Training expenditure is down – more bangs for less bucks, or a misfire?

By Mark Beatson - Chief Economist, CIPD  @Markbeatson1

 A story in today’s Financial Times , published in the run-up to tomorrow’s JP/Morgan/IPPR European Jobs and Skills Summit, reminded us that employers are spending less on training than they did before the recession.

 The figures for employer investment come from the recent National Employer Skills Survey, a humungous survey of some 91,000 employers conducted on behalf of the UK Commission for Employment and Skills. The survey produces an estimate of total employer investment in on-the-job and off-the-job training, including (importantly) the opportunity cost of the time that workers spend being trained.

 Employers invested £42.9 billion in 2013, down 5% from the 2011 estimate of £45.3 billion in 2011.  Comparisons over longer periods become more complicated but the data for England show a big increase between 2005 and 2007 followed by much smaller increases between 2007 and 2009 and 2009 and 2011.  These are nominal figures with no adjustment for inflation.  It is not easy to work out precisely how we should adjust for changes in cost – after all, the “rate of inflation” for the labour costs elements will have been very low between 2011 and 2013 because average earnings were falling in real terms.

 We know that some employers did cut training budgets due to business conditions during the recession.  According to the 2011 Workplace Employment Relation Study, 12% of employees in workplaces with 5 or more employees said access to training had been restricted as a result of the recession. However, given the severity of the recession, this might have been expected and it could even be argued that the numbers have held up reasonably well in the circumstances.  Employer investment in training in 2013 was (approximately) the same as in 2007.  Total business investment in 2013 was about 10% lower than its 2007 value.

 Furthermore, the amount of training delivered – in terms of number of training days – fell by just 2% from 115 million training days to 113 million training days.  Now the number of employees increased between 2011 and 2013 and the proportion of them receiving training increased quite a bit, from 55% to 62%.  This happened because the average number of days training received by each employee who received any training fell from 7.8 days to 6.7 days. We can also surmise that the average cost to an employer of a day’s training also fell. Training has been spread more thinly (and cheaply).

 Of course, the amount of spend does not guarantee either quality or relevance.  Many employers have been looking for ways to make under pressure budgets go further. The period between 2011 and 2013 saw a slight shift away from on-the-job to off-the-job training and, as a result, employers paid more in fees to external providers but spent quite a bit less on on-site training centres and on managing training. No doubt they bargained hard with providers on fees too – we’d be interested to hear our L&D consultants’ views on this.

 Probably even more significant is the use of distance learning and e-learning, which can reduce the cost of tuition and is potentially less disruptive to the business than taking employees away from their workplace (and, who knows, some employees may do some of it in their own time).

 Of course, at this point, we very much reach the boundaries between ‘training’ as employers see it and informal learning.  For example, qualitative work undertaken to support the NESS found that few employers would regard guidance from a supervisor or colleagues in how to do their work as training, yet this might well be a very important element in building (or cementing) competence.

 A push for better value does not mean that employers have been buying their training from the Pound Shop. Anyone who’s ever sat through an off-the-job course proceeding at a snail’s pace will know that longer does not always mean better – although, for some employees, the smartphone provides a way of getting some of that time back. At the same time, no doubt you sometimes get what you pay for.  The problem is that most training does not lead to nationally recognised qualifications. There may be good reasons for this, but quality is more difficult to judge outside a framework of this kind.  And most employers do not have robust estimates of the returns to their training investment because they don’t have either the data or the analytical framework to permit this – another reason for the Valuing your Talent initiative.

 But even if the headline numbers may not be the whole picture – because employers have been investing more efficiently – has the investment been effective?  Is the investment actually used in the workplace?  The single biggest category of employer spend is in ‘job-specific training’ but are the skills required to do the job enough for an increasingly competitive global economy?  Even if an employer hasn’t sourced their training from the Pound Shop, it could be where their business model is from.

 A recent report for the CIPD by Ken Mayhew and Ewart Keep from SKOPE highlighted the links between product market strategies and skills demand.  The 2013 National Employer Skills Survey found that establishments with “high road” product market strategies were more likely to engage in training than establishments with “low road” strategies – and the average training per employee was also higher.  The risk is not just that employers under-invest in training because of a lack of demand for skills – it is that the very considerable investment they do make doesn’t achieve its full impact because the competences acquired are under-used.

 

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  • Thanks for this post Mark. You ask for L&D consultants' views on budgets and bargaining, so here's my two-penneth:

    Yes, I've noticed reduced budgets for external providers at many of my clients in the creative and media sector. Same goes for peers working in other sectors.

    Although your stats suggest in-house facilities are being squeezed, I hear 'we can do that in-house' more often these days.

    Multiple 'vendors' (new term for supplier in many orgs - which says something in itself) often asked to bid. One contact lost out to a rival quoting half her fee - we don't know how the rival managed to deliver, but they got the job. Memo to self: I think we can and should do more to support our clients when they pitch projects to CFOs & co.

    Buyers love the idea of e-learning as a means of achieving scale gains and cost reductions - understandably desirable. But I hear learner enthusiasm and completion can be low.

    On the positive side, I'm seeing clients supporting the middle manager level, which I think addresses historic budget allocation imbalance at top and bottom of the org (with small change left for the middle). And the love of e-learning is pushing providers like me to find ways to make it work, making what we do more sticky and better value.


  • Hi Dawn, thanks for your comment.  I worked in consultancy for a short while and your comment reminds me of some of the tricks of the trade (if that's quite the right work). 'We can do that in house' sounds like a classic tactic to reduce the fee - they may not necessarily be able to do it, of course.  And the insanely low price quote where the bidder is taking a chance on being able to go back to the client and explain why it will cost more.  In a world of e-learning and MOOCs, I suspect a lot of organisations will be thinking "... there must be a way using technology to do things very differently and take out lots of cost" but without much knowledge of the effectiveness of different solutions - what can safely be delivered through a piece of e-learning and what requires a more sophisticated approach.  Another reason for organisations to visit the L&D Show!

  • Anonymous
    Anonymous

    Thanks Mark, this is quite useful, but I am more interested in the precentage of tureover organisations invested in the training stage. you metioned the training exprenditure is falling in these years, does there has a possibility that the precent of investment on training is stable, but due to the economic depression, the organisational turnover also declining?