The hottest new trend in HRO Training and Learning
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FINDING TRAINING OUTSOURCINGS IDENTITY
Outsource training? Are you insane?
Actually, no. Training outsourcing is a burgeoning market. Its watershed moment came in 1986 when General Physics inked its landmark training outsourcing relationship with General Motors. Regardless of its mega-deals, training outsourcing has taken the long road to its own identity. With the increase in training business process outsourcing (BPO) deals since 1998, training now has a distinctive place in BPO alongside other human resources (HR), finance and accounting (F&A), and information technology (IT) business process functions. Moreover, corporate trainings focus now extends beyond employee learning to customer education. This increase in trainings scope has resulted in a steep boost in demand for outsourced training services of several flavors.
The Numbers Behind the Story
The data on trainings value is starting to pour in. And here is the bottom line. The growth in training outsourcing is all based on two facts: Training boosts organizational productivity, and outside training providers increase an organizations ability to train more people faster and more cost-effectively than in-house staff.
According to a 2004 report by Accenture, high-performance organizations, representing approximately 10 percent of the organizations surveyed, exceeded their peers in productivity (as measured by sales per employee) by 27 percent more than their competitors, revenue growth by 40 percent, and net income growth by 50 percent.
The American Society for Training and Development (ASTD) reported that training spending in U.S. corporations was $826 per employee in 2002, an increase from $734 the year prior.
The Exceleration Group estimates that corporate training expenditures of all types, in-house and outsourced, was nearly $120 billion in 2004. Of this, 42 percent was targeted for employee learning, 52 percent for customer training, and 6 percent for training supply chain interests. The ASTD, in 2003, estimated that 28 percent of all training expenditures go to outside vendors. That indicates that the training outsourcing market exceeds $30 billion.
Like many BPO segments, the training market has seen the start of a significant wave of consolidations. In March 2004, the biggest of the mergers happened when Cincinnati-based Convergys picked up San Franciscobased DigitalThink for $2.40 per share, or $120 million, a 30 percent premium to DigitalThinks share price.
At the time, Thomas J. Starr, senior principal of learning services for Convergys Employee Care, said DigitalThinks capabilities would create synergies for the company by beefing up its capabilities in learning while improving its competitive position in HR outsourcing.
The Convergys acquisition also set the stage for back-to-back Thomson Learning deals in August 2004. In the first of the two deals, Thomson Learning added Capstar, a unit of Educational Testing Service. Capstar develops competency assessment, learning and measurement, and testing solutions for private and public sector markets. The second deal, two weeks later in August 2004, featured Thomson acquiring KnowledgeNet, an e-learning provider, which Thomson merged with its own NETg unit. The two buys, while positioning Thomson Learning as a market share leader, contrasted with Convergys stated goal for its training outsourcing acquisition: to position Convergys to better compete for large-scale HRO contracts. The differing M&A philosophies of Thomson and Convergys reflect the training outsourcing markets conflicts about its own identity. Is training outsourcing a market of its own, or does it comprise a subset of the HRO market?
Follow the Money:
Customers Come First
On Wall Street, the trend is your friend. In training outsourcing, the overwhelming trend is toward investing in customer training. In 2004, TrainingOutsourcing.com writer Paul Harris documented software provider Intuits eureka moment, which caused it to invest heavily in customer training.
Sales of the companys QuickBooks software were suddenly spurting, Harris wrote, and a new analysis revealed why: Professional accountants were referring the product to their corporate customers after taking an e-learning course that made them certified users.
We discovered that accountants who received their ProAdvisor Certification were referring QuickBooks to their small business customers at four times the rate of those who simply use the software, says Rich Walker, Intuits director of accountant and advisor relations. It is a causal relationship.
Launched two years ago, Intuits new customer training initiative is outtasked to Convergys Corporation, the business process outsourcing firm that recently acquired e-learning content provider DigitalThink. Convergys Learning Solutions helped create the courseware and now manages the training via its scalable Web-based platform, the L5 Learning Delivery System. It supplements Intuits classroom training program begun seven years ago with Dallas, Texas-based Real World Training. Intuit, as Harris showed, illustrates the fastest-growing trend in learningthe outsourcing of customer training initiatives.
How to make the fastest-growing area of HRO work for your company.
Training and development outsourcing is one of the HRO areas with the greatest potential. But first, those evaluating their T&D programs must educate themselves on how to make them an A-plus strategy.
