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Written by: Cindy Lynn Roche, CPHR
The investment in Learning and Development (L&D) tends to shrink from budgets as business looks for ways to cut costs. According to the Human Resources Institute of Alberta’s recent Alberta Spring 2017 HR Trends Report that looked at the latter half of 2016, L&D spending is still fairly low as a percentage of overall budgets. The average that organizations are investing in learning and development is just 3.8% of their total budget, which is virtually unchanged from the previous six months and that was only a slight improvement over the last half of 2015.
Large organizations allocated a greater fraction of their budget to learning and development than small ones. Oil & Gas, Health Care, and the Professional Services sector all saw decreases in their learning and development budgets, while in the Public Administration sector budgets grew.
According to the Western Canada HR Spring 2017 Trends Report released by CPHR Alberta, the picture for Western Canada reflects similar results as what Alberta has experienced. Alberta and Manitoba are spending more than BC and Saskatchewan, but year over year, most organizations are spending less of their overall budget on L&D. On average, organizations are investing 3.7% of their total budget towards learning and development. Interestingly, although there had been some recovery in the first part of the year, in the last six months of 2016 large organizations dropped their budget allocation to learning and development from 4.3% down to 3.8%.
These numbers aren’t surprising. L&D is usually one of the first things to be cut when there are reductions to be made and it very often is one of the last things to make a comeback. The uptick in spending in the first part of 2016, garnered some optimism that things were turning around, but these numbers reflect the more likely reality that after more than a year of virtual stagnation on the training front, organizations recognized that learning and development is necessary to being strategically and operationally effective.
Some research suggests that in organizations that have fostered a strong learning culture, the L&D budget is between 6 and 12% of the total budget. The trend over the past two years in Western Canada has been about half that amount. It’s a reasonable assumption that where learning and development investments have been made, it has been in those areas that could not be deferred any longer. There are certifications that must be maintained, there are leadership needs, there are opportunities to improve processes or systems that will increase efficiencies, and the list of things that are ‘must haves’ goes on.
How organizations use their L&D dollars varies, and how they calculate their spending may also vary. Developing something in-house rather than hiring a vendor will be an option for some organizations to save money; other organizations will eliminate in-house L&D teams to eliminate costs and then spend as needed on external vendors. Many companies might include HSE training in their L&D budget, companies with large HSE budgets capture required training in that bucket instead. Still other companies create a self-service model that relies heavily on an online solution, and there are those that leave individuals to pick up the cost of any development they might choose. The question for me is less about how much organizations are spending, and more about what kinds of solutions they’re finding for their performance support and development needs. L&D can take many forms, whatever the proportion of budget being allocated, let’s hope that the conversations are happening that drive organizations to encourage and support their employees to grow.
Alberta HR Trends Report – Spring 2017, Human Resources Institute of Alberta
Western Canada HR Trends Report – Spring 2017, Human Resources Institute of Alberta