Training During The Current Global Recession Management Essay

Training During The Current Global Recession Management Essay The report attempts to find out the possible effects of cutting down the training budgets and deferring training programs during the current global recession as suggested by the senior management. Current and past literature has been reviewed to explore if training is a luxury during the current global recession. Research shows that although during the time of recession when a large number of companies are cost cutting, laying off employees, and compromising on training, Asian firms unlike western companies are focusing on training and development of their employees. In spite of the economic recession; there is a call for managing and attracting the talented employees efficiently. Employers, who will be able to pull the top talent and take on them, quickly build their capacity, hold on to them by providing advancement and development prospects, and direct employees input in line with the broader organizational strategies, will not only survive the current recession but also emerge fr om it with a distinctive advantage. Through training, such employers communicate trust in the employees and thus attain employees commitment and engagement. Moreover the trained employees will be motivated and skillful enough to cope and serve their employers with the rapidly changing knowledge based economies. Training will be an investment whose profit will be earned in post recession period. Thus it can be concluded that in the current global economy, the need for training of the employees has never been greater. Human resource management should chose relevant cost effective methods of training such as E-Learning, distance learning and self directed learning for training line mangers and employees. The blend of various methods can make training cost effective as well as beneficial in increasing productivity of the organization. Introduction Global recession is a phase, faced by most of the countries, all over the world. This economic recession has led to bankrupty of many companies. Companies have been lossing billions of dollars and firing millions of people. Analysts are of the view that this is not the first time and the last time that the global economy is going through recession. (Himachali, S. 2009). Since the Great Depression of the late 1920s, the world economy has experienced recession about every decade or two and, typically, this was followed by steady growth, driven mostly by the many ensuing innovations. Therefore it can be implied that this recession is likely to follow a similar pattern (Ndahi, H. B. 2009) Companies are trying hard to survive by cost cutting, laying off employees and compromisng on employee training and development during recession (Himachali, S. 2009). The global recession is a challenge during the time when there is the globalization of economy; expansion of knowledge based economies and more industries being centered on knowledge-based activities are now offering increased support services. Jeff Immelt CEO of GE believes that during the time of recession just holding on until things get back to normal is an error for most companies what we are seeing now is the new normal, the new world order (Charan 2009). The present report reviews current and past literature to explore if training is a luxury during the current global recession. The report will look at the possible effects of cutting down the training budgets and deferring training programs during the current global recession as suggested by the senior management. It is hypothesized that Training increases productivity of an organization during the current global recession. Review of literature will imply whether or not the managements decision to cut down on the training budget and defer any training programs is justified or not. Here the variable Training is defined as systematic development of the knowledge, skills, and expertise required by a person to effectively perform a given task or job (Patrick, 2000). Landy (1985) defined job training as a set of planned activities on the part of an organization to increase the job knowledge and skills or to modify the attitudes and social behavior of its members in ways consistent with the goals of the organization and the requirements of the job (p. 306). Where as the other variable Productivity of an Organization is defined for the present study as organizational performance in terms of revenue generated, product quality, customer service, optimal performance, customer relations and business reputation. Role of Training of Employees in Productivity of an Organization The goal of training is for employees to master the knowledge, skill and behaviors emphasized in training programs and to apply them to their day-to-day activities (Noe, Raymond A; Hollenbeck, John R; Gerehart, Barry; Wright, Patrick M. 2003). Training can increase employees knowledge of foreign competitors and cultures, which is critical for success in foreign markets. It helps ensure that employees have the basic skills to work with new technology, such as robots and computer assisted manufacturing processes. It helps employees understand how to work effectively in teams to contribute to product and service quality and ensures that the companys culture emphasizes innovation, creativity, and learning. It ensures employment security by providing new ways for employees to contribute to the company when their jobs change, their interests change or their skills become obsolete. It prepares employees to accept and work more effectively with each other, particularly with minorities and wo men. (I.I Goldstein and P. Gilliam, 1990). There is sufficient evidence that training increases job knowledge and skills and in turn, this results in better employee performance (Colquitt, LePine, Noe, 2000; Goldstein Ford, 2002). More over the research shows that the learning can contribute to self-efficacy and job satisfaction (Allen, Poteet, Lentz, Lima, 2004), which in turn can raise organizational performance (Patterson, Warr, West, 2004; Riketta, 2008). A good deal of research has linked individual learning with job performance (Colquitt et