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COMPENSATION & REWARDS
Mar 10, 2014

Weak development comes with high price

Conference Board finds only modest gains in spending levels on training since 2010
    

By Claudine Kapel

New research tells a familiar story about organizations and their struggle to facilitate employee development while containing costs.

The Conference Board of Canada’s Learning and Development Outlook reports Canadian organizations spent about 1.4 per cent of their annual payroll — or an average of $705 per employee — on learning and development in 2012, up from $688 in 2010.

That represents a small gain of less than three per cent (or $17 per employee), although the Conference Board notes it reflects a “modest reversal of the downward trend of the past two decades.” The study results reflect responses from 198 Canadian organizations.

Overall learning and development spending is still down nearly 40 per cent from its historic high of $1,207 in 1993, the Conference Board notes. “Over the past 20 years, spending has declined in both the public and private sectors and in organizations of all sizes.”

A strategic focus on learning and development is vital for a number of reasons. Employee development is a key total rewards component that influences an organization’s ability to attract and retain talent, drive performance and ensure continued access to essential skills and knowledge.

Inadequate attention to employee development can undermine more than just an organization’s talent management strategy. Over time, it can erode the organization’s ability to compete as a business.

The Conference Board warns Canadian organizations are “lagging other nations in terms of the relative importance and consistency placed on employee skill development and learning.” It points to the 2013 International Institute for Management Development (IMD) World Competitiveness Yearbook report, in which Canada ranked 28th out of 59 countries in terms of the importance Canadian organizations place on workforce training.

The Conference Board notes it has been concerned about the declining competitiveness of Canadian organizations for years. “Global rankings, based on a number of key performance indicators, show that Canadian competitiveness has dwindled in recent years.”

It adds that ongoing learning and skills development are “crucial factors” in ensuring organizations have employees with the training to drive both innovation and performance. “But, it appears that Canadian organizations are still struggling to keep pace with global leaders.”

The Conference Board cautions that if organizations don’t take action to strengthen organizational learning, they will run the risk of falling even further behind.

“In the end, the consequences of doing nothing far outweigh a move toward investing in areas requiring immediate attention, such as human capital and skills development.”

So what does it take to translate employee development into a competitive advantage?

Not surprisingly, the Conference Board says it starts with strong leadership support for learning and development, which supports the creation of a strong learning culture. “Over the past decade or so, there have been a growing number of studies investigating the link between leadership development and the business success of organizations.”

The Conference Board notes survey respondents who reported the overall leadership of their organization was better or significantly better than that of their competitors were four times more likely to have effective leadership development practices in place.

Yet while 60 per cent of respondents indicated leadership development was a strategic priority, only about one-third felt their practices were effective.

As a result, when it comes to strengthening their approach to employee development, some organizations may find themselves stuck between a rock and a hard place. Without leadership commitment, their approach to development may be less than robust – leaving them without the means to build the leadership capabilities needed to drive a learning culture.

To escape the chicken-and-egg quandary, organizations may need to revisit and strengthen their business case for employee development in general — and leadership development in particular. This could be done as part of a broader review of their total rewards or talent management strategies.

Some organizations may need to begin with baby steps — such as modest increases to investment levels. This would at least represent steps in the right direction. But much more needs to be done if Canadian organizations are to drive performance and innovation and successfully compete on a global stage.

Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.

    
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