Executive Summary/Introduction

Two thousand and seventeen marks the 20th Anniversary of the Universal Ideas 'Training Services in China' Directory, often referred to as the "Black Book". This publication and it's Annual Market Research Report has become a source of valued information for both Suppliers and Buyers of training services providing services inside the People's Republic of China.

As we embark on this milestone 20 years of consecutive publishing and distribution of the Training Directory, we decided to provide an introspective of how the industry has evolved over the years. We will share with the reader excerpts and highlights from a 20 year historic perspective, and identify some of the key changes that have impacted the industry in the context of China.

In discussions with Buyers and Suppliers, all would agree that the industry has significantly evolved over the past two decades with a number of noticeable changes. We hope this research enhances your ability to stay ahead of the rate of changes when buying and selling training services, both now and in the future.

The following report will be broken into key categories to help you better understand the changes that we have experienced over the last 20 years.

Our study will show a number of key themes:

Attraction and Retention of Talent

There continues to be a search for talent. Despite an ebbing economy, companies are stressed with the need for finding the right talent to support their organizational requirements. There is continued focus on developing leaders for the future. The most significant change we have seen with this regard is the attraction, retention and development of young Millennials. Organizations have placed special emphasis on this group because within the next five years they will start taking over management positions.

In 2012 we conducted a round table with young Millennials. At that time our research identified 3 key factors for Gen Y or Millennials in the workplace. Below is an excerpt from the study:

a. Career Development:

Opportunity for career development was echoed within the group. The importance of joining an organization where one could develop professionally was at the forefront of the conversation. Learning on-the-job experiences were considered a key attribute when Millennials were deciding on their workplace preference.

b. Company Culture:

The environment where one works was of significant importance. Young Chinese professionals are influenced by the culture of an organization. Culture was defined as: 1) good relationships between staff 2) not a lot of pressure, 3) an environment where supervisors and colleagues supported young employees.

Lack of pressure was described as an environment that was relaxed. They recognized the importance of performance and delivering results, but they also wanted an environment that stressed efficiency and performance; as well as recognized the need for positive relationships among colleagues.

c. Money – not the only factor:

In previous Executive Round tables, China executives described the war for talent was often driven by money. The loss of talent was primarily a result of talent leaving for higher paid jobs. This premise was refuted when presented to young professionals at a subsequent roundtable discussion. An identified financial aspect for leaving an organization occurred when new entrees were not being paid fairly and/or equitably. Young professionals stressed the importance of being recognized for the value they brought to an organization.

The perception shared was they felt disadvantaged financially because of their age. "Age should not matter if I work as hard and contribute as well as my older colleagues. Some organizations feel that because I do not have as many years of experience, or because I am younger that I should be paid less. This is understandable, but if I am an equal contributor this should be considered in the compensation I am paid. Pay should not be based on age alone". This representation was endorsed by the other young professionals who participated in the round table dialogue.

Four years later, a 'Generational Study' conducted by Cindy Jensen of BOLDMOVES CHINA noted these feelings remain consistent with the younger generation. "Those born in the 1990's, want the opportunity to learn and place importance in career advancement. For this generation learning, especially from their boss, is more important than money. However, if they feel their contribution in not valued then pay becomes a motivation."

The challenge of developing talent has been consistently captured in our Training Directory Research. Organizations recognize the need to constantly develop key talent. Ongoing talent development has been a persistent problem echoed in every survey and every interview over the years. As organizations work hard at developing talent, they are still faced with the challenge of retention. Many organizations often experience their key talent pool left after a couple of years due to better opportunities offered by other companies. Our studies never identified what the 'better opportunities' were. Even when talent transferred to new companies and new jobs, their new employers were still faced with the burden of investing in management and leadership development. Good for the training supplier, a never-ending circle of trainees); difficult for the organization that risked the training investment only to lose the talent after two or three years.

In China, many managers experience rapid career advancement with job-title inflation, often at the price of not gaining meaningful experience due to limited time in their roles. Career advancement often exceeds ones' capability or readiness for the next role. Sooner than later, competency deficiency caught up with performance capability creating a steady stream of midlevel to senior management attrition. Therefore, the time spent on the job doesn't adequately supplement the knowledge management and career maturation to fulfill the tasks at hand. The rapid career advancement is resulting in an overabundance of quickly promoted managers who are lacking fine-tuned leadership capability which is normally fostered over time.