al., 2000; Salas Cannon-Bowers, 2001). There is an evidence to suggest that learning engagement can result in greater work role flexibility and willingness to learn new skills (Birdi, Allan, Warr, 1997). Training can be used to foster higher levels of commitment and satisfaction. Several HRD studies confirmed that training practices could enhance employee commitment (Meyer Smith, 2000; Whitener, 2001). Satisfaction with workplace training in an employees overall job experience is crucial. Ranstads 2001 North America Employment Review survey of twenty-six hundred American and Canadian employees found that 80 percent of respondents said receiving training that increases their skills and abilities was a key component of what they looked for in jobs (What Drives, 2001). In fact it has become an important characteristic of the new employment relationship. Roehling, M. V., Cavanaugh, M. A., Moynihan, L. M. Boswell, W. R. (2000) systematically assessed current thinking regarding the nature of the changing employment relationship through a content analysis of the practitioner and academic literatures and reported that the two most frequently mentioned characteristics of the new employment relationship are employers responsibility to provide training, education, and skill development opportunities, and employees responsibility to take advantage of those opportunities to develop and maintai n their skills. Nevertheless the global economy of today makes ongoing learning important throughout an employees career. Employees must continue to learn and grow on the job simply as a requisite for continued employability (Schmidt, S. W., 2007). Significance of Training at Manegerial Level Training shouldnt be confined to employees only. Recession brings stress and many businesses are under threat from the poor psychological state of their  stressed managers during the  global recession.  As stressed executives are more inclined to make wrong decisions that driven by their short term survival but are  not in the  companys strategic direction thus they end up ultimately damaging their business productivity and progress. Thus Managers and leaders need to be trained in this time of stress to trust their intuition and make meaningful decisions based on what is important for their business in the long term. (Zeus and Skiffington, 2004). Organizations are now realizing that workplace expertise is crucial to maintaining optimal performance and adapting to change in todays dynamic business world (Herling, 2000; Krohn, 2000). Training in the principles of social interest, democracy, and encouragement can assist managers in developing the leadership skills to foster collaborative and participative workplaces. Managers educated in participative management typically create satisfied, committed employees (Soonhee, 2002). Employer-employee relationship largely depends upon how well trained mangers are and their effective leadership qualities. Hogan (2002) noted that 60% to 75% of the employees in any organization report the worst or most stressful aspect of their job is the relationship with their immediate supervisor. According to Goldsmith (2004), employees interpersonal competence becomes more important as they achieve more visible leadership status. Most job candidates are hired based on their technical and functional abilities, but these skills recede into the background as individuals assume more prominent leadership positions. Annette Ryan, director of The Effect believes that although business leaders prior to the recession looked like leaders, but actually they were just managing in the good times. The recession demanded leadership skills, not management skills, and so these people came under a lot of pressure. Ryan says the companies that weathered the storm best are those with leaders who c ould make the hard calls, appropriately (SamGanankkan, S. 2010). Impact of Recession on Training Recession has been defended differently by various economies. Top performing economies, including the US and UK, are reducing focus on knowledge development, coaching and mentoring, and other human capital investments, with more firms reporting a decline than an increase in investment in staff development in 2008 (Clarke, M. 2009). The British Chambers of Commerce Quarterly Economic Survey (2008) also reported that firms that were investing earlier in the year are now cutting back investments in plants, machinery and training due to the pessimistic outlook for sales, orders and exports. However, by comparison, in Asia, according to the Economist Intelligence Units Business Outlook Survey, Asian companies are instead taking measures such as cutting business travel costs, reducing inventories and streamlining other budgets to cope with the recession. A minority of Asian firms (just over 40 percent) said that they would cut their training budgets in response to the recession, which was low in the order of priority compared to other measures. This contrasts with the industrialized countries, where a larger number of firms are cutting investments in employees rather than increasing them. (Economist Intelligence Unit, 2009). These findings suggest that emerging market countries will be well-positioned to overtake industrialized countries when the economy improves (Clarke, M. 2009). Impact of Deferring Training during Recession Deferring training means communicating to the employees that there are no long-standing prospects in the company. Moreover it may lead to assertive competitors picking up cream of the company leaving behind less capable employees. Thus companies that can afford to keep training, as part of their regimen will position themselves well for a rebound (Girard, K., 2008). The studies show that this lack of investment in training is detrimental. According to the Global Competitiveness Report 2008-2009, compiled by Klaus Schwab and Michael Porter for the 2009 World Economic Forum in Davos, an inadequately trained workforce was a highly rated problem-factor in doing business in the US, the UK and many other European countries. In comparison, fewer felt this was a major concern in developing markets such as China, India and South East Asia. According to analyst firm