The layoffs just keep stacking up, raising fears that we’re on the brink of a recession. Google-parent Alphabet let 12,000 people go, mere days after Microsoft and Amazon announced that they were slashing 10,000 and 18,000 jobs, respectively. These announcements come on the heels of recent big-time layoffs at heavyweights like Salesforce, Meta, and Twitter.
Conventional wisdom holds that when things get tight, finance executives should look to trim costs wherever they can, and one of the first items that wind up on the chopping block is training budgets. This approach is misguided for several reasons and can actually wind up doing more harm than good.
Even if a company lays off 5% or 10% of its workforce, the overall amount of work in the organization doesn’t magically disappear. That work will likely pile up on an employee that might not have the skills to get the tasks done. That’s where training comes in.
It might be tempting to say, “Well, we’re all watching our spending these days, so we’ll let our employees learn their additional roles and responsibilities on the fly. There might be a few rough patches for a bit, but they’ll get the hang of things soon enough.”
Not a smart move. Companies might be experiencing turbulence, but the customer doesn’t care — as long as the customer experience meets the customer’s expectations. The expectations of a great customer experience don’t change just because the winds of the economy start blowing in a different direction.
Investing in New Skills
Preserving training budgets is a proactive way for companies to help employees effectively adjust to their new roles and more easily take on new responsibilities, particularly if they require fluency in new skill areas. And based on current trends, we know that new skills requirements are only increasing.
Training also helps calm the waves of anxiety among remaining employees after a layoff, many of whom are suddenly looking over their shoulders and wondering if they’ll be the next one to be handed a pink slip.
The employees that provide the best return on investment are typically the ones that are continuously learning, staying up to date on their certifications, enhancing their skill sets, and showing they're able to adapt to change.
Seeing the company investing in their professional development and continual learning and helping them to fill any skills gaps so that they can do their jobs more effectively, helps reassure them that they don’t need to jump ship or “quiet quit.”
There’s a benefit for employers, too. The employees that provide the best return on investment are typically the ones that are continuously learning, staying up to date on their certifications, enhancing their skill sets, and showing they're able to adapt to change, stay nimble, and find new ways to add value. The result of continued training.
Develop a Training Program
Some companies might feel like they’re stretched too thin after workforce reductions to focus on training. It’s important for managing costs to remember that training doesn’t have to be done in-house — it can be outsourced to a training partner.
Between 1% and 3% of an employee's salary is a good number to shoot for as a training budget.
Keep in mind, though, that finding a good training partner and setting up a strong training program doesn’t happen overnight. It takes time to develop familiarity with what type of training is needed within a certain industry or within a certain company; it takes time to develop a meaningful relationship, coupled with a relevant curriculum. Once that familiarity is established, the training partner is much quicker to ramp up and deliver the skills the company’s workforce needs.
Training as a Strategic Priority
Company CFOs keeping an eye on the bottom line should know that training doesn’t have to be a huge investment, either. Between 1% and 3% of an employee's salary is a good number to shoot for as a training budget.
For those who still bristle at that number, it’s worth taking a trip down memory lane and reflect on recent history. Companies should ask themselves: The last time the market was down, and their company adjusted by reducing expenses on training, how long did it take to recover from that when the market was back up and the economy was all systems go? What competitive edge or position was briefly surrendered and how long did it take to get it back? It’s safe to say that retention is also top of mind during that trip.
While it may seem like a quick financial fix, putting training and reskilling on the back burner can negatively torpedo your business. In any type of economic conditions — but especially in a down market when there’s less margin for error — companies need to make the ongoing training of their workforce a strategic priority.
Eric Lloyd is executive director of Denison Edge.