Increasing the Profit of Training
When working to increase the profitability of training and running a training team as a P&L, as with any other business there are only two way to increase profit: increase revenue or decrease costs. Previous white papers have looked at how to quantify training efforts into revenue and discussed some strategies to reduce expense, but for most departments, the single largest expense by far is salary. In challenging economic times and a company is faced with trimming costs, training tends to be one of the first to be cut back. While being prepared to show specifically how training is helping revenue at any time goes a long way to prevent this, outsourcing may be another option to consider.
Challenges with Outsourcing
A 2002 report by The Conference Board found that only 2 percent of companies outsource the entire training function. That's low compared to 55 percent of companies that outsource part of the training function, usually the administrative tasks.
However, in-house trainers are an invaluable asset to a company. There are few employees who are as familiar with so many aspects of the company, know as many people in the company, and have their finger on the pulse of company trends and how to impact them. Their versatility lets them interact with sales one day and with accounting the next, executing on projects often outside the traditional scope of training. But as the pressure builds to cut costs further and to focus solely on core competencies, companies are turning to the growing trend of business process outsourcing (BPO), or total outsourcing of an entire function. But, due to cost-cutting mandates, the number of companies exploring training BPO as an option is on the rise. Doug Howard, CEO and Managing Partner of The Exceleration Group and Founder of TrainingOutsourcing.com and TrainingIndustry.com, says that the number of requests for proposals has tripled in the last 12 months for his firm. In HR, the outsourcing industry is expected to grow from $2.5 billion in 2003 to $15 billion next year, according to estimates. In training specifically, industry experts predict that within 10 years, half of all trainers will work for outsource providers.
Industry experts predict that within 10 years, half of all trainers will work for outsource providers.
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Challenge #1: Loss of Control While the immediate benefits of outsourcing, most notably the reduced cost, are obvious, many training organizations are very hesitant to outsource. Ninety-eight percent of the training at Staples, for example, is done in-house, outsourcing things only when they simply do not have the resources to get the projects done on time. This is a very valid concern. Outsourcing, by definition, invites the potential for some loss of control and speed of execution. But this does not have to be the case. Clear, two-way communication is essential to build a trust-based relationship. A gradual approach from individual projects to longer term contracts reduces the perceived risk of losing control. The goal for the best outsourcing providers is to create a relationship where your organization does not even perceive them as a vendor. This partnership creates an open dialogue about how well the relationship is working. There is also a good amount of flexibility, recognizing that requirements change and that the contract, if there is one at all, can be revisited when necessary.
Challenge #2: Loss of Responsiveness Top outsourcing providers realize that responsiveness is key. When an organization feels that an outsourcing provider is not delivering in a timely fashion, they begin to look in-house instead. As a result, one common approach outsourcing providers take is to hire as many of the former in-house trainers as possible, retaining their valuable knowledge on the business and keeping the comfort level for the client high.
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