International Data Corporation (IDC), businesses are already losing  £19 billion annually because of employees not having sufficient knowledge to do their job correctly. This statistic is staggering and particularly detrimental during hard economic times (Clarke, M. 2009). Employee misunderstanding, resulting from a lack of training and knowledge assessments, can be very costly for businesses; not only in terms of time and money, but also customer relations and business reputation. Additionally, a lack of knowledge and understanding of corporate and industry regulations could potentially result in high costs for the company. Business regulations seem to be constantly changing within every industry, across all sectors, and if employees are not conducting their business in compliance with new laws and policies, they are putting their company at risk of being fined and incurring other such penalties (Clarke, M. 2009). According to the survey of Monster resource center, employers are becoming increasingly tasked with how to handle present workplace changes and managing employees in the short-term. However, the companies that invest in their people now will be a step ahead in retaining their top talent (Monster World wide, inc 2009). Significance of Training During Recession Recession is a perfect time to invest even more in the training and retraining of workers to take on the new challenges of the current financial crisis, and for improved productivity when the economy recovers. The fact that all sectors of the economy are affected by the crisis means that all enterprises will require workers who are skilled, innovative and adaptable to help their company emerge from the crisis strong enough to compete in the global market. Therefore, investing in education and training of human resources should be a priority for every enterprise public and private (Ndahi, H. B. 2009). History shows that in the first few months in an upturn, hiring quickly becomes a front-burner issue, so in fact its a better option to save costs in hiring by investing in nurturing the skills and talent of employees. Investing in employee training during a downturn has the added benefit of improving staff loyalty, commitment and building high-performing teams (Ndahi, H. B. 2009). Chartered Institute of Personnel and Developments (CIPD) Recruitment, Retention and Turnover survey found out that Employers are choosing to focus on retention rather than recruitment in response to current resourcing issues. The report revealed that 73% of organizations find a lack of necessary specialist skills remains the key resourcing challenge, whilst 56% of employers are tackling this by concentrating on retention strategies such as training and career development opportunities with 75% of employers saying that additional training to allow internal staff to fill posts was the most effective recruit ment initiative. (Hesselschwedt, P. 2009). Training and development doesnt only mean to build the capacity of the employees for efficiently performing tasks in the work place. From employees perspective it means respecting and trusting individuals for what they are. According to Kelly International Workforce Survey (Kelly Services, Inc., 2010), during recession the issue of salary and benefits is of secondary importance for all generations. In answer to the question what one factor would be most likely to cause you to leave your organization, most respondents from various regions regarded lack of opportunities for advancement to be the reason for leaving organization. When respondents from various regions were asked as a result of the economic recession are you more loyal to your employer? If yes, why? Most of the respondents regarded positive management (56-70%) to be the reason to stay loyal to the employer, whereas a significant number (37-38%) regarded it to the training and development. It shows that managers training is very significant so that they can impart influential leadership skills. When considering whether to remain in or quit their job, younger workers have a much greater interest in the possibility of career advancement, while more mature workers predominantly focus on the quality of management ( Kelly Services, Inc. 2010). Studies have shown that for small and medium-sized enterprises formal training is not preferred due to high cost for training (Curran et al. 1997; Westhead and Storey 1996), uncertainty and short time horizon (Westhead and Storey 1996), loss of trained employees to other employers due to lack of internal promotion opportunities. Therefore informal training is opted as it is less costly, can be easily integrated into daily operations of the small firm, and is focused on employees specific needs (Hill and Stewart 2000; Curran et al. 1997). Large organizations during recession are facing the similar issues such as uncertainty and difficulty managing finances for training. But as the research for the small firms show that In spite of these seemingly legitimate reasons for preferring informal training, it is argued that failure to provide adequate formal employee training retards development of sustained competitive advantages in small and medium-sized enterprises (Stewart and McGoldrick 1996; Garavan, Costine, and Heraty 1995). And this significance of providing formal training can also be implied to large organizations during recession for high productivity. Need for training has become inevitable since companies today are challenged to expand globally. Because of the increase in global operations, employees often work outside their country of origin to work with employees from other counties. Cross cultural preparation training to educate exaptriates who are to be sent to a foreign country to conduct business successfully in the global market place is vital so that employees must understand the business practises and the cultual norms of different countries (Noe, Raymond A; Hollenbeck, John R; Gerehart, Barry; Wright, Patrick M. 2003). Knowledge Based Economies and Need for Training in Post Recession Economy Analysts are of the view that after recession; customers, competitors and suppliers will have different expectations and behaviors, so business