Investment in Training and Development in Times of Uncertainty

Abstract

The Problem While there is some consensus in the economics literature that there is a negative association between uncertainty and investment in capital, whether this relationship applies to investment in human capital—in particular training and development (T&D)—undertaken by firms is not clear. The evidence about what has happened to T&D investment in the aftermath of the global financial and economic crisis of 2008 is very inconclusive. This article examines how uncertainty has affected overall, general, and firm-specific T&D post-2008. The Solution The analysis shows that T&D investment is highly sensitive to uncertainty, especially general T&D. Given the importance of T&D—especially general T&D for sustained competitive advantage—it is absolutely essential that investment is sustained, even in the presence of uncertainty. Viewing and treating T&D as an investment, rather than its current accountancy configuration, as an “expenditure,” can help to ensure T&D investment is maintained. Practitioners need to become more confident and competent in demonstrating that T&D is an investment, with the potential to generate significant returns for organizations, especially in relation to sustained competitive advantage. The Stakeholders The article will be of particular relevance to human-resource development, T&D practitioners, and employees, all of whom have to compete for scarce resources.