It is no secret that the last two years have been brutal on many training companies - not to mention corporate training organizations. By our estimates at TrainingIndustry.com, overall spend by U.S. companies for training activities is down by as much as 25% from 2008. Of course some verticals are hurt more than others,
(e.g. automotives and finance) while others have churned through the recession and held their own (e.g. healthcare).
I recently had the opportunity to speak with Richard Klingshirn of ACS about how the economy has affected the training industry. Richard told me he thought our industry is beginning to experience the ‘rubber band effect’.
To put this metaphor into perspective, as the need for training has continued during the recession, albeit at a lower level than before, the availability of cash to fund the training dwindled. In some cases, it almost dried up resulting in an effective drop in demand.
During this time, many companies on the supply side of the industry maintained their capacity of resources for the delivery of services as long as they could, eventually reducing resources to stay in business - effectively leveling their resources to demand.
Two important things occurred during this time that affected the supply of resources in the market. First, unfortunately many Strata 4 suppliers (independent training consultants and small training companies) were not able to make it through the recession and went out of business. Secondly, there’s been a huge increase in unemployed training professionals from layoffs in both the demand and supply side of our industry. Both created a supply glut of talent.
All of this means we have tension in the market. Demand side company’s remaining employees still need training they were not able to get last year. Some of these same companies are now planning for growth next year, meaning they will have new demand for training for new resources, on top of the demand for training of pre-existing employees.
This return in the market will put new pressure on training suppliers in terms of price and resources. Short term prices may go up in some segments (IT training and sales training) because demand will return faster than supply. Resources that are on the sideline (unemployed training professionals) will then be pulled back into the mix allowing the market to return to its original, somewhat stable state.
Thus the reason we call it the ‘rubber band effect’. Anytime you have this kind of stress on a market you will find a survival of the fittest condition. Those who are best positioned and best capitalized , and Those who survived have a lot to look forward to. Those who didn't, now should be looking for how to plug themselves back in at different points of the supply chain.
I welcome your comments. And as always, please feel free to send me an email at
dharward@trainingindustry.com.
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