Training budgets to rise as skills shortages fuel recruitment difficulties

HRD 2004, CIPD annual Learning, Training and Development Conference and Exhibition, 20-22 April 2004, Olympia London

A íwait and seeí approach to training and development in the workplace is giving way to more concerted investment by employers, as increasing confidence in the private sector coincides with growing fears of skills shortages. This is one of the key findings of the Training and Development Survey 2004 conducted by the Chartered Institute of Personnel and Development (CIPD), the professional body for all those involved in the management and development of people.

The survey, which is launched on the 20 April, at HRD 2004, shows:

* Although the survey revealed little change in the size of training budgets between 2002 and 2003, one in three private sector training managers expect to see their training budget increase in 2004;
* Eighty-one per cent of organisations have a training budget - indicating an acceptance of the training means business case;
* One third (32%) of respondents say that employees in their organisation receive, on average, more than five days training per year. However, nearly one in five (18%) receive less than three days training per year.

Despite the positive signs in the survey, the CIPD is warning that anticipated increases in training budgets must materialise for the sake of the overall economy. Other recent CIPD research* shows that the majority of employers in some sectors are already experiencing recruitment problems, despite relatively weak economic conditions.

Jessica Rolph, CIPD Learning, Training and Development Adviser, said: If anticipated increases in training budgets do not materialise, current skills shortages could translate into wage inflation, leading to adverse implications for interest rates, growth and the economy as a whole.

Economic uncertainty has led to a íwait and seeí approach to investment in training, but there is a danger that employers have not invested nearly enough in anticipation of impending skills deficiencies. A failure to invest now could leave employers in many sectors short of skilled labour, or needing to offer unsustainable salaries in order to fill vacancies for skilled workers.

The survey also shows a surprising disparity of experience between public sector and private sector training managers. Thirty per cent of public sector training managers reported that their training budget had decreased last year (as compared to 27% in the private sector), and over a quarter (26%) expect the budget to decrease next year (as compared to only 17% in the private sector).

Jessica Rolph continued:
The Government has invested heavily in public services over the last year, and yet training budgets appear to have fallen. If, as it seems, the public sector is diverting money away from training and in to pay awards in order to tackle recruitment and retention difficulties, they are taking a short-term approach which could store up problems for the future.

As the private sector recovers, competition in the labour market can only increase, so reductions in public sector training budgets are ill advised. It would be ironic if the Governmentís investment in public services were to be undermined by a focus on pay rather than training, leading to services suffering because the public sector is failing to equip staff with the skills to do the job.

Other key findings:
Training spend
* Average training spend per employee is higher in smaller firms (possibly due to economies of scale for larger employers):

Size of firm Average training budget Spend per employee
25-49 33,833 884.06
50-99 58,504 878.82
100-249 111,658 660.62
250-499 212,132 602.45
500 970,429 Not available

Benefits of learning
* When asked to rate the benefits to their organisation of training, respondents to the survey gave higher ratings to immediate job demands, such as improvements in competence (62% said this was a great benefit), behavioural skills (61%), technical skills (61%) and quality of service (61%).
* By contrast, general organisational benefits received lower ratings, for example job satisfaction (33%), staff retention (29%) and raised commitment (27%).

Training the time poor
* For 77% of respondents, time pressures have made it essential to provide training in short, íbite sizeí chunks. The same proportion are providing more materials that employees can use at times convenient for them.

The impact of Government skills initiatives
* While 86% of respondents have had contact with further or higher education institutions and 81% have had dealings with Investors in People, only 33% have had contact with Sector Skills Councils and only 28% have dealt with their Regional Development Agency.
* When asked to assess how effective bodies they have had contact with were at meeting their needs, 30% rated their Learning and Skills Council (or Education and Learning in Wales) as poor, 38% rated their Sector Skills Council as poor, and 43% reached this conclusion about their dealings with their Regional Development Agency.