Originally posted; ASTD Wednesday October 30, 2013 by Laura Miller
Overall spending on employee training in U.S. organizations increased last year, to $164 billion.
In a continuously changing economic environment, organizations remain committed to organizational learning and development (L&D). In the 2013 State of the Industry Report sponsored by Skillsoft and Cara, 475 organizations representing a diverse sample of industries, sizes, and locations report on training metrics in their organizations.
ASTD estimates that in 2012 organizations spent approximately $164.2 billion on employee training. Of this total direct learning expenditure, 61 percent ($100.2 billion) was spent internally. The remainder was spent on external services, which accounted for 28 percent ($46 billion), and tuition reimbursement, which accounted for 14 percent ($18 billion).
Spending per employee remains stable
In 2012, the Bureau of Labor Statistics estimates that on average 181,000 jobs were added per month and the unemployment rate fell one percentage point. Organizations adapted to the changing workforce size and managed to keep the average direct learning expenditure per employee stable at $1,195 in 2012, which is $13 higher than the average in 2011.
Spending per employee is affected by several factors. One major factor is the size of the organization. Smaller organizations, particularly those with fewer than 500 employees (which account for 36 percent of responses in this study), typically spend more per employee than larger organizations. They rely more on external services and tuition reimbursement plans, and have a smaller L&D staff.
Due to smaller staff size, they typically spend more per employee because they are not able to distribute training—costs including development and implementation—among as many employees as a larger organization. In 2012, small organizations with fewer than 500 employees spent on average $1,800 per employee on direct expenditures, mid-size organizations with 500 to 9,999 employees on average spent $964, and large organizations with more than 10,000 employees spent an average of $700.
In line with spending per employee remaining constant, the number of training hours used by employees also remained stable in 2012 at 30.3, compared with 30.5 in 2011. During the past four years there has been little movement in the number of training hours used by employees.
It also is noteworthy that organizations are not just increasing the reuse of content to keep costs down. The reuse ratio in 2012 fell slightly from 52.8 to 47.5. The reuse ratio is the number of learning hours used compared with the number of learning hours available. The reuse ratio typically remains around 50, which is a healthy ratio. It shows that organizations are producing new content and it is being used.
Role of technology
The question that remains to be answered is how organizations are continuing to offer new training and maintain spending levels, yet the number of training hours used by employees has remained relatively flat during the past four years. There are a few reasons why this may be happening. One of which might be the increasing role of technology usage for training and the shift toward e-learning. Another might be increased usage of informal and social learning.
For the past three years, the percentage of training offered by organizations via traditional instructor-led classroom has been making a slow decline, accounting for 55 percent of training hours used in 2012—which is a six percentage point decline from 2010, when instructor-led classroom accounted for 61 percent of hours used. At the same time there has been an increase in the usage of technology-based methods, such as instructor-led online (accounting for 10 percent in 2012 compared with 8 percent in 2010), instructor-led remote, and mobile learning.
What all three of those methods have in common is that their usage by employees can be difficult to measure in time increments, and they often don’t easily align with an organization’s learning management system. Mobile learning is a good example of this.
During the past three years, we have seen organizations’ percentage of mobile technology learning hours available increase from 0.74 percent in 2010 to 2.1 percent in 2012. However, the percentage of mobile technology learning hours used has remained unchanged at approximately 1.5 percent.
The 2013 study Going Mobile: Creating Practices That Transform Learning, conducted by ASTD and the Institute for Corporate Productivity (i4cp), found one of the major challenges of implementing mobile learning is measuring its usage and effectiveness. Forty-one percent of respondents in that study who use mobile learning admitted that their organizations do not have metrics in place to assess the program’s effectiveness. More than half of survey respondents said their organizations use mobile learning for just-in-time learning (65 percent), job aids (63 percent), and on-the-job support (52 percent). How much time an employee spends in the app accessing this valuable information may prove to be elusive as organizations are challenged to measure it.
Another method in which employees are learning but not necessarily recording the hours doing so is through informal learning. In the 2013 ASTD/i4cp study Informal Learning: The Social Evolution, 27 percent of respondents reported that informal learning represents more than half of the total learning taking place in their companies. However, it is difficult to pinpoint and record the exact number of hours an employee participates in informal learning, such as online social networking, accessing knowledge through Internet or intranet searches, and peer-to-peer coaching.
Informal Learning also reveals that informal learning does not necessarily decrease an organization’s training budget, but may in fact increase the budget as they invest in technology. Eight percent of respondents in that survey reported that in the past four years their organizations’ informal learning programs caused their training budget to increase, and 82 percent said it stayed the same. Only 10 percent reported that informal learning caused their training budgets to decrease.
Examining these shifts in training methods and the role technology is playing helps to explain how training budgets are changing. It also may help explain the increasing cost of learning hour available and learning hour used.
The 2013 State of the Industry Report shows the average cost per learning hour used is $89 and the cost per learning hour available is $1,772. Both these metrics increased over the previous year and have been on an upward trend since 2004. The cost per learning hour used increased by 4 percent in 2012 compared with 2011, and the cost per learning hour available increased by 20 percent in the same time period.
Without examining organizations’ budgets, a definitive answer to the question, “Why is the cost per learning hour increasing?” is not available. However, some possible influencers could be the upfront costs of implementing technology as discussed previously, inflation, a decrease in the ratio of employees to L&D staff members, and the challenge of accurately recording all the training hours employees use.
L&D staff members are critical to the success of an organization’s training program. Knowing how many staff members it takes to implement an organization’s learning strategy is an important question. And the answer is as unique as the organization’s learning strategy itself.
To provide some guidance and benchmarking statistics, the State of the Industry Report tracks the number of employees per L&D staff member and the number of hours used and available per L&D staff member. Organizations looking to compare their own data with these numbers will not find value in matching their numbers to the averages since factors, such as organization size, play a significant role in these data.
What will provide value, however, is to examine how the data align with the other reported metrics. In 2012 the average number of employees per L&D staff member was 299 employees when adjusted for outsourcing. When not adjusted, the number increases to 400 employees to one L&D staff member. Both these ratios decreased 5 percent from 2011. The decrease in the ratio of staff members to L&D staff could help explain the rise in the cost of learning hours used and learning hours available.
Similar rationale can be applied to learning hours used and available per L&D staff member, adjusted for outsourcing. In 2012 the number of hours used per L&D staff member decreased to 3,452 from 4,807 in 2011, and the number of hours available per L&D employee increased to 553 from 470. That is another example of the aforementioned trend during the past four years of the hours used dropping while the hours available increases.
Organizations continue to invest in their employees by offering training and development opportunities delivered in person or online. They are implementing new learning methods and technologies to stay relevant and control costs in economic conditions where they are being challenged to develop more employees with the same or fewer learning resources. Organizations are meeting these challenges by offering training in various ways, including in person and online.
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