Training Tragedy

Training budgets are often the first to be cut when the economy hits a recession, but the UK is in the midst of a serious skills shortage. Without skilled staff, businesses will be left behind.

The UK economy is suffering as a result of a serious shortage of skilled labour. In the IT, new media, marketing and finance industries – the sectors that have supported the economy over the past couple of years – companies cannot get enough staff to manage the increasingly complex systems they have developed.

Wage costs have spiralled as companies battle it out for a skilled workforce, but still their desire for skilled staff remains unsatisfied.

This should augur well for the training industry, whose remit is to bring workers up to date with the skills needed to keep the new economy growing – and quickly.

Now, the UK’s 8,000 training companies and 30,000 freelance and employed trainers – with a combined turnover of about &£16bn a year – have become a crucial element in driving economic prosperity.

But since the New Year, economic gloom has been emanating from the US, the self-professed engine of economic prosperity.

While ministers from the G7 states say that US monetary policies should support growth, the International Monetary Fund (IMF) has almost halved its forecast for US economic growth this year, to 1.7 per cent. There are fears that Japan, which has seen its economy stagnate in recent years, could now experience contraction.

Together, these factors fuel fears of a worldwide economic downturn, although there is little real evidence yet to suggest a recession on the scale of the early Nineties.

In times of economic hardship, the first areas to face cuts are those considered as the “optional extras” of business. Advertising was slashed in response to the recession of the early Nineties. Training was cut before that, as the effects of this would only be felt in the medium to long term.

But much has changed in the world of marketing and media in the past ten years. The rise of new technology means that many companies have no choice other than to pour money into training, or face exorbitant costs in luring skilled labour from rivals.

Experiencing a skills shortage while economic growth levels off, will create a peculiar climate for training. According to World of Training chief executive Nigel Linacre: “Legend has it that in previous recessions, training was cut first. It may be that this is the first downturn in which training is not cut, but in fact is slightly increased.” He says that his company has seen no evidence of businesses panicking about a downturn.

But elsewhere, there are signs of nervousness as companies digest the worrying statistics on economic prospects that appear in newspapers daily.

Nigel Howarth, vice-president of international marketing for training company Netg, says: “I wonder whether we talk ourselves into recession. Clients say they may see a slowdown in growth, but I would not categorise that as a recession. I am not sure I see the same kind of nervousness concerning the UK’s economy that I see in the US, where many new companies are going to the wall.”

The jury is still out on how severe the slowdown in the US economy will be, or whether it will simply settle down to “trend growth” after a period of high performance. Even then, it is unclear how such a slowdown would affect the UK economy.

Nervous tension

Recruitment Media managing director Victoria Lubbock says: “People do feel a general nervousness, but there is a skills shortage and it is no less important to continue people’s professional development.”

Even if the news does turn out to be worse than expected, and UK companies see their business slow, trainers expect demand for their services to be maintained. Paul Butler, chief executive of training company KnowledgePool, says: “The training industry is not bomb proof. We tend to notice when things get tight. There are two phases in a downturn: first, companies don’t recruit additional staff, then if the downturn continues, they cut back on surplus staff.”

But a downturn might not always be bad news for trainers, as companies may decide that rather than hiring new staff, they will train existing workers to fill vacant roles. They may also introduce new systems to cuts costs, and this will mean increasing the training budget.

Butler says: “A downturn can create an increase in demand, as people will be expected to do more than they did previously. A downturn can also drive a requirement for more effective training.”

But there is a feeling that many companies fail to pay enough attention to training. A board of directors may spend weeks working out which is the best piece of new technology they can buy, then spend little time considering who is actually going to use it.

Meeting the challenge

Lubbock says lack of training can cause people to leave companies as they feel there is little prospect of development. “When people say I want a new challenge, they do not mean ‘I want more money’. People are interested in adding to their skill set. Most staff who are unhappy with their employer and leave do so because the company is not investing in them.”

One of the major problems with the Internet boom last year, she says, was that new media companies were expanding rapidly and suddenly hiring between 20 and 30 people in a short period of time. But they had neither the time nor resources to provide them with adequate training.

For marketers, training is seen as essential to keeping up with developments in the industry. According to the Chartered Institute of Marketing (CIM), nearly a quarter of employers are planning to increase the size of their marketing departments in the next 12 months, while 67 per cent of employers plan to maintain staffing levels in the coming year. The retail, financial and business services sectors are the most likely to be recruiting staff for new positions.

But CIM research also shows that many marketers are struggling to gain appropriate experience to equip themselves with the skills to manage new technologies. Some 50 per cent of marketing professionals say they are “ill prepared” to manage Internet marketing.

Screen test

Another development since the last recession has been the rise of e-learning, or training on the Internet. This is now estimated to account for some 15 per cent of all training, and is growing by about 30 per cent a year.

Its benefits are clear – it costs a fraction of classroom-based training and workers can study at their own pace rather than take valuable time off work. It is appropriate for studying “hard” skills, such as how to use a particular computer programme, or accounting and other financial training. But it has limits and in many cases cannot replace face-to-face training.

According to Howarth of Netg: “You will never see e-learning displace classroom training totally. If you are training in leadership or management skills, you have to learn by experience through role play, and you can’t replicate that in e-learning.”

Tradition and innovation

But it can be used alongside classroom training, and some courses use it for 20 per cent of learning, with the rest taking place in the classroom. It is also useful for giving managers access to information on how staff are progressing, as they can log on to a particular employee’s course work and assess it as it progresses.

If the economy does start to turn nasty, companies could be caught up in a double bind. They will be keen to cut costs and know that training can be exorbitant – anything from &£250 to &£750 and more for each staff member a day. But they will cut this at their peril, as they will face a shortage of staff skilled in the specific hi-tech abilities they need to cut costs in other areas.

E-learning will help to keep costs down as it amounts to as little as one-fifth of the cost of classroom training. The resultant cost-saving can then be ploughed back into more training.

In the new economy, lack of training is likely to drive businesses into recession – or at least hold them back from climbing out of one. As Mark Spencer-Scragg, planning and resourcing director at Maritz Learning, says: “When a recession hits, or there is a downturn in the economy, the first things to go are the two ‘Ts’ – travel and training. This is a very short-sighted approach, particularly where training and development is involved.

“Surely if organisations are to survive a downturn in the economy, then a better motivated, committed and developed workforce will enable them to succeed? The use of new technologies in learning allows organisations to leverage a higher return on investment from the money spent on their learning resources, so why don’t organisations rethink their recession ‘disaster recovery strategy’ and keep investing in their most valuable resource – the development of their people?”

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