strategies must anticipate and adapt to the new challenges and opportunities (Welch and Welch 2009). Global Competitiveness Report 2008-2009 sketches new dimension of the world economy which is now experiencing globalization, knowledge based economies are being expanded and more industries that were previously not centered on knowledge based activities are now offering increased support services. Firms that do not obtain or maintain necessary skills through workplace education will find themselves excluded from the global value chain (Gorg, Greenaway and Kneller 2008). There are many dimensions in which firms must develop their capabilities, including in the use of new technology, production methods and engagement with global supply chains and networks. No less important is a commitment to investment in learning and development to ensure empl oyees and management are confident, competent and skilled to carry out their roles (Clarke, M. 2009). With the expansion of knowledge-based economies investment in knowledge will be essential in creating competitive advantage in the future (Fauth and Brinkley 2009). All this put a heavier emphasis on training of employees so that they are able to seek knowledge. Thus a lack of investment in people and their knowledge development will threaten the ability of leading industrialized countries to maintain global competitiveness in the post-recession economy (Mizen, P. 2009). Cost Effective Training Methodology During Global Recession Employees can be trained through e-learning, self study, video based training, instructor led training, simulations, apprenticeship, case study, interactive videos, team building and adventure learning, distance learning and job shadowing etc. Although the research shows that the methodologies which involve an instructor or coach were preferred significantly such as instructor-led training, one-on-one training, and job shadowing (Schmidt, S. W., 2007) more than the more solitary methodologies such as computer-based training, or self-study including video-based training (Nordhaug, 1989) as participants prefer a high degree of interaction between an instructor or coach and a student or students (Schmidt, S. W., 2007). But it is expected that the use of training technologies will increase dramatically in the next decade as technology improves and becomes cheaper; companies recognize the potential cost savings of delivering training via desktop computers (M. Van Buren, and W. Woodwell, J r., 2000), especially during and after recession. New training technologies can lower delivery costs and increase flexibility in delivery. (Gupta, H. U. 1996) for example, training delivered by an instructor at a central location requires employees to spend time away from their regular jobs and incurs employee travel costs. Lower delivery costs can be realized by using satellite-based training or distance leaning in which training programs are transmitted via satellite to several locations. Also use of CD-ROM or web base training gives employees the flexibility to participate in training on 24-hour basis at home or work though use of personal computers. (Noe, Raymond A; Hollenbeck, John R; Gerehart, Barry; Wright, Patrick M. 2003). These methodologies can be safely used during recession. An advantage of distance learning is that the company can save on travel expenses. It also allows employees in geographically dispersed sites to receive training from experts who would not be otherwise available to visit each location. E.g. the research and development group at 3M found considerable cost savings by using video conferencing to conduct an eight week class on imaging technology that involved instructors from Europe and USA. (Nadeau, M., 1995 B. Flipczak and B. Leonard, 1996). Without video conferencing the class wouldve cost $100,000 making it too expensive. With video conferencing the course cost only $13,000 (Noe, Raymond A; Hollenbeck, John R; Gerehart, Barry; Wright, Patrick M. 2003). Similarly the self-directed learning requires fewer trainers, reduces costs associated with travel and meeting rooms, and makes multiple site training more realistic. In the same way, although employers have to pay highly for developing interactive video programs and purchasing the equipment yet this is offset by the reduction in instructors costs and travel costs related to a central training location. At Federal Express, interactive video has made it possible to train 35,000 customer contact employees in 650 locations nationwide, saving the company millions of dollars (Hannum, W.H. 1990). In the same way, e-learning trainees are more engaged through the use of videos, graphics, sound and text, which appeal to multiple senses of the learner. Besides enhancing the training experience e-learning can reduce training costs and time. It brings geographically dispersed employees at their locations reducing travel costs (Noe, Raymond A; Hollenbeck, John R; Gerehart, Barry; Wright, Patrick M. 2003). Recession can be an Opportunity Similarly, Lynda Gratton suggests that recessions provide the space for new ideas to flourish while the economic effects can be dire, in the long term recession can have a positive effect on work and working habits (Gratton 2008). For many companies, times of turmoil offer new business opportunities, but taking advantage of them requires fast response, aggressive attitudes, and serious changes to the corporate status quo (Thornton 2009). Visionary leaders will emerge from the recession strong, with an educated and skilled workforce, because they would have invested in training during tough times. They would have realized that education and training constitute a bridge to entering and competing in new market conditions in the global economy (Ndahi, H. B. 2009). Recession is the right time to focus on innovation and creativity. An emphasis on greater market research (which is often neglected because of complacency when times are more profitable) would definitely pay off. Creating new products or services can open the gates for new consumers of products or services. Training is an investment not an expense. Despite any recession, it should be maintained as a continuous process to ensure