Organisational Behaviour & Development
Over the last thirty years, there have been three major recessions in the US and UK and these either contributed to or were caused by global recessionary trends. The economists, with their definitions, indicate that in each case the recession lasted two years but just about every businessman I have spoken to feels that the definition is too limiting and that, in reality, while the economy may well have climbed out of recession in two years, company performance has taken nearly twice as long to recover. Take this last recession as an example: ‘technically’ it started in the last quarter of 2007 and lasted until the first quarter of 2009, but the European and US economies started their collapse in mid-2007 and are still underperforming and are a long way short of what was being achieved in the first half of that year. This recession might be ‘technically’ over but its legacy is likely to be with us for five years or more!
This recovery trend, which ranges from flat to very slowly rising, means that many businesses that are not diversified will be facing extreme difficulties and will be eating into capital reserves just to stay afloat – and if their reserves are not big enough and they cannot switch markets, then they will go bankrupt. As part of their actions to avoid this, most organisations, especially businesses, look towards cutting their fixed and discretionary expenses, hopefully without aversely impacting their ability to ride the up-wave of a recovery. Unfortunately, there are two ‘easy targets’ for cost cutting – mainly because of the budgetary impact – and these are the FTE (full time equivalent) headcount and the staff development costs, which includes training.
Cutting either of these two could have a hugely detrimental impact on the ability of the organisation to respond quickly, flexibly and effectively to a recovery and it could and should be argued that both should be amongst the last to be cut – none the less, the short-term and immediate realities of survival often take priority over the calm assessment of what is best for the organisation, and the HR budget gets cut.
When the recovery comes, fearful of a double-dip recession or something similar happening, organisations are slow to recruit new and replacement staff and even slower to engage in staff development.
Organisational expenditure on training and staff development is, therefore, amongst the first things to be cut when a recession looms and is one of the last to be reinstated and this makes it a leading indicator of a down turn in the economy and a trailing indicator of a recovery. So, for the providers of training, their market cycle is one of short-term peaks and long-term troughs. Anecdotal evidence suggests that training providers saw an immediate, dramatic and sometimes fatal down turn that started in September 2007 and is still a long way short of recovering.
This market impact spills over into the discretionary educational sector as well. By discretionary, I am referring to the higher education sector that delivers practitioner degrees such as MBAs. Whereas a Masters degree student generally enters onto their course on a full time basis, usually straight from a Bachelors degree course, an MBA student is generally working full time and studying in the evenings and at weekends – and are often sufficiently junior in the management hierarchy for their jobs to be at risk in an economic downturn. This makes potential MBA students think twice before committing their time and money to pursuing a course at such a time. In turn, this impacts enrolment at business schools (in particular) and low student numbers is common during economic downturns thus choking off curriculum development and investment in facilities and research. Again, anecdotal evidence suggests that business school enrolment and attendance is currently at a near record low and is only now showing some signs of recovery – and the business schools that are seeing numbers growing steadily are those that have used the downturn to re-think their MBA curriculum and to distance themselves from the types of programme that are too closely associated with the actions of business leaders that brought about the crisis in the first place.
One rather disturbing outcome of this recessionary impact on the training development and higher education sector, is that many of the instructors, seminar leaders and lecturers have found their work drying up and their contracts not being renewed and so they have diversified away from the training and educational sector and this may create an artificial shortage of qualified staff which in turn risks lowering the quality of the programmes on offer.
Alasdair White has been a workshop facilitator and seminar leader for the last 20 years and a business school lecturer for the last 11 and has survived the last two major recessions by diversification of activities.