ATD's annual State of the Industry report provides a snapshot of the learning activities in more than 300 organizations.
Spending on learning programs continued to be a priority for organizations in 2015, according to the Association for Talent Development's 2016 State of the Industry report. For the fourth consecutive year, ATD's definitive annual review of learning investment found that employers, on average, spent more on direct learning expenditure per worker than in the previous year.
Another bright piece of news for industry professionals: This increased investment was coupled with employees receiving more formal learning hours, according to data collected in an online survey of 310 organizations representing a diverse range of industries.
Recognizing that formal learning hours do not capture the valuable development experiences that are embedded in daily work, for the first time, the State of the Industry also provides a snapshot of on-the-job learning activities, which were emphasized heavily in two-thirds of participating organizations.
Healthy spending growth paired with efficient distribution
On average, organizations spent $1,252 per employee in 2015 on direct learning expenditure, according to the 2016 report, which is sponsored by Bellevue University and the Training Associates. This figure captures the design, administration, and delivery costs associated with learning programs, including the salaries of talent development staff. The $23 increase from 2014's expenditure of $1,229 is the largest single-year growth since 2010, when many organizations were in the early stages of recovering from the Great Recession.
Indeed, 2015's expenditure growth cannot just be explained as "keeping up with inflation." The 2 percent increase in direct learning expenditure dwarfs the average inflation rate of 0.3 percent calculated by the International Monetary Fund for advanced economies in 2015 (more than 80 percent of participating organizations are headquartered in advanced economies). In emerging and developing economies, the inflation rate was slightly below 5 percent.
Another key indicator of investment supports that commitment to learning was strong: The average cost per learning hour available across all organizations was $1,803 in 2015, $51 or 3 percent higher than the previous year's cost. New content, or content recently adapted for a new delivery method, often carries a high cost per hour available because of up-front development expenditures. Frequent updates to existing content also may put upward pressure on the cost per hour available.
The increased investment was accompanied by learners receiving more learning hours and efficient distribution of content and offerings across workforces; the average number of learning hours used per employee across organizations rose to 33.5 in 2015, from 32.4 in 2014 and 31.5 in 2013. Additionally, despite the increase in the average cost per hour available, the average cost per learning hour used (if a one-hour class was offered twice a year and five employees took the class each time, then one hour was available, but 10 hours were used) shifted downward to $82 from the 2014 figure of $84, meaning each hour of learning consumed actually cost organizations slightly less. Confirming the efficiency with which learning programs are being disseminated, the average reuse ratio, or the number of learning hours used per hour available, rose to 49.6, the highest value seen in four years.
Where does the spending go?
Is this sizable investment being directed to the in-house design, delivery, and administration of learning programs or is it being funneled into supplier services? In 2015, for the average organization, 28 percent of direct learning expenditure went to outsourced or external activities (which include consulting services, external content development and licenses, and workshops and training programs delivered by external providers), similar to previous years. Another 11 percent went to tuition reimbursement. Slightly over 60 percent of spending was on internal expenditures and salaries.
Not surprising, efficiencies and expenditures vary sharply every year across industry groups. For some industries, a relatively large percentage of workers might require highly specialized, individualized, or frequently updated training that requires substantial investments in technology, infrastructure, and staff time. Illustrating this, information and software firms spent, on average, a hefty $1,586 per employee on direct learning expenditure even though, at the average company in this group, employees used less than 20 formal learning hours each in 2015. Compared with organizations in other industry groups, a smaller percentage of the average information and software organization's learning spending was directed to outsourced services and tuition reimbursement, possibly because these sources do not offer products that meet employees' specialized needs.
In contrast, manufacturers, which typically employ labor forces with less specialized and less rapidly changing development needs than high-tech employers, had an average per-employee direct learning expenditure that was only slightly over $500, and nearly half of this spending went to outsourced services and tuition reimbursement. The relatively low average spending per employee and cost per hour available and used for manufacturing also may be partially explained by location; the data indicate that manufacturers are more likely to be headquartered in or have operations in China (the world's largest manufacturing country), India, and Mexico. In these countries, the costs of developing and delivering training may be much lower than in the United States or other advanced economies.
Workforce size also has an impact on expenditures and efficiencies; the market for learning is characterized by economies of scale, as larger employers typically can offer a program at a lower cost per person because they have more participants. The data reflect this: Small organizations with fewer than 500 workers spent, on average, more than $2,000 per employee on learning, whereas midsize organizations with 500 to 9,999 employees spent just under $800 and large organizations with at least 10,000 workers spent $700.
Despite having the lowest average per-employee expenditure, large organizations, on average, saw their employees use more learning hours than midsize employers. Small employers had the highest average learning hours but, because their potential audience for each learning offering is capped at their limited number of employees, small organizations also had the highest cost per hour used and the lowest reuse ratio.
