Learning is a Business Imperative
When I sit down to begin musing each week, I ask myself: “Andy, what’s the most impactful thing you can say this week?” Well, with all the talk about weakening economic indicators and recession, that’s the topic we’ll tackle today.
Business executives around the world are watching economic signals of myriad variety with great interest. The key question is: “Have we fallen into recession, and if so, how long will it last?”
During a typical economic downturn, business executives and planners constrain spending as growth plateaus to protect operating profitability and cash flow. These short-term actions to reduce the size of the middle of the profit and loss statement (expenses) are designed to keep the company’s stock price as high as possible, protect executive total compensation (bonuses), and ensure the future viability/sustainability of the business in the face of economic headwinds. While in many cases, these actions are prudent, not all expenses should be treated equally.
Historically, when the going gets rough, one of the first line items to get pared down—or jettisoned all together—is the learning and development budget. While this may seem counterintuitive to some, the economic returns to learning and development (L&D) spending are difficult to measure, and this lack of measurability means that L&D budgets are viewed as discretionary in many organizations. My goal today is to shift that thinking.
Is Learning and Development Spending Really Discretionary?
The answer to this question depends on how learning and development is structured within your organization. If learning in your company is designed to be an employee benefit and decisions regarding what to learn and when to learn it are up to the employee to decide, then I can empathize with the number-crunchers on the finance team that learning is indeed discretionary. In companies that take this approach, these programs are called “education-as-a-benefit” and the employee gets a pot of money to invest as they see fit in qualified educational programs like an associates, bachelor, or masters program at an accredited college or university. This funding is typically limited to $5,250 per year because this is the amount that the company can give to an employee without the employee having to pay tax on the educational support received from their employer per IRS Section 127.
Section 127 educational assistance programs can be wonderful employee engagement and retention tools, but the issue I have with their use is that learning is usually not tied explicitly to the goals and strategic direction of the business. In many cases, decisions about what educational programs to engage in are left entirely to the employee, who may or may not have had robust conversations with their manager about the skill gaps that exist within the business and how best to close those gaps. Ideally, education-as-a-benefit (EaaB) spending is tied to skill gap conversations, but since many managers don’t have a clue what their organizational skill gaps actually are, education-as-a-benefit spending ends up being far too ad hoc. This then reinforces management perceptions regarding the weak return on educational investment from EaaB programs.
As you can tell, I am not a fan of “create your own educational journey” EaaB programs for a number of reasons, but that’s a discussion for another day. For now, their lack of direct link to business strategy and the perception of a poor return on educational investment is the focal point.
What Is (or Who Is) Your Most Valuable Asset?
Many modern leaders shout from the rooftops that “our people are our most valuable asset!” Leaders who truly believe this invest heavily in educational opportunities for their team members. These leaders understand that we’re in the midst of the Fourth Industrial Revolution and that technology advances will disrupt the viability of their most valuable asset’s skill portfolio at an ever-increasing pace. They also understand that to combat accelerating skill atrophy, they must climb onboard the Reskilling Revolution to ensure that their most valuable asset remains healthy, vibrant, and engaged.
In these organizations, skill taxonomies are being developed, job descriptions are being rewritten, the degree is no longer the primary signal of work readiness, the skill needs of the business are being aligned with long-term strategic aims, and hiring and retention practices are based (in large part) on closing identified skill gaps. Here, managers know the skill gaps that exist within their functional area and they have routine conversations with team members regarding their existing portfolio of skills, how that portfolio maps to the needs of the department, and how the employee should upskill or reskill to ensure their skill portfolio is continually kept up to date. In these organizations, lifelong upskilling/reskilling becomes a cultural norm.
In this environment, spending on L&D is anything but discretionary. If your people truly are your most valuable asset, it becomes a business imperative to ensure that the skill portfolios of your team members are maintained and nurtured in good times and in bad—especially when the seas get rough.
Conclusion
I could write for the rest of the afternoon on this subject, but it’s important I keep things short and to the point. In my career, I’ve had many conversations with business leaders who believe that returns to learning are unmeasurable, and, as a result, learning spending should be the first thing to cut when belts need to be tightened. While it is true that computing a precise return on educational investment is difficult at best, the evidence I lean on to support the hypothesis that learning spending should be protected in an economic downturn follows this logical path.
People are my most valuable asset. Check.
The Fourth Industrial Revolution is real and technology advances will continually disrupt the viability of skill portfolios. Check.
It’s more costly (monetarily and non-monetarily) to hire from the outside than it is to upskill existing team members. Check.
As a leader, I want to exit an economic downturn stronger than my competitors so I can take advantage of their weakness. Check.
The best way to beat the pants off my competition is by nurturing and growing my most valuable asset with impactful learning opportunities that align directly with my company’s strategic aims. Check.
Leaders who shout “our people are our most valuable asset” but don’t make L&D spending a priority when the going gets rough need to either (a) change their message, or (b) put their money where their mouth is. Nothing says “I value you” more than investing in your team member’s future through learning.
