The Conference Board’s Leading Economic Index uses 10 data elements as leading
indicators for the purpose of forecasting future economic activity. These indicators
include data such as manufacturing activity, unemployment, change in interest rates
of treasury notes, housing starts, and more. Obviously what is not included is data
related to corporate spend for training.
Please allow me to put my disclaimer in now. I’m not an economist, nor am I an expert on the various ways to gauge economic activity. But I do follow the activity of buyers and suppliers in the training industry. What I find interesting is how the revenue performance of supply side companies indicates early what is happening in the market. Sounds logical, even though on average, only a little more than half of companies training budgets goes to external suppliers.
So what do we all see? When the economy is starting a downward cycle, the two areas corporate executives cut first is training and travel. This usually happens way prior to government and non-government groups telling us the economy is in a decline. And it’s driven more by what executives see for revenues and profits for their own companies.
And when the economy has bottomed out and about to return to growth, or shall I say when corporate executives believe revenues are about to grow at an increased rate, one of the areas that companies begin spending on early is training. Why? Because they are preparing for bringing in new resources to handle growth in the company; or they are preparing to train new customers on how to use their products.
So is it a coincidence that since the 4th quarter of 2009 (when the National Bureau of Economic Research stated we were coming out of the recession) we started seeing strong growth in revenues for training suppliers in certain market segments? What we’ve heard over the past year is suppliers who focused on custom content development and sales training services were doing very well. Spend coming from buyers was up; RFP activity increased, revenues for suppliers were growing, profits were getting better, and staffing improved. And they tell us they expect it to be even better in 2011. It obviously demonstrated that corporate training organizations have been renewing activity and utilizing external suppliers more. Although I’m not sure it indicated they were increasing internal resources. I believe this is a lagging indication of activity. That will be for another discussion.
And as always, I welcome your comments. Or feel free to send me a note at dharward@trainingindustry.com.