organizations remain competitive and productive. (Rao, M. S. 2009). Conclusion Thus through the review of literature significance of employee and managers training has been highlighted. Workplace expertise is vital to sustain optimal performance and adapting to change in todays changing business world. Although companies are cutting down training due to global recession, yet research shows that inadequately trained workforce has affected business detrimentally. It is better to spend on retention rather than recruitment, as right after recession highly skilled staff will be required to compete in the global market. Moreover training employees is an investment that leads to staff loyalty and commitment. During recessions, organizations can find ways and means to cut down on unwarranted expenditure elsewhere other than training. Human resource management can chose relevant cost effective methods of training such as E-Learning, distance learning and self directed learning for training line mangers and employees. The blend of various methods can make training cost e ffective as well as beneficial in terms of increased production and improvements in product quality or customer service, raise in organizational performance in terms of greater revenue generated, maintenance of optimal performance, sustained customer relations and business reputation, saving company from the risk of being fined and incurring other penalties. Thus the hypothesis Training increases productivity of an organization during the current global recession is proved to be correct. Therefore training during recession is not a luxury; rather its a necessity. Hence the organizations management is not justified to cut down on the training budget and defer any training programs. In fact recession can be an opportunity for employees to spend time learning and for employers to gain a competitive edge. Recommendations Following recommendations are made for the organizations training program for management as well as employees during recession. The organization should map out the cost effective training related activities and the processes used to accomplish them methodically. Relevant cost effective methods of training such as E-Learning, distance learning and self directed learning for training line mangers and employees can be used. These methods can be used in a combination to maximize benefit and reduce cost. Need assessment should be done before planning training so that training objectives are in line with the organizations strategic goals. The planning process should be initiated with an audit of existing activities and measurement of new employee performance and of turnover outcomes. Whereas the outcomes should be defined and regularly evaluated (Holtan III, E. E, 1996). It is suggested that the organization should focus on collective learning during the time of recession. The organization should take steps to generate, disseminate and retain knowledge about itself. The managers should be trained extensively and through the acquired knowledge, capacity of the other workers should be build. The trainer employees should be appreciated when they are able to share and transfer their knowledge and skills with other employees. As past studies have shown information sharing as a way of involvement, to be linked to better business performance (Gibson, Porath, Benson, Lawler, 2007; Law Ngai, 2008; Lin, 2008). Organizational training can further be used to enhance team learning. It is suggested that training should be provided at managerial level and later trained managers should disperse this learning in team to other members. This will be not only cost effective but would result in stronger shared mental models that can improve performance as Marks, Zaccaro, and Mathieu (2000) and Marks, Sabella, Shawn Burke, and Zaccaro (2002) demonstrated in an experiment. It is proposed that the employees can be trained through the orientation programs learning in the workplace apart from job-training programs. During recession period, apart from the formal training, orientation sessions can be useful and less expensive. Through orientations employees can be trained for short-term period in which they can be provided basic information and the social cues. (Holtan III, E. E, 1996). A part from the formal job training, employees can be facilitated for workplace learning activities which may include all learning activities that occur in the workplace itself, such as on-the-job training, social learning, and informal learning. HR should evaluate employees after these formal and informal learning and should grant employees certificates provided their skills are developed. Moreover the organization should enhance and develop existing training programs because they will help reveal employees learning and areas that need more consideration. According to Clarke (2009) this kind of information helps to prepare future employees for their roles and saves companies the time and money that would otherwise be lost in misplaced and ineffective training programs. Due to the fast changing business scenario and economy, unpredictable market situation and global competition, during the period of recession or after that it is very important that the organization is transformed into a learning organization. It is not unrealistic to visualize for a learning organization that facilitates the learning of all its members and continuously transforms itself [Pedler, Burgoyne, Boydell, 1991]. This can help to increase competitiveness through generative learning that is forward looking and reduces the major shocks of change, through close relationships with customers and other key constituents that allow for mutual adjustment, and through the ability to quickly reconfigure and reallocate resources based on environmental change (Slater Narver, 1995). It is suggested that the organization should use assessment programs to identify the top employees to determine which employees are the most valuable for the business and should be retained. Such employees should be given extensive training and their capacity should be build to train other employees. As employing trainers within the organization would be more cost effective.