The global financial crisis has caused some dramatic changes in the Chinese HR world. Over the last few weeks, I have detailed the transformation from an employee centered scramble for talent scraps, to a barren recruitment environment in which salaries are falling and headcounts are frozen. However, it is not just recruitment and salaries that have been affected by the economic downturn. The way companies train and develop their employees is also changing.

Over the last few years, both turnover and salaries spiraled out of control. In turn, the training market also developed rapidly. This ranged from high-level management training companies such as FranklinCovey or AchieveGlobal down to low-level language training firms such as the likes of English First. Many major organizations were happy to shell out for all kinds of training products: technical training, soft-skills training, English language training and teambuilding. However, even though they knew exactly how to sign the contracts and pay the bills, the majority of these companies were far less clear on why they were actually purchasing the training. As a result, the value they took from the training was often negligible.

Photo: genvessel

One of the major reasons companies were prepared to sign those checks so readily was to use training as a form of recruitment and retention. With employees so difficult both to attract and to keep, the promise of personal and internal development became a major weapon in the battle for talent. The promise of expensive long-term development opportunities was often a potent weapon when used alongside an impressive salary. For example, many multinational organizations often employed tactics such as training bonds, where employees would agree to work for a set period of time – often two or three years – in exchange for receiving high-level training. This approach to training may well have helped companies to keep their top employees or to lure others from different companies, but it certainly did not help them develop employees in order to achieve organizational goals. Rather than focusing on the specific needs of the company, many HR departments simply ordered the type of training that would please want-away employees.

Now, thanks to the financial crisis, things are different. The chances of employees being headhunted or jumping ship to a rival organization have decreased exponentially. Most companies no longer need to wave training around like candy to keep employees happy. This means that most companies will be reassessing their training plans. Just as with other HR trends, such as salary and turnover, training expenditure is likely to fall. However, the most striking effect of the crisis will not be a reduction in the amount of training companies will provide, but the type of training they will give.

The crisis is likely to make HR departments wake up and focus on training that will provide clear, measurable, performance-based results. The focus will shift from ‘softer’ goals (recruitment, retention, employee morale) to ‘harder’ goals (employee performance, profit margins, KPIs). Gone will be expensive training used to retain a few key employees rather than improve overall organizational efficiency. So too will the sweeping plans that would incorporate vast swathes of a companies workforce and be used as a form of tacit teambuilding. In their place will be specifically designed plans to ensure a company or department can operate as an efficient, cost effective machine.

Photo: 陈少举

Take Swiss pharmaceutical giant Novartis for instance. Relatively unaffected by the crisis, it is looking to cash in on the China market. It plans to double its training expenditure, focusing this investment on areas such as R&D and grass roots technical knowledge. Another organization heading in a similar direction is fast food giant McDonalds. Newly appointed China CEO, Kenneth Chen, recently announced some ambitious plans for employee development. Susanna Li, VP of HR, said, “McDonald's is not only a company that sells hamburgers, but also a talent-oriented enterprise. McDonald's has been trying to create training opportunities for different levels of staff," Their ideas include ambitious plans to open the first ‘Hamburger University’ in Mainland China (One was opened in Hong Kong in 2000) and a new leadership program, the China Leadership Development Program.

Companies that are investing in employee development right now are likely to benefit in three key ways: First, the added efficiency the training can create will give them an edge in the market, particularly as other companies may be slashing their training budgets. Second, even though training can be an expensive outlay – many of the higher end management companies do not come cheap – it can actually save money. With employees worried about their future and the state of the economy, they are becoming far more flexible than they once were in terms of salary and bonuses. For example, many are no longer quite so adamant about the size of their bonuses and are becoming far more receptive to slightly more flexible options. In fact, at new-year, several companies replaced the traditional hongbao with free training, which was remarkably well received. Third, many employees are becoming increasingly concerned with their own skills and viability. They realize that with millions of graduates entering the market every year, there is a virtual army of cheaper replacements available. Therefore, helping them develop skills that would make them increasingly efficient in their roles will not only improve organizational performance, but it will also help employees feel more confident and more secure.

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