations suddenly find themselves shaky and apprehensive of being sucked into the quagmire of bankruptcy. The responses to the current downturn generally hover around survival, consolidation and growth singly or in combinations. While survival strategies focus on operational cost optimization, stricture on all non-essential expenditures, disposal of surplus assets and re-negotiation of various contracts, healthier companies consolidate their strength to achieve competitive edge through various repositioning strategies which include innovations, upgrading human assets, restructuring of cost base and adopting better operating models. However, companies with strong business models and stable order books use the downturn as an opportunity to grow through green field investments, mergers & acquisitions and enhancement of their global footprint.
Learning & Downturn
Edwards Deming has said it wisely – “Learning is not compulsory but neither is survival.” It is common knowledge that learning is essential for both survival and sustainability. In the current scenario of cash crunch and cost cutting the first thought of denominator management that may cross the strategist’s mind could be to cancel all training programs and review when the situation improves. It is not uncommon to see corporate training budgets being tightened as an obvious outcome of overall cost cutting measures. However, the good news is that most organizations are unlikely to pull the plug on professional skills development in 2009 as a result of economic downturn, as revealed in a new survey by Cegos. In this opinion poll, 254 senior L&D professionals participated during November 2008 out of which only 17 percent have plans to cut budgets and the rest expect their budget either to remain the same or increase with respect to 2008.
A recession is an ideal time to recalibrate one’s learning strategy and to seek answers to the following questions:
- What would be the ‘real’ savings in case of cutting down the training budget?
- What would be the ‘cost’ of not investing in training at tough times like these, when capability building is the need of the hour?
The L&D budget typically represents a small fraction of a company’s total expenditure budget. Indiscriminate budget cuts can impact the development plans and programs adversely and yet would hardly make a significant dent to the company’s bottom line. Let’s take an example: in a manufacturing company setup the obvious strategy could be to continue with technical training which directly drive the projects and products and to cut down on behavioural training including leadership development. In a closer examination, it may be seen that any reduction or elimination of leadership development would result in proportionate reduction in productivity and effectiveness of leaders. It may be emphasized that during an economic downturn an astute leadership assumes more importance than ever. During tough times the leaders have to face and tackle greater challenges in terms of organizational restructuring, productivity improvement, managing employee anxiety, finding innovative ways to drive value and working even harder to rebuild the business. In this perspective it hardly makes any sense to save a small amount of money by training costs at the expense of not building requisite skills, capabilities and internal networks.
Reorganize, Prioritize, Focus and Deliver
This is the time to sanitize the learning interventions and practices and align the efforts with clear focus on survival, consolidation and growth. During the growth phase companies setup and develop learning programs throughout the organization embedded into various functions and business units and the training function is mostly decentralized catering to individual needs. High impact learning organizations use a blended model of centralized and decentralized training, which is popularly known as the ‘federated’ model. Such organizations drive critical strategic programs centrally which enable enterprise level transformations and focus on operational excellence directly impacting business delivery through decentralized BU-specific learning interventions. Using downturns as an opportunity to leverage training for survival, companies may plan to rationalize the training portfolio focusing on anxiety management, role specific performance linked learning interventions, cost consciousness and denominator management, product improvement and numerator management, waste reduction in all dimensions, crisis communication, balancing growth enabling solutions with efficiency enhancement solutions as well as customer facing skills. When market forces compel companies to reduce their production, they perhaps would do best to keep their workforce engaged in meaningful training activities. The old adage of “An idle mind is the devil’s workshop” may be relevant in this context.
Ready for the next Downturn?
The current downturn provides a good learning ground for companies to capture the lessons so that they can prepare and not get caught unaware. The L&D department perhaps has a challenge to retrace the events during the recession especially in the context of the industry sector and the company, and assess the level of own preparedness as the recession hits the business, the company’s survival responses, successes and failures of survival strategies adopted, etc. This would help to design appropriate learning solutions which may be useful for the company to be proactively ready for facing the next downturn as and when it occurs.
Cost Optimization in L&D Function
Several cost optimization strategies may be adopted within the L&D function itself, while going through the litmus test of the current crisis. These may be enumerated as follow:
- Rationalize the program portfolio with an optimal mix of strategic and operational programs which directly enable the company’s business.
- Build internal facilitation and faculty capability with increased use of own subject matter expertise to reduce dependency on external resources.
- Leverage technology platforms to deliver appropriate e-learning modules, thus improving reach and coverage.
- Promote and foster informal and collaborative learning through networks, communities of practice, expert help desk, effective use of KM Portal, etc.
- Encourage and streamline workplace learning & self learning.
One thing that is certain is that the downturn is not permanent and eventually the gloom will lead to bloom and perhaps to boom in due course of time. Resting on your oars during a downturn and allowing yourself to drift with the current could be disastrous. During the recession, production might slow down but productivity may be kept high if time and opportunity are invested in training, thereby improving the readiness of the company to take rapid strides, rather than quantum leaps into the future. We must remember that, “The more we sweat in peace, the less we bleed in war”.