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Of all the human capital/HR activities that lend themselves to outsourcing, the area with the greatest potential is training and development (T&D). Pre-Internet and before IT demonstrated its potential, the HR professionals T&D initiatives were restricted by location, cost, and availability. They were also restricted by the organizations ultimate resourcethe caliber of the training professional (if, that is, the organization believed strongly enough in T&Ds importance that it budgeted for one).
The potential of T&D as an effective function was limited even further by complications that have existed since its inception. First, candidates frequently targeted for the T&D profession were career-changing teachers from the primary and secondary education ranks. The challenge with this is that not only do children learn differently from adults, but also training is a different skill set than educating.
Second, employees were often made trainers, not due to their ability or potential, but rather because of their temperament, personality, or the needs of the organization. Finally to complicate matters further, training professionals too frequently prefer the excitement of classroom presentations to the aspects of T&D design. This results in many training presentations being given by professionals who are only subject matter experts in how adults learn and not experts in T&D program design (and even subject-matter experts are not always guaranteed).
The whole question of T&D becomes quite strategic when approached in this context. There is a lot at stake for the organization in light of the competencies it is trying to develop for its employees. But dont let a fear of tackling a highly strategic issue prevent you from doing it. Because doing nothing different from the status quo, or even nothing at all, is also a strategic decisionwith its own set of dire consequences.
When the T&D function is considered in its entirety, think of the full range of activities, including administration, evaluation, Website design, and maintenance. In fact, as with all outsourcing considerations, early on in the process, you should consider breaking down each function into core competencies and commoditized (and labor-intensive) activities. The core elements are those that your organization does well and that provide a competitive advantage. Commoditized activities are those that sap energy and resources but are tangential and nonconsequential when done correctly.
Commitment to any T&D effort should be part of an overall organizational development strategy that should really be undertaken internally. To entrust others with this process is to deny key players inside the structure the chance to determine what would really be effective. In fact, as with all strategic planning, the process is as important as the result. Others may be called in to provide advice, but the decision should rest with those responsible for providing leadership for the organization.
Before we discuss where to begin, you need to consider your personal attitude toward T&D. See if you agree with this statement: You have many more resources accessible to you if you agree that you want the best available training for your organization, regardless of where you find it. This is a big step for those organizations that have traditionally prided themselves on homegrown training and believed it was the best available.
Consider a gap-analysis approach. Ask your executive team and C-level players what they feel the organization needs from training to maximize organizational effectiveness. Get granular and obtain all the details that you can, and avoid generalizations.
Then ask each of the key staff members you approach what they would like to see and expect from in-house training efforts. Even ask what they think of the new employee-orientation program as well as any other training programs currently provided internally. Your goal is two-fold. First, to determine the priority level these key executives assign to the training function. Second, to assess their level of sophistication for what they feel training should and should not be expected to do.
Before you begin the next phase of T&D assessment, one more step to take (assuming you have received positive indications from your activities above) is to continue your research by enlisting the support of anyone organizationally who could provide you with additional input. This includes reaching out to contacts locally and elsewhere who will share with you information about what they and their organizations are doing and what resources they are using.
Dont ignore the young talent around you, mentor the next HR generation.
One of the requirements you need to meet as you become an HR professional of the 21st Century, is to go out and see what is occurring outside the office walls. Heeding my own words, this past week I participated in the 17th Annual Benefits Management Forum and Expo in Nashville, Tennessee. The conference was arranged by Thomson Media, the publishers of Employee Benefit News. Let me share with you some observations in case you either did not attend or were there but had a different experience.
First, it was good to see that there were a lot of senior HR professionals representing major buyers and providers of outsourced services, both as presenters and as participants. Unfortunately, it did not appear that the seniors brought along their juniors, the detriments of which I will discuss later.
Second, so what was new? I was impressed to see an increasing level of specialization among the exhibitors. The provider industry is becoming more and more specific in terms of what they wish to offer and to what size employee population they wish to offer their expertise. One of the exhibitors was a CPA firm that specializes in HR areas, particularly retirement plans, and is, in fact, getting referrals from the Big Four. This is a dramatic change from the past, where HR has had to suffer second-class status as part of the annual organizational audit, with short-shrift treatment from lower-level public accountants who had little experience in the HR and health and welfare area. What is the big deal? It is not so different, was the cry from their seniors. They didnt add, It is also so boring, but you could see it in their demeanor. Now, finally, there are thriving firms who relish the business in this most recently higher profiled area.
Third, there continue to be top-tier benefit professionals in placedespite the mergers, acquisitions, and downsizing that has frequently decimated HR professionals as part of cost-reduction programs.
