When economic times are good, most companies spend a lot of money on training as a way of developing employees. However, it is quite unfortunate that training is often the first activity to be cut during tough economic times instead of them being increased. As Lipman (2013) points out, companies should not ignore training during tough times because it is only through training that they can align their workforce with shifting objectives, which allows these companies to gain a competitive advantage during economic recovery. This therefore means that cutting training budgets during tough times is not really the smartest business strategy to employ during economically difficult times. However, most companies understand the importance of training employees during economic downturn, but they find it difficult to increase the training budget in such a time. These companies are always left with no option but to cut training budget. As they do so, they often have several reasons to support their decision and to explain why training should be cut during tough times (Edmonds, 2011).
According to Lipman (2013), one of the challenges that companies face during tough economic times is to stay relevant and competitive while at the same time, keeping the budget constant. During economic downturn, companies tend to budget with the small amount of money they have to keep all activities running in order to compete favorably in the market. The little that is available is however not enough for these companies to meet all costs, which compels them to cut budget for those activities that do not seem to be crucial (Toman, 2009). These companies feel that they should cut training budget during economically difficult times in order to focus on activities that will enable them do more with less. According to Edmonds (2011), managers tend to focus on essential day-to-day operations and they do not concentrate on long-term activities that will not pay back to the company as fast as possible. During tough times, managers see training as an activity that has less payback than other activities, making them to cut training budget.
Ideally, in a tough economic climate, managers should concentrate only in what they can do and ignore what they cannot do. For instance, they should focus on those activities that bring about fundamental benefits to their organizations and forget about those activities that will not bring about any significant benefits. Employees who are offered on-the-job training are able to acquire new skills which help to keep them highly motivate and engaged. However, despite the importance of training to an organization, it is important to note that effective training is difficult to implement during tough economic times (Lipman, 2013).
Another reason why training budget should be cut during economically difficult times is because training tends to divert the attention of managers away from real activities that the company should attend to in such economic environments (Edmonds, 2011). In order to avoid conflict of interest, managers cut training budget in order to get the opportunity for making relevant targets. Additionally, managers should be concerned with actions when they are faced with economic difficulties to help bring back the company to its normal status. According to Edmonds (2011), success is always measured in tangible assets and training is an intangible asset which is not directly associated with success. Most organizations believe that training may not improve the bottom line in the short term and it should not always be considered in times of financial distress (Toman, 2009).
Training employees during tough times is like spending money but not bringing any financial gains to the company. It is true that when a company is facing financial distress, it does not have much to sell to customers, yet it still has to meet overhead costs (Toman, 2009). In this sense, it does not gain much revenue from its operations, making it difficult to meet other financial responsibilities such as training employees. Some managers claim that training in times of financial distress is a waste of time and money because the trained workers have nowhere to apply their newly acquired skills (Lipman, 2013). The main problem with training during tough times is that the workers will feel dissatisfied instead of them being satisfied because they cannot get anything constructive to do in order to make use of the acquired skills.
According to Lipman (2013), training in times of financial crisis assists organizations to build loyalty among employees which helps in increasing productivity. The main reason behind this idea is the fact that loyal employees are highly engaged and maximum productivity is achieved from engaged employees. Eventually, increased productivity helps to relieve the company from economic difficulties. However, certain training sessions have very little value to the organization, yet they take a very large portion of the training budget (Edmonds, 2011). During tough economic times, it is important to ignore training sessions that do not add any value to the organization. Most importantly, managers should not spend any money on training sessions that do not bring about any tangible benefits to the organization. Dropping certain training activities during tough times does not mean that they are worthless, but it is just a way of keeping the company moving (People Management Association of the Philippines, 2015).
Financial crisis compels organization to review their budgets and come up with ways through which they can maximize available resources. One of the main critical areas that managers should revisit is employee training together with all the budgets associated with it. From the review, the manager comes up with a conclusion as to whether or not it is necessary to increase or cut the training budget during economic downturn (Toman, 2009). Cutting the training budget is just one of the ways through which a company tries to remain viable and to increase its chances of survival. During tough times, increasing training budgets will bring even more economic problems to the organization despite the significance of employee training in enhancing performance (Toman, 2009).
Managers agree that employee training, even during tough times gives them the opportunity to grow and develop, which in turn brings about numerous benefits to the organization. Edmonds (2011) points out that, training employees during tough times can be a complete waste of time particularly if managers themselves lack understanding on how to fully engage the minds of workers. Instead of finding a way of engaging the minds of the workforce in times of financial crisis, most managers choose to cut training budgets. Even though employee training does not bring about any tangible benefits to the company in the short term, managers should not ignore this concept completely during tough times. The People Management Association of the Philippines (2015), gives a number of things that managers should do during tough times in order to develop employees and keep them motivated, while at the same time keeping budgets at manageable levels.
According to the People Management Association of the Philippines (2015), managers need to distinguish between training activities and training budgets. It is only after acknowledging this distinction that managers will be able to make wise choices concerning the training aspects that they should willingly let go and those that they need to retain on order to keep their organizations moving. When managers are able to make this distinction, they may decide to cut training budget but still endeavor to meet the training target for the year. Cutting training budget in tough times is just a way of reducing training activities for a company (People Management Association of the Philippines, 2015).
Managers must be ready to stretch their training budgets during tough times there is no way they can have new training modules without extending beyond the existing budgets. Employees should be trained effectively during tough times in order to equip them with new skills necessary for driving the organization from economic crisis (People Management Association of the Philippines, 2015). This additional training increases efficiency and it can only be achieved through rationalization of administrative costs. For example, the manager can increase the number of employees attending a given training program in order to cut the cost of running several separate programs at the same time. At the same time, the cost of running a program with more attendees will be increased. In this manner, the manager will be able to cut the training budget per employee while increasing the number of workers trained. This does not only bring about financial benefits to the company but also increases the number of employees who are equipped with new skills (Toman, 2009).
Managers are advised to adopt a teaching culture in times of economic difficulties in order to do away with formal training programs that require a lot of money to implement. A company will incur minimum costs if it uses experts who offer in-house on-the-job training on important subject matter. Such team projects will not only help on engaging employees, but will also increase productivity across the workforce even during tough economic times. These cost-saving schemes will assist companies to cut training budgets but still compete favorably even in times of financial crisis (People Management Association of the Philippines, 2015).
Even in times of economic difficulties, a company cannot do away with technical skills training, but it can survive without soft skills training. It is therefore important for managers to prioritize programs that are critical to business needs by focusing on training programs that are responsive to business needs and that will assist the organization to achieve its business objectives. When this is done, the company will be able to cut training budget by leaving out those programs that are not essential considering its current situation (People Management Association of the Philippines, 2015).
In conclusion, managers need to understand that even economic crisis comes with opportunities, and early preparation is important to help the company to survive and achieve competitive advantage suppose financial crisis ensues. This calls upon managers to identify opportunities that may arise during economic crisis and train their workforce in advance on how they can take advantage of those opportunities when they arise. Most managers normally consider cutting training budget during tough times because they feel that training employees does not result in positive financial gains to the company in the short term. However, managers should not ignore employee training completely during tough times, but they should adjust their budgets to ensure that employees are effectively trained and that business objectives are achieved.