Organizations' training and development investments are at "a healthy level" compared with previous years.
The Association for Talent Development's (ATD) 2014 State of the Industry report paints a picture of an industry that is stable and consistent. A diverse group of 340 organizations of various sizes, industries, and locations submitted their 2013 training and development efficiency and expenditures data to be included in the 2014 report, which is sponsored by Skillsoft and the Ken Blanchard Companies.
In 2013, organizations on average spent $1,208 per employee on training and development. This is a small 1 percent increase over last year (an additional $13 more per employee). The number of learning hours used per employee also slightly increased to 31.5 hours from 30.3 hours.
The April 2014 World Economic Outlook, published by the International Monetary Fund, reports that global activity is strengthening and predicts it to improve further in 2014-2015. According to the IMF, "Global growth picked up in the second half of 2013, averaging 3.33 percent—a marked uptick from the 2.33 percent recorded during the previous six months." However, low inflation rates in advanced markets are a concern in the outlook for continued growth and recovery. In advanced markets, inflation was on average about 1.5 percent in 2013; in emerging markets and developing countries, inflation was about 6 percent.
The data reported in the World Economic Outlook support the conclusion that organizations' investment in training and development is at healthy level compared with years past. With low inflation rates and a stabilizing economy, organizations are maintaining their investment in talent development.
Direct learning expenditures
On average, direct learning expenditure per employee is $1,208 (see Figure 1 below). However, there are many factors that influence this number for an organization. The size of the organization and industry in which it operates are two significant influencers. Small organizations with fewer than 500 employees spent on average $1,888 per employee, and midsize organizations with 500 to 9,999 employees spent $838, which was the same amount spent by large organizations with 10,000 or more employees in 2013.
However, midsize and large organizations do not always spend the same amount per employee. Large organizations typically spend less. They have large direct learning expenditure budgets, but they usually spend less per employee because the cost to develop and maintain the training is spread among more employees.
It is also worth noting that employees at large organizations participating in this report received more training hours than their counterparts at midsize organizations. On average, large organizations report that their employees received 36 hours of training, approximately 4.5 days. Midsize organizations report that their employees received 27 hours of training, almost 3.5 days. This means at the same direct learning expenditure per employee, large organizations were able to provide an extra day of training to their employees.
Industry also has a significant impact on how much an organization spends on training and development per employee. Each industry is unique in the type of training needed and provided. It is important to keep these factors in perspective when benchmarking organization data compared with reported metrics.
For example, manufacturing organizations, which are characteristically large organizations, report on average spending $535 and providing 27 hours of training per employee. Healthcare/pharmaceutical organizations spend on average $1,392 and provide 24 hours of training per employee. The combined group of finance, insurance, and real estate spend on average $1,107 and provide 33 hours of training per employee. (See Figure 2, "Direct Learning Expenditure per Employee by Industry.")
Cost per learning hour
Similar to the direct learning expenditure per employee, the cost per learning hour available slightly increased from 2012 to 2013. In 2013, organizations report that the cost to have one hour of learning available was $1,798, which is a 1.5 percent increase over 2012, or $26.
After several years of significant increases, the cost per learning hour used fell in 2013 by $15, which could mean organizations are effectively distributing training to more employees. This theory is supported by the decrease in the reuse ratio, which fell from 47.5 in 2012 to 46 in 2013.
The reuse ratio compares the number of learning hours available with the number of learning hours used. Typically the reuse ratio ranges between 40 and 60. This shows that organizations are providing a healthy amount of new content while effectively using existing content.
Internal and external services
Organizations continue to spend almost two-thirds of their direct learning expenditure on internal services (63 percent). Internal services include items such as the learning department staff salaries (including benefits and taxes), travel costs for the learning staff, administrative costs, nonsalary development costs, and nonsalary delivery costs (for example, classrooms and online infrastructure)—but does not include learners' travel expenses or loss of work time.
External services—which include consultants and services, content development and licenses, and workshops and training programs—account for 27 percent of expenditures, and tuition reimbursement accounts for 10 percent. This distribution is relatively unchanged from 2012, when organizations spent 61 percent on internal services, 28 percent on external services, and 11 percent on tuition reimbursement.
Training content and delivery
Every organization has unique needs and challenges that their organizational learning function will need to address. How they do so and what they offer will affect how they align with the benchmarking statistics presented. Just as organization size and industry affect the direct learning expenditure per employee, the types of training offered and methods of delivering training also have an impact.
Learning departments are responsible for providing content that addresses a wide variety of topics and needs. About one-third of their content is focused on managerial and supervisory skills, mandatory and compliance training, and profession- or industry-specific training. The remaining two-thirds of content cover topics such as processes and procedures, customer service, sales training, and executive development, to name a few.
Training is available in a variety of delivery methods. More than two-thirds of organizations' formal learning hours involve an instructor, 55 percent take place in an instructor-led classroom, 9 percent is led online by an instructor, and 5 percent is led remotely by an instructor. There were no significant shifts in the training delivery methods made available. However, there seems to be a slight uptick in the use of online offerings.
Twenty-five percent of training hours used were completed through an online course, with 16 percent using a self-paced online program. Formal training hours continue to most often involve an instructor, with 70 percent of training hours used in 2013 being led by an instructor. The amount is unchanged from 2012.
ATD continues to monitor how the ever-increasing presence of technology affects the delivery of training. Informal learning, gamification, and mobile learning are a few examples of valuable training that organizations are implementing, but many have not yet perfected measuring usage, so it is not included in their data. For example, in the ATD/i4cp study Playing to Win: Gamification and Serious Games in Organizational Learning, 25 percent of organizations report using gamification, and one of the top three barriers to usage was not being able to interface with their existing learning management system.
As organizations and talent development professionals begin to collect their own data and benchmark against industry data presented here and from other sources, it is important to not aim to replicate the data, but instead to observe trends and use the information as a benchmark. All the data is linked, so it is important to not only consider the amount spent per employee, but also how many hours are being offered, what topics are being offered, how the training is being delivered, and how many employees are being served, to name just a few influencing metrics.
In conclusion, 2013 saw organizations continuing to invest in training and development for their employees. Technology continues to play a significant role in the delivery of training while the role of instructors remains steadfast. As the world economy continues to grow, talent development will continue to have an important and valuable role in organizations.
Since 1997, ATD’s State of the Industry report has been the definitive annual review of training and development investment. This report provides data covering the strategic and operational activities against which organizations can benchmark their training investments and practices.
This 2014 State of the Industry report discusses industry trends—data are collected from participating organizations via an online survey. The survey was open to participants from May 2014 to July 2014. All data are reported in aggregates, and individual company data are confidential. The 2014 report has 340 participating organizations reporting on their 2013 metrics.