Identified by successful businesses as critical, training is the all-important yet sometimes difficult to incorporate function. Through training, companies transmit information, convert it into knowledge and transfer learning in an attempt to improve employee and overall organizational performance, meet various compliance standards and engage the workforce in continuous development necessary to meet personal and organizational goals and objectives.
While some businesses are fortunate enough to have a professional and experienced trainer on the payroll, many do not. Even those companies with a training manager or a training department often find themselves in need of something more either because they are not well-versed in a particular area, have little or no experience or accreditation on a certain topic or are simply overloaded and focused on other areas within the organization. It is for these and other reasons that the training function, in part or in its entirety in many cases, continues to be outsourced at an accelerating pace.
In the summer of 2006, Bersin & Associates performed an extensive study titled, “The Economics of Outsourcing Training Technology and Operations,” and the study indicated that the market for training outsourcing will grow by $20 billion over the next few years. Outsourcing training is a reality, and one that successful organizations—big and small—are increasingly turning to.
What Is Outsourcing?
Outsourcing of the training and development function is not a new phenomenon. It has been very popular for a long time, particularly over the last fifteen years. In most organizations, learning and development specialists are either non-existent or are a relatively small group of professionals who are expected by the company to be technical experts in a variety of topics, skills and procedures. Even organizations with internally identified and well-run learning and development functions continue to outsource certain aspects such as content development, a wide variety of training programs and, increasingly, management and executive development. In addition to training design and deployment itself, businesses often outsource functional tasks such as the production of books and manuals, training materials, training videos and CD-ROMs.
Outsourcing really has three main components to it. First, it refers to the traditional use of vendor services, such as working with a human resource (HR) and/or training consulting firm to provide identified coaching, training courses and programs. Second, it refers to the outsourcing of training technology such as learning management systems (LMS), e-learning content development and content integration and hosting of complex training and development (T&D) software. The final component, often referred to as business process outsourcing (BPO), entails outsourcing help desks, vendor management, classroom administration and the training personnel themselves.
Research indicates that a significant percentage of outsourcing falls within the first component—the traditional use of outside vendors for content development and other training tasks and initiatives. Trends indicate that this percentage will continue to increase, with the largest area of growth coming in the outsourcing of both training technology and comprehensive training program design and development.
Training technology is extremely challenging. LMS, e-learning content, content management, development tools, assessment tools, simulations, virtual classroom tools, and integration with internal HR and financial systems are far more complex than many other enterprise technologies today. Most training and development functions are starved for technical resources. Discussions with chief information officers about the challenges learning and development functions face confirm that organizations often serve training last, and the few training technologies that are available get spread very thin.
Learning technology is changing rapidly. Many training technology organizations that seemed at first to have great potential soon find themselves on their way out just as fast as they got their feet moving due to the rapid rate of change. Often, even the most seasoned experts in learning technologies have a hard time keeping up, and this doesn’t even begin to address issues in small to medium-sized companies.
Outsourcing training and development makes a lot of sense for most organizations. The training function is often a decentralized operation. Most companies are unsure of how much they spend on training across the enterprise, and don’t really know what or how much they need. Of course the process of identification, analysis, design, development, deployment and evaluation varies from group to group, department to department and division to division, even within an organization. What is necessary within the training function is to make outsourcing a value-added component of business by taking a customized approach and building in an ability to make it repeatable within the contextual needs of the organization. In order to ensure that quality is not lost and that the unique cultural attributes of each company, division and department are considered, even a repeatable program must be reviewed and adjusted as necessary.
Outsourcing Saves Money
The economic benefits of outsourcing training and development are real and can be significant.
Outsourcing Learning Management Systems Reduces Costs
Outsourcing LMS technology and operations reduces cost in three ways:
- Implementation costs: Outsourcing companies save time and money by leveraging the outsourcer’s IT investments and professional expertise. Implementations are simplified and streamlined because configuration options and customization options are typically limited.
- Operational costs: Organizations that manage their own LMS spend more than twice as much per learner annually in maintenance and upgrades than companies that outsource. These savings are due to the outsourcer’s ability to pass on economies of scale and efficiencies of centralization to their customers.
- Reduction in technical staff: Companies that manage their own technology have in-house technical staff—a big cost with no training benefits. Outsourcing the technology platform reduces necessary IT staffing.
Outsourcing Frees Valuable Staff Resources
Organizations that outsource realize substantial savings. Research indicates that companies that outsource save approximately 30 percent per learner and have about a 24 percent lower staff-per-student ratio. This also translates into smaller program and administrative staff needs. Additional potential benefits of outsourcing also include offload registration, ongoing support and reporting functions.
Outsourcing Adds Expertise
Additionally, many times in-house staff is not able to perform some aspects or types of training. For instance, in order to bring Daniel Goleman’s emotional intelligence model and Emotional Competence Inventory (ECI) to managers and other leaders within an organization, it is necessary to contract with a training professional who has been specifically accredited in this area. Recognizing that this is a critical developmental area and the baseline for successful management and leadership development, outsourcing this function becomes necessary. Not only does it become the natural and needed option, but it also serves as the best course of action, as the accredited professional holds a level of expertise in the field, which is unmatched by internal, non-accredited staff.
Outsourcing Increases Strategic Alignment with Business Strategy
The aforementioned study examined how well management rated the effectiveness in delivering learning outcomes aligned with business strategy. It indicated that companies that outsource training aligned with business strategy were 18 percent more likely to rate their learning as extremely effective over those organizations that run their own learning and development functions. It is clear that companies that outsource their training are expecting value-added results that have a direct link to increasing individual and organizational performance.
Outsourcing Facilitates Redistribution of Resources
- Training managers and executives indicate that when they outsource training, they:
- Focus more strategic planning with the line organization
- Spend more time on performance metrics
- Spend more time planning and budgeting
- Increase time with line management in conducting needs assessments
- Examine continuous improvement activities for effectiveness and efficiency
The overarching theme that emerges is a clear intent to align training strategy with the overall business goals of the organization and to provide for a greater opportunity to deliver training and development through the best avenue for both employees and the organization, allowing internal employees to focus on their core functions. If the internal training function does not add direct value to the business or is not the best choice for the development and/or delivery of a particular learning initiative, it needs to be outsourced.
Weighing the Pros and Cons
It is reasonably accurate to say that outsourcing is not for every organization. It is an option that should be evaluated by management periodically. Studies have shown significant cost reduction and strategic benefits to outsourcing training, such as:
- Reallocation of staff to focus on content development and program management
- Allowing learning and development management and staff to spend more time with the line organization (headquarters, division and field)
- Freeing resources for measurement, evaluation and overall operational and quality improvement in training programs
- Improved quality of program and curriculum development in varied areas
- Greater flexibility and accountability in meeting business requirements
In the end, organizations that outsource their training report higher levels of satisfaction from their staff and the stakeholders whom they serve. These organizations approach training from the perspective that it must be aligned with and be value-added for the business. Outsourcing is a trend that will continue to grow. Many factors are likely to fuel this trend: increasingly complex solutions, integration initiatives, budget constraints, staff limitations and demand for quality and diverse training resources. It is important to remember that learning is unique and organizational contexts must be considered by the outsourced training vendor. It is clear that technologies and basic skill requirements are similar for most organizations, but business-specific strategies, employee populations and training processes widely differ. In the end, organizations should consider outsourcing some or all of their learning and development functions as a part of the company’s overall strategic planning and budgeting process.
Construction Business Owner, November 2007
