Time to Reduce Costs in Corporate Learning & Development

Our soon to be published research on corporate L&D spending in 2008 shows a definite slowdown in spending on corporate training.  (An 11% drop!)  This is certainly not a surprise – in August our research panel shows that today’s corporate talent managers cite “a need to reduce costs” as their #1 business challenge (54% of all respondents, up from 51% in May and 36% in January).

One of our long-term research clients is a large pharmaceutical company which has grown by leaps and bounds over the last decade.  This company, like many others in this industry, invests heavily in R&D and has benefited from the tremendous success of many of its blockbuster best-selling products.  

In the last 18 months, however, growth has slowed – so this organization is now looking for ways to better rationalize its spending on corporate training and other business support functions.  A few recommendations to consider, based on this organization’s situation:

1.  It’s time to build a truly federated spending model for training.  Centralize the programs and functions which are repeatable and scalable (typically these include leadership development, career development, LMS and training technology, vendor operations, and advanced e-learning.  

In this industry companies typically have strong functional business leaders in sales, manufacturing, research and development, and corporate functions.  These business units are going to have to give up some autonomy and rely on a shared services or corporate university function.  Such a move can save 10-15% or more of a company’s training spending with little or no real reduction in effectiveness.

2.  Rely heavily on informal and collaborative learning.  One of the least expensive ways to improve programs like onboarding, management and supervisory development, and career development is by focusing heavily on building collaborative programs which rely on communities of practice, social networking, and coaching.  David Mallon’s recent research (and soon to be published study in this are) shows that among all the social networking program in companies today, the most prevalent and successful are communities of practice.

Pharmaceutical research teams, sales teams, manufacturing teams, and technical teams can all learn rapidly and easily from each other.  And the L&D spending on such programs is minimal.  

3.  Rationalize external spending.  Most big companies (like large pharmaceuticals) have many suppliers.  In a decentralized L&D environment it is almost impossible to efficiently manage these contracts.  While many excellent learning solution providers deliver high value (e.g. supervisory training companies, content development firms), they also look for opportunities to sell services to multiple business units in a global company.  When you centralize vendor operations you often find 20-30% extra spending in many program and functional training areas.

4.  Consolidate the LMS and build a talent management systems strategy.  Finally, focus on the area which most companies have been focused on for a few years, consolidation of the corporate LMS.  Our research shows that almost 70% of large corporations (more than 10,000 employees) are now focused on LMS consolidation.  This process, in conjunction with the development of an integrated talent management systems strategy, will save millions in IT and technical expenses.

Today nearly every major LMS vendor also has an integrated talent management (e.g. performance and succession management) suite.  Look carefully at it, because our research clearly shows that organizations which buy their LMS from the same supplier as their talent management system are seeing 3-4X the return from those who buy them from different companies.

I know cutting costs is not always easy.  But it is something we must deal with continuously, and today it is probably one of the most important things you will be asked to do.