Wednesday, April 08, 2009

Would Training Be Outsourced?

Over last few weeks, I have had several discussions with companies in different countries, mainly in India. Many of them are existing training clients, some of them are prospective clients and yet others members of the fraternity with a strong opinion.

Everyone seems to agree that the party is over. The next few months will be tough, where the fittest will survive in training. The question is indeed whether we shall survive, and what needs to be done for that. But, I shall keep that question aside for a moment and dwell on another subject - a debated one - whether the training departments in the companies I am speaking to will actually survive.

There are two views. The training departments seem to be believe that they will become more relevant than ever. The logic is simple. Most organizations have cut cost and let people go during recession. They will have to quickly get back on their foot when the market improves. So, the training function will become very critical - ramping up skills in a short period of time.

The other view, mostly held by training companies, is that the days are numbered for inhouse training organizations. They see the recession will put pressure on the companies and training department will be one of the first to go. The common argument is that the companies do not view training as a critical function - a view often echoed by large company training managers - and therefore training will be the first to go.

Of course, the views were not as black and white as I make them sound. I saw various shades of grey, or rather, black stripes on white and white stripes on black, so to say. But there is a lot of passion involved. The training managers feel outraged at the mention of the possibility, whereas the training providers see validation of a long-held belief, inhouse training do not work.

I had an interesting conversation with one of the insurance training providers. He told me the story of life insurance training in India, with some clarity. Life Insurance in India was nationalized long back and was run through a monopoly, Life Insurance Company of India. Only recently, last decade, several private operators were allowed a license to enter the field. However, recognizing the need of enhanced investor protection in a market like India, the government appointed a regulator and had set out clear norms for agent training. Under those norms, the agents needed more than 100 hours of instructor led training, and had to pass an examination, before they could go out and sell life insurance.

However, this was a bit of a cost for the companies and they did not want this 'distraction' of training when they market was fast expanding and new competitors were coming in the field every day. The companies wanted to recruit agents thick and fast and capture their natural market. They did not care about retention, all they wanted to do is to recruit agents for a short while and capture their natural markets. They cajoled the regulator to water down the training requirements, cutting it to half or 50 hours training, and then recently moved an amendment which will make any training completely optional. They have also worked hand in gloves with the regulators and training providers to turn the examination into a complete farce - bribing, impersonation and cheating in the examinations have become a common practise - and allowed the short term business imperative to completely distort the agenda.

Amazingly, given the low strategic priority of training in the corporate agenda, most insurance companies also sought to insource training over last few years. Apparently an exercise in controlling costs rather than enhancing control, these companies have created elaborate infrastructure and skill bases internally to deliver training to staff. This is an initiative riddled with paradox - if the companies felt training is not important, they are likely to do a very bad job at it anyway. However, they took in training teams at salaries at par with their sales teams and other functions, and when the time is turning bad, they are finding these salaries most painful and cutting these jobs first.

Insurance is not unique. I do think the same pattern can be seen in Telecom, Banks, Non-banking Finance, Travel and Tourism, Hotels and Airlines too. At various degrees indeed, but the fact that every industry in India is getting big fast while getting bad at what they do tells the same story. I asked someone once - regarding training business - whether he has met, in his considerably long experience, anyone who talked about less than 200 centres in India. I should have also asked if any one of these big thinking entrepreneurs ever had a plan to get 1000 staff trained. Most unlikely.

However, returning to the main subject, I believe in the ongoing, mission critical importance of training for the Indian organizations. Just that I know of only one way the low strategic priority of training and the critical need for training can be reconciled: outsourcing. Also, while I know about huge underserved market potential of India, last few months have told me that a sharp recovery from this downturn is wishful thinking. The recovery will be painful and slow across the world, and the business confidence will take several years to be repaired and restored. So, the assumption that training managers will soon be back in demand is possibly overtly optimistic. Rather, the only way to plan to service an underserved market in the middle of a downturn is, yes, outsourcing.

So, I choose my prediction - a huge surge in training outsourcing in India. In insurance and in all kinds of areas. A huge expansion of freelance trainers' pool, a more established code of conduct and soon professional standards and associations of training and development, all that is required to get an independent training services industry going. Huge opportunity for trainers and training businesses alike, indeed; however, those who have a bad hang over from last year's party, are probably setting themselves up for a rude awakening.

1 comment:

Anonymous said...

hi,
i am a freelance trainer for irda exam .i agree with you. the article is good.

padma.

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