US training organizations grew their spending by 12% in 2012 with similar growth rates expected in 2013.
This is the highest growth rate in the last 8 years.
Why the high growth? Companies realize that despite the high levels of unemployment in some locations, skills are hard to find. Jobs have become more specialized and even highly skilled professionals must continuously reinvent themselves. Plus, as recent research from McKinsey points out, educational institutions are not developing graduates who are immediately ready for work.
We have been studying the corporate training industry for over a decade, and it continues to change and evolve. Businesses spend more than $62 billion on training in the US alone, and more than 50% of all dollars go into technology, tools, coaching, and other "non-instructor led" solutions. (Globally we estimate the market at around $135 billion.)
The e-learning industry is over $2 billion and growing, but has changed dramatically. Today employees want their training to include video, games, and a whole next generation experience. Much of our research shows that modern best-practice research focuses heavily on the "learner experience," and is highly tailored to the working environment of the employee. Training for sales people, for example, is integrated with the CRM system. Training for new hires is often delivered on mobile devices or integrated into social networks.
The explosion of Massive Open Online Courses (MOOCs) is further expanding the market. Organizations like EdX, Coursera, Udemy, and Academic Partnerships are delivering free training and education materials (charging for academic credit), further expanding opportunities for corporate training.
High-Impact Organizations spend More
Most companies struggle to understand where and how to spend training dollars. Are you spending enough money on training? And is it being spent in the right way?
Our research shows that while underfunding training is a problem, the use of "average spending" benchmarks can be misleading. While the US "average" spending on corporate training is around $706 per year, actual spending levels vary from $200 to over $3,000 per year depending on industry. You, as a training leader, should benchmark yourself against similar organizations in your industry.
Retailers, which have high levels of turnover and employ lower wage workers, for example, spend less per employee but actually deliver more hours. Training is typically delivered by store managers and local programs, supplemented with many online programs. Professional services organizations (consulting firms, for example), spend as much as ten times retailers, and programs must include many hands-on exercises and activities to develop strong client management
Our research also shows that organizations with highly mature L&D functions (we call them High-Impact Learning Organizations) spend 34% more than others. This shows that spending more money on training pays off when it's done well.
Most organizations find it easy to cut the training budget. But over time these decisions reduce workforce productivity, and there's nothing more expensive than employees who do not have the skills to do their jobs well. And remember that training is also an engagement and retention tool: it brings people together into a common culture.
This is why we spend so much time advising companies on best-practices in organization, governance, technology, standards, and processes within L&D. A world-class training organization is truly a sight to behold. It adds huge amounts of value and creates sustainable competitive advantage.
It's exciting to see businesses invest in capability development again. This is a predictor of business confidence and future economic growth. And of course if you're in the workforce looking for a job, it means employers want to invest more in you.
To learn more, read the Corporate Learning Factbook or download the WhatWorks brief.
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Just as the importance of training is recognized in US, it needs to be recognized in all countries where performance improvement is a priority. In fact the in house training of the employees must always be complemented by the trainers specializing in verbal communications.
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Josh Bersin writes on the ever-changing landscape of business-driven learning, HR and talent management.
His favorite topics include strategic talent management, creating high-impact learning organizations,
and how organizations drive business change and competitive advantage through talent strategy and technology.
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