5 CRITICAL ACTIONS YOU CAN TAKE TO INCREASE TRAINING'S VALUE WHEN COMPANIES ARE DOWNSIZING

By By Seth N. Leibler, President & CEO

The first half of this year was a record breaker for U.S. employers. But not in terms of profits, market share or shareholder value. Rather, employers broke records with respect to the number of workers who were laid off. In the first quarter of the year, over 340,000 workers lost their jobs--the highest first quarter on record. In the second quarter, another 371,000+ U.S. workers lost their jobs.¹ And the second half of this year is likely to hit an all-time high as airlines and other industries directly affected by the tragic events on September 11th take drastic action to cut costs.

What can you as a training or performance improvement professional do to help your organization if a) it has recently been downsized, b) is considering downsizing or c) you anticipate a downsizing event may, at some point, occur? In a word, plenty.

You can start by learning from the past. While downsizing is widely perceived as a viable means of improving financial and corporate efficiency, a series of studies, conducted over the past decade, have revealed just the opposite. In reviewing the financial performance of downsizing companies throughout the ‘80’s and ‘90’s, research shows that:

• Less than half successfully reduced expenses over time (in part because, four times out of five, managers ended up having to replace some of the people they had dismissed).²
• Fewer than one in three said that profits increased as much as expected.²
• Only 21 percent reported satisfactory improvements in shareholders’ return on investment.²
• In the year following the downsizing, companies with the largest layoffs exhibited the largest decreases in return on assets.³
• Up to four years later, most downsizing organizations saw quality, productivity and effectiveness fall below that of pre-downsizing levels.²

In other words, assuming that layoffs will automatically translate into increased profits and improved shareholder return is far from assured. While there’s little that we as training and performance improvement professionals can do to try and prevent layoffs from occurring, you can take immediate steps to build a credible case for the need for training when layoffs do happen. It’s important for you and your organization to realize that, in today's uncertain economy, the role of training is more critical than ever before.

An American Management Association (AMA) report shows a direct correlation between improved corporate performance and increases in training activity among downsizing companies.⁴ Of those companies that followed a downsizing with increased training budgets (in other words, companies that increased their investment in the skills of their remaining workforce):

• 60 percent reported that operating profits grew.
• 64 percent reported an increase in shareholder value.
• 58 percent reported that product quality improved.
• 56 percent reported an improvement in worker productivity.

To help ensure that your organization doesn’t downsize the role of training during a layoff event, here are five critical actions you can take to quickly demonstrate your value in these tough economic times:

1. Share the research findings about the importance of training during downsizing with key members of your organization. Arm yourself with the research studies referenced in this article (to order the 1999 AMA study -- the most recent AMA study to focus on the issue of downsizing and training -- contact the AMA at 212-903-8052 or log on to www.amanet.org/research). Then selectively disseminate this information to the areas of your organization where it will do the most good, including your manager and others in the training chain of command, as well as executives and other opinion leaders outside the training arena.
   
   
2. Establish a clear link between existing training and your organization’s critical business imperatives. The primary reason training is vulnerable is because executives make decisions about downsizing based on data. They see the expense of training but rarely do they see the tangible value that training generates. Therefore, it’s important that you a) understand your organization’s critical business imperatives and b) demonstrate how training will help achieve these imperatives . To identify mission-critical imperatives, talk with senior managers and executives. If this isn’t possible, then do your own research -- read your organization’s latest press releases, annual report, and internal newsletters. Or talk to stockbrokers. Then assess your existing training programs to determine if they are essential to your organization’s business goals.
   
   
3. Critically examine existing training programs. Once you’ve completed this assessment, you’ll likely find some programs that aren’t tied to your organization’s business imperatives or that fail to meet your organization’s critical needs for job-relevant skills and knowledge. If so, either fix the training immediately or eliminate it. By eliminating certain training programs, you will immediately free up resources and expenditures that could be allocated to fixing training that is mission-critical.
   
   
4. Identify new training needs. Whenever organizations restructure, people’s jobs are affected. In some instances, organizations substitute new technologies to replace laid-off workers, creating the need for the remaining employees to learn entirely new skills and work procedures. In other cases, the remaining workforce is simply expected to take on additional responsibilities. In either case, new training needs often emerge and must be addressed.
   
   
5. Document all training actions taken. To help senior management understand the critical role that you play, it’s imperative that you document the steps being taken to eliminate unnecessary training, to improve existing training, and/or to develop new training. Be sure to tie these actions directly to your organization’s mission-critical objectives and, whenever possible, quantify their impact, either in terms of dollars saved, productivity gains, or some other tangible measurement.

I am sure you will find that most executives are completely unaware that a direct correlation exists between the importance of training during downsizing. My goal and the goal of CEP is to do everything we can to help you in communicating this critical role. If you need advice or counsel on how to proceed, feel free to email me at sleibler@cepworldwide.com. The importance of this topic on our industry as a whole cannot be overstated.

¹"Extended Mass Layoffs in the Second Quarter of 2001," Bureau of Labor Statistics, August 22, 2001.
²"Downsizing: What do we know? What have we learned?" Academy of Management Executive, Feb. ’93, Vol. 7 Issue 1.
³"Downsizing After All These Years? Questions and answers about who did it, how many did it, and who benefited from it," Organizational Dynamics, Winter ’99, Vol. 27 Issue 3.
⁴"Workforce Growth Slows, AMA’s 13th Annual Workforce Survey Shows," American Management Association, October 26, 1999.

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