Leadership development has long been considered a discretionary expense. During economic downturns it is often one of the first budget line-items to be cut. However, there was a different feeling this time around. As we entered the recession in 2008 and 2009 there was hope, and some evidence, that companies had learned from past downturns. Eliminating leadership development only left them further behind when the economy did start picking up again, as it inevitably does.
In the Wall Street Journal last week, an article reports that training budgets over the past two years have been down 11%, but now there is signs that it is coming back. It appears that the companies that did scale back training are now scrambling to catch up:
Already, some companies say they are finding they don’t have the managers to spearhead new projects or step in for departing executives, a problem as companies try to shift into growth mode.
The article goes on to report that companies like Amway and Rockwell Collins are re-launching leadership programs that were cancelled during the downturn. The goal is to accelerate the development of internal talent while they hire experienced managers from the outside to meet the increased demand to fill vacancies.
Unfortunately the article does not contrast the experience of Amway and Rockwell with one or two companies that continued to invest in leadership development at a steady or increasing pace over the past two years. Companies like O’Neal Steel remained committed to training and entered 2010 with a strong talent pipeline and engaged employees. These organizations are better suited to take advantage of the opportunities for growth in 2010 and 2011.
As for the other companies, well, hopefully they learned their lesson; cutting spending on leadership development is more expensive in the long-term.