In January, 2022, software review site Capterra surveyed HR leaders about plans for upskilling employees. Some of the findings were surprising, as Capterra’s principal HR analyst Brian Westfall reported on the company’s blog. For example, close to half of companies (49%) are increasing their L&D budget in 2022, compared to 41% in 2021, and almost twice as many companies increased their L&D budget than decreased it when the COVID-19 pandemic began.
I interviewed Westfall about some of the details and his conclusions about the results.
Bill Brandon (BB): How did you decide to conduct this survey?
Brian Westfall (BW): We had some ideas about what would be the results of the study, but what we actually found was different. We wanted to find out what has been happening with L&D budgets over the course of the pandemic. We had a theory that companies likely scaled back at the beginning. The hypothesis was that management wouldn’t see L&D as necessary to the operations, more as a “nice to have.” People would be looking for budget cuts to stem the pandemic. Then we thought that maybe in 2022, businesses would be making more long-term plans for other things going on, like the Great Resignation, and then start pouring more money back into L&D.
I think we were spot on about the second part. We are seeing a lot of companies pouring money into L&D in 2022. But I was surprised, along with my with colleagues, to learn that companies have been investing pretty steadily in L&D the entire pandemic. We have some theories as to why but it was definitely surprising.
BB: Are you confident about those findings?
BW: I’m pretty confident, especially if you break it down into what businesses are doing now and what was going on back in 2020. We found that nearly half of HR leaders are increasing their L&D budgets this year. I’m thinking that companies are over their initial obstacles of COVID, settling into long term plans, and that it is the right time to really invest in L&D, get systems in place, get new content, that sort of thing. The second reason is the skill gaps. Skill gaps didn’t go away during the pandemic. That was something, obviously, that companies were very concerned about. You’re talking 2018, 2019, and the pandemic happened. We got sidetracked. There are other priorities but now we can focus on skill gaps. Alongside other things like the Great Resignation, we are seeing this huge knowledge and skills drain from organizations. Companies are saying we really need to put our money where our mouth is on L&D, or we’re really gonna fall behind.
BB: Are you seeing most of this happening with small companies, or with medium or large companies?
BW: We defined large companies as 501 or more employees, mid-size as 100 to 500, and small as 100 or fewer. We saw a pattern where large businesses are consistently increasing their L&D budgets year over year between 2020 and 2022. Mid-size companies are consistently doing more of the same. Small businesses really haven’t been investing in L&D until this year. And that makes sense. If you really think about it, small businesses have been hit particularly hard by the pandemic, so they really didn’t have the resources support for L&D.
The biggest jump in the number of businesses increasing their L&D budget from 2021 to this year was in small businesses. I’m most concerned about small businesses. Their skill gaps did not go away. We did research a year and a half ago, and found that something like half of small business employees haven’t developed any new skills during the pandemic. Some of them are really behind, but it’s encouraging to see that they are taking the biggest jump this year.
BB: How are the businesses that are behind addressing their skills gaps?
BW: The way the market is going, there are more affordable tools now for small businesses than ever before. We’re getting away from the “gatekeeping” mentality about upskilling, thinking that only large enterprises can really do it because they are the only ones with the money and resources to implement a full-fledged LMS or LXP. The market has been trending downward in terms of size. I think small businesses are responding. They’re saying: OK, there are more tools, more content, more things we can do with our resources that we can take advantage of.
BB: Where else can organizations look for ways to upgrade their upskilling and reskilling efforts?
BW: In the research we didn’t ask about specific tools. but we do know that across the board big businesses and small businesses are all making most of their new investments in technology. We can look at something like the prevalence of remote work being a big reason why. Companies transitioned to remote work during the pandemic. Whether large business or small business, this way of working is still very fresh. A lot of companies, even large ones, are just way behind on their digital learning initiatives ... having content available to people at home, getting away from the instructor led classes, paper based content, where you have to be in the office or some other facility. It makes sense to continue to look for affordable ways to offer appealing content to people working from home.
We are seeing good growth in areas like mentorship programs, for example. Mentorship used to be pretty ad hoc and pretty employee-driven. Now we are seeing it being more company-driven. It’s learning content that can scale and be used throughout the whole organization. If you have a decent LMS provider and you have a good relationship with them, adding new features such as support for mentorship is really no big deal.