Learning budgets have been squeezed like never before. So, what is L&D doing to survive?

David Perring, September 2023

Continuing his supporting blog posts around the Digital Learning Realities research for 2023, Fosway Group’s Chief Insights Officer David Perring gives us a look at the state of L&D budgets and the very real consequences of not investing in learning.

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When the pressures for transformation are so intense, organisations tighten the purse strings at their peril

In 2023, L&D budgets are feeling the biggest pinch since we released the first survey results in 2016. Those who expected a reduction in their L&D budget increased by almost threefold. That’s three times the number from 2022, saying ‘our budget in L&D is going to decrease.’

Thinking about the importance of learning to the employee experience overall, e.g. people's personal growth, their sense of satisfaction, their sense of learning as a part of their journey in their career - quite often your best people will go if they don't feel as though they're growing in your company and it could have a truly stagnating effect on your organisation.

Around 80% say that they have skills gaps. In some of our previous research, the CIPD say that 42% have hard to fill vacancies. And 97% in our surveys cite the availability of talent as their biggest business challenge. So the impact on growing a business, innovating your business to cope with changing customer expectations or take a lead in your market space can be truly stifling to the success of your organisation.

If you want to grow your L&D budget, you need to have an effective C-Suite influencing strategy. It's incumbent on every L&D professional to explain how they are adding value to their organisation. Remember – L&D teams who have C-Suite support are twice as likely to see their overall L&D budget grow, and three times more likely to see their digital learning budget grow. So, having an executive influencing strategy is one of the critical pillars to being a successful L&D team. And the data is the proof that you have the evidence that really makes a difference to how well you can influence your C-Suite to invest in you. The effects of not prioritising L&D budgets? Stagnation, lack of growth, loss of talent, lack of innovation and a shrinking business.

When we see budgets get squeezed, what L&D leaders tend to do is look at how they can make their money go further. So as much as this year may be the year of skills, you could also call this the year of doing more with less. Every time we've asked that question – ‘what are you doing about your budget?’ What everybody has said in our survey anecdotally for the last 20 years is ‘I'm going to do more with less by increasing automation, self-service’ and things like that. So, whilst overall L&D budgets are under pressure, learning technology tends to be less so and people are still growing their investment in digital learning, especially in contents and platforms.

Empowering businesses to be ‘learning organisations’ is now as important as training delivery

As budgets get tighter, L&D teams tend to look at how they can scale learning within their business, and that is a good thing. Trying to encourage more people to share more learning with each other is part of building a learning organisation.

But - one of the things that also comes out of maybe this year's research is that sense of investing in helping subject matter experts and project teams to develop their own training. So, user-generated content is higher up learning organisations’ and learning teams’ agendas because they know that they can scale the demands on them by getting people to do some of this stuff themselves.

On a broader scale, if you think about the effect of budget constraints, one of the interesting things is the development of software and techniques and approaches to understand what the strategic workforce skill gaps are would be an interesting way to counter some of the budget cuts that people may be facing.

With re-skilling, you do need to have some supporting process to help people move from one set of expertise into another, e.g. if you were able to use the sorts of diagnostic tools that would say ‘this is what a future organisation should look like, and this is the gap in our people skills in order to get there’. And if you even took a step back from the learning side, understanding the impact of a lack of skills in your business would be the sort of conversation that says - you set these targets, there's no way we can reach them, because you don't have people who can do the work that enables you to reach those targets.

That’s part of the mature conversation that increasing the L&D needs to start to stand up not only as part of L&D, but part of the overall HR function.

Budgets for elearning will shrink because of generative AI, unless we raise the bar for personalised learning

We’ve talked a lot in the past year about the commoditisation of elearning content. We’ve talked about that for two or three years now, and we're going to see more of that price pressure in the market space. If you combine user-generated content with innovations around AI, around content authoring, it's not difficult to see a continued squeeze on the price per learner of traditional learning content.

But I don't think it's going to be the bleak prospect of vendors thinking they’re going to get less revenue because people are going to be spending less; we’re going to see a switch from people thinking as buyers, simply about the cost of production, to now where they might think, ‘I'm going to spend 50K on a learning project including the cost of production and the cost of consumption’.

So, people will now need to look at how much does it actually cost for 10,000 of my employees to go through half an hour's training - especially if they didn't all need to do the full hour, if they knew most of it already. Why am I wasting that time? If half of them know most of it already, then that's a lot of hours lost to business. So, trying to find this switchover between L&D talking about the cost of production, to thinking about the cost of delivery and the cost of learning - that's going to see us think about how we can spend a little bit more to have a much better business cost.

Because ultimately, the cost of business time dwarfs the cost of the learning itself. So, we'll start to see smart teams look to leverage and protect their L&D investment in learning tech by thinking about how we not only do more technology-based learning, but how we make that technology mechanism even more effective, even more targeted, even more precise, even more personalised.

To download the infographic

The latest Digital Learning Realities research infographics are free to download from our website.

https://www.fosway.com/research/next-gen-learning/digital-learning-realities-2023/

About Fosway

Fosway Group is Europe's #1 HR Industry Analyst focused on Next Gen HR, Talent and Learning. Founded in 1996, we are known for our unique European research, our independence and our integrity. And just like the Roman road we draw our name from, you'll find that we're unusually direct. We don't have a vested interest in your supplier or consulting choices. So, whether you're looking for independent research, specific advice or a critical friend to cut through the market hype, we can tell you what you need to know to succeed.

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