Evolving Role of HR
If we were to step back ten years ago, many would have described the HR role as one that was transactional based, more focused on administrative tasks. HR was also seen as a gate keeper, limiting training provider's access to the business leaders in order to more fully understand the needs that were shaping the training requests.

The role of HR has often been described as a function that has seen the greatest change. Today the HR professional is perceived as more sophisticated, having a stronger understanding of the business, and more importantly a better grasp and more active role in recommending the appropriate training solutions; as well as providing input in the program design and deliverables.

There is still a need for HR professionals to work more closely as business partners with the line mangers. Today's HR professional has a better understanding of market trends and the challenges their various businesses face.

There is a desire expressed by HR managers to move away from their former more transactional roles toward a more strategic function playing a more vital part in partnership with their senior management. Many companies articulate their HR manager is 'empowered' to have a voice at the decision-making table; yet, very often the HR manager has limited 'power' to exercise their wisdom and expertise to truly make changes that are in the best interest of the corporation.

HR Professionals recognize the significance of linking training to the business. They recognize that having a clear understanding of the business strategy and the impact of training will be fundamental in the long-term sustainability of the business in the context of professional development. On the other side of the coin, we have noticed increasingly that the business line managers are more involved in decisions regarding training providers.

In the past, HR has predominantly been involved in the decisions regarding selection of training providers. Over the past five years there is a trend for business lines to once again take a more active role in the selection of training providers.

Twenty years ago the selection of Training Providers was left almost entirely to the decision of the business managers, In many cases HR was a small department where the functions included some recruiting, and primarily 'compensation and benefits' (C & B) responsibilities. As far back as 1994 Beijing University and Nankai University in Tianjin had just expanded and initiated courses and degrees around the HR function that went beyond 'C & B' and a regulatory issues. The contemporary role of HR in China is just a little over 15 to twenty years in the making.

Today many companies are now staffing separate departments for HR and Learning and Development. The Learning & Development division is responsible for the leadership development of 'Hi-Potentials' and the organization's professional development or talent pool development.

Training Areas of Focus
Leadership Development: We have seen over the twenty years, without exception, Leadership development and programs with a focus on enhancing interpersonal skills as being the key area of focus for organizations when identifying training requirements.

Definitely the training 'hot button' continues to be Leadership Development. There is a continued need for developing key managers within organizations with the critical skills required for Leadership excellence. Leadership Skills coupled with Strategic Management was highlighted as the #1 training focus area. It was also noted the need for these managers to have the ability to build an organization along with its talent.

Conversations with organization over the years indicated that companies felt the importance of developing their talent, in particular those who will take over leadership positions in the future.

Within the Leadership context there is a requirement to develop a more skilled employee in the following areas: business understanding, ability to coach and develop their team members, and ability to participate more effectively in the board room; as well as in a global context.

Soft Skills or (Basic Skills Training) such as communication (both oral and written), presentation and interpersonal skills were also identified as important requirements for managers to develop.

Analytical Skills including critical thinking and problem solving have also been repeatedly cited as important areas of development for managers. Previous reports identified that managers need to have the ability to develop new solutions and possibilities around a variety of given situations. These skills were especially important when their span of control for direct reports rose and/or the complexity or scope of their responsibility increased.

Team Building:one of the more traditional requirements has also remained a consistent training focus for organizations. In recent years organizations emphasized the importance of team development. Many felt the opportunity to take teams off site employing experiential learning with a focus on team development, enhancing team relationships and enabling teams in a relaxed setting to focus on problem solving, collaboration in an informal manner and simply to just have fun while getting to know each other better.

Today there is also a shift toward a more blended training solution. This includes handson training programs in combination with Coaching options. The 2014 TD Research Report focused on the application of Action Learning in the China business environment. Regrettably,HR personnel still struggle with accessing their senior leadership to present real challenges for teams of managers to solve; and the practice of bottom up (so called) action learning projects fail to meet the mark of reaching meaningful and necessary changes within the