Fourth, there is more interest at the C Levelthat is CEO, CFO, CTO, CLO, and hopefully CHROfor the benefits aspects of HR, and internal HR professionals are stepping up to the plate. The result is that credibility is increasing because HR professionals are doing a better job of communicating the message upward and sideways.
Here, though, comes the alas (I bet you knew it was coming). A panel of four very distinguished senior benefits executives was moderated by conference mastermind David Albertson. One of the participants asked the panelists what senior-level professionals, themselves included, are doing to grow the next generation of benefits professionals. Other than a response of That is a very good question, the answer seems to be not much at all based on the weaknesses of the replies. Sure they include junior-level staff at meetings, but did they bring them along to this conference? Are they offering any opportunity for formal structured training? How about networking?
Talk about Killer Skillswhether your HR specialization is benefits or any other HR function, the key question you should always be asking is what are you doing to grow your staff? Not to detract from the panelists own drive and intelligence, but I am sure that each of them was fortunate enough to have been nurtured by someone as they were learning the profession, and they benefited from it.
It should not be by chance that a person gets to grow professionally or not. Make it part of the HR DNA, and hopefully, it will become an integral part of the organizational fabric elsewhere as well. Start today to plot a specific professional development program for each member of your HR team. Whether they grow internally or move over to the other side (buyer or providerI am sure in the future it will go both ways), there is no greater legacy that you can leave behind.
To make you feel uncomfortable, let me ask you to consider the alternativeWhat if you do nothing to help your team to grow professionally? If you dont do anything, you should not be able to sleep nightsyou will have too much to worry about and may even feel guilty as well.
Corporate training and e-learning are poised for a rebound.
Corporate training budgets are notorious for being the first ones to be slashed by organizations in difficult economic times. The last two years proved no exception to the rule, and providers of corporate training services have had to learn new survival skills during dismal years for their industry. For the survivors, though, there is finally some indication that the corporate training market is recovering and is expected to grow robustly over the next several years.
According to research firm IDCs U.S. Corporate and Government eLearning Forecast2004-2007, all three segments of the corporate training market covered in the survey (e-learning, business skills training, and IT education services) should see substantial growth during the next five years. In particular, strong increases in e-learning spending should continue to outpace the already robust growth expected for the broader training market.
Three recent transactions, all taking place within weeks of each other earlier this year, illustrate the different ways in which investors and strategic buyers are placing new bets on the corporate training market.
In January, Chrysalis Ventures led a B-round investment in TechSkills, the Austin-based national provider of IT certification, medical education, and general businessskills training. Chrysalis was joined in this round by OCA Ventures and Tobat Capital, both current investors in TechSkills.
TechSkills is extremely well-positioned to take advantage of the rebound in corporate training spending with an offering specializing in blended-learning solutions that combine instructor-led training with elearning solutions. With 30 learning centers across the country and more than 100 courses focused on skillsbased training or certification, TechSkills clearly hopes to bridge the gap many businesses are expected to face during the next five years as the U.S. educational system comes about 6 million graduates short of the anticipated demand for skilled labor.
INTREPID LEARNING SOLUTIONS
A few weeks later, Seattle-based Intrepid Learning Solutions announced an additional round of investment led by new investor Rustic Canyon Partners. Existing investors Madrona Venture Group, Buerk Dale Victor, and Staenberg Venture Partners also participated in the new round of financing.
Unlike TechSkills, with its proprietary training centers, Intrepid Learning is a provider of outsourced training services who takes over the management of existing corporate training departments for large clients (like Boeing) and applies a proprietary learning delivery system aimed at improving employee performance in a cost-effective manner. This model should appeal to larger organizations that have invested heavily in corporate university models and are now seeking to run these cost centers more effectively.
Finally, in February, publicly-held Phoenixbased Prosoft Training and Berkeley-based Trinity Learning announced that they had agreed to merge their businesses.
The merged company combines Prosofts line of certification products and services for IT and communications professionals with Trinity Learnings current training and certification offerings. Prosofts Certified Internet Webmaster certification program, in particular, is a very well-recognized professional certificate covering IT job-role skills (in Web-site design, e-commerce, network administration, security, application development, and programming) and has been earned by individuals in more than 100 countries.
According to Harvard professor David A. Garvin, an expert on learning organizations, At the core of active learning is a deceptively simple requirement: Students must be personally invested in the learning process. Trinity Learning, Prosoft, and the roster of fund managers who invested in TechSkills and Intrepid Learning are in fact betting that investing with their wallets will bring rewards well beyond sheer learning for their investors and shareholders.
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