1.6 The Pervasiveness and Price Tag of Training

Virtually all private- and public-sector organizations of any size have formal training and development programs, and the commitment to such programs seems to be growing. In the late 1970s, the average annual training expenditure per employee was under $100. In contrast, by the mid-1980s, IBM had a training and development budget of over $700 million per year (about $2,000 per employee). By 1990, IBM was reportedly spending $1.5 billion on training annually.1 Motorola, a leader in organizational training efforts, spends about 2.4 percent of its payroll on employee education of one type or another. According to a 2014 survey by ATD, the total dollars spent for training in US organizations that employ 100 or more people was $156 billion in 2013.2 This amount divides out as follows: 56 percent ($87.5 billion) on direct internal costs of training, 30 percent ($46.9 billion) on external services for training, and 14 percent ($21.9 billion) on tuition reimbursement. According to its 2018 survey, the ATD found that the average direct training expenditure per employee amounted to $1,296, which is up from $1,273 the previous year.3 Also, the survey found that the average employee clocked 34.1 hours of training per year.

Of course, the total investment that firms make in training and development is significantly larger than the $156 billion figure suggests. Surveys typically only ask about formal training programs wherein there is some kind of class and an instructor or online materials. Informal training like on-the-job, coaching, or mentoring goes on all the time and no doubt represents an even larger investment. Also, these estimates typically include only the direct costs of training, not the overhead or the time away from the job spent by trainees.

The ATD survey also gives us a glimpse of the types of training that are common in practice. As of 2011, the most common types of training were managerial and supervisory training, profession- or industry-specific training (e.g., nursing knowledge updates in hospitals), and training on business practices (e.g., how to conduct a performance appraisal). The next three in terms of popularity are mandatory or compliance training (e.g., sexual harassment), interpersonal skills, and information technology.

Figure 1.2 is a complete list of training content areas and percentages representing relative frequencies of each area.4

The way that training is conducted has changed over time as well. The ATD survey mentioned above has tracked the percentage of training hours delivered via e-learning since 2004. E-learning is defined by ATD as the use of electronic technologies to deliver information and facilitate the development of skills and knowledge.5 In 2004, 25.6 percent of training hours were delivered via e-learning, while in 2011 that percentage had increased to 38.5 percent. While the trend is apparent, and there is probably no stopping the adaptation of electronic technologies to training, the author remembers a visit he made some years back to Cisco Systems in Palo Alto, California. Cisco makes backbone products for the internet (e.g., routers) and is one of the archetypal high tech firms in Silicon Valley, with an army of twenty-something employees as hip on technology as you can find. What surprised the author was that Cisco offered all of its training both online and in person (traditional classroom), and the latter was more popular than the former. Even tech-savvy employees may prefer more traditional training approaches, dependent on the topic of the training and the availability of alternatives.