Content and the role of managerial training
As in previous years, in 2015, managerial and supervisory content made up the largest share of the total portfolio of learning offerings (12 percent on average across all organizations). However, while the average organization may not lack programs for managers, research suggests there are opportunities to improve senior leader and organizational support for managerial training. A forthcoming ATD study, ACCEL: The Skills That Make a Winning Manager, finds that less than half of talent development professionals believe that developing managers is a priority for their organizations.
Mandatory and compliance training ranked second among content areas, with 11 percent. Because certain industries or types of workers (for example, those who handle privileged or classified information, those who are responsible for others' safety, and those who operate heavy machinery) are more heavily regulated than others, the percentage of the learning portfolio dedicated to mandatory and compliance training varies across industry groups. Public administration; manufacturing; and finance, insurance, and real estate (FIRE) organizations reported, respectively, that 19 percent, 14 percent, and 11 percent of their learning portfolios covered mandatory and compliance training.
The rise of technology over the years
The State of the Industry has documented the rise of technology in the delivery of learning content over more than a decade. In 2015, 41 percent of learning hours used at the average organization were delivered using technology-based methods, nearly 10 percentage points higher than in 2008 and more than 15 percentage points higher than in 2003. Technology-based learning can be delivered via online or satellite classrooms; self-paced online or non-networked computer-based methods; mobile devices; or non-computer technology (such as DVDs).
Despite the increasing flexibility, availability, and accessibility of technology-based methods, the traditional, instructor-led, face-to-face classroom continues to play a crucial role, and it was still the delivery mechanism for 51 percent of learning hours used in 2015. However, this figure was above 60 percent until 2010 and, if trends in the data persist, less than half of hours used at the average organization will be delivered in the traditional classroom in the near future. At information and software companies, which often are trailblazers in leveraging technologies, less than 40 percent of hours used in 2015 were delivered in this setting.
For the first time, a look at on-the-job learning
All learning hours referenced in the State of the Industry are formal learning hours, which capture only standalone learning occurring separately from job activities. But often, much of an employee's overall skills development can be embedded in daily work. Consider the case of Kohler Company, a manufacturing firm with an award-winning talent development program, where the average employee only uses about three formal learning hours annually (less than one-tenth of the figure for the average State of the Industry participant). As the ATD case study Kohler: Making Learning a Way of Life explains, this low number can be attributed to the company leadership's insistence that the large majority of an employee's learning occurs outside of formal, structured settings.
Because learning that occurs during the course of work is inherently difficult to measure in hours, ATD captured a snapshot by asking State of the Industry survey respondents to assess their organization's commitment to on-the-job learning—defined as any learning that is not a standalone activity and is intertwined with work activities—in 2015. Overall, two-thirds of organizations emphasized this type of learning extensively, and only about one in 10 placed little or no emphasis on it.
Information and software firms and manufacturers both had above-average rates (more than 70 percent) of using on-the-job learning to a major extent; note that both of these industries saw employees, on average, receive less than 20 formal learning hours annually. It appears that some organizations in these industry groups, like Kohler, promote an employee development experience that has a high ratio of learning while working to learning in formal settings. On the other hand, FIRE employers had a rate of only 52 percent for high use of on-the-job learning, but employees received 38 learning hours per year on average.
Turning to more specific activities, about half of organizations used on-the-job coaching by managers to a large extent; the same is true of on-the-job coaching by peers. Job shadowing was used heavily in 27 percent of organizations, and rotational training programs in only 17 percent. One-fifth used stretch assignments (job assignments that are beyond the employee's current skill level that are intended to be development tools) extensively. Manufacturers depend more on these programs than other industry groups; their rates for job shadowing, rotational programs, and stretch assignments, respectively, were 36 percent, 29 percent, and 36 percent.
In-person employee knowledge sharing was used heavily in 56 percent of all organizations, but only one-third applied technological tools (such as social media or collaboration platforms) to a high extent for knowledge sharing. Technology-aided knowledge sharing, in particular, was used more in some industries than others. As is the case with the use of technology-based formal learning, information and software companies are ahead of the curve. Half of these firms extensively used technological tools for knowledge sharing, but only one in eight public administration organizations, which may harbor concerns about government information security, did so.
The 2016 State of the Industry report will be available for download in December at www.td.org/SOIR.
A Word About Benchmarking
The data presented in this article and in the State of the Industry report hold great promise as tools to aid organizations in benchmarking their learning expenditures and activities against those of other organizations. To make benchmarking comparisons more meaningful, readers should review the data by industry and workforce size groupings when possible.
However, be aware that all figures in this article and in the State of the Industry report are averages across groups, and the circumstances faced by your own organization may be vastly different from those facing the average participating organization, or even the average organization in your company’s industry. Therefore, organizations should not aim to replicate the statistics, but rather view them as benchmarks so they can better understand their own learning expenditures and activities and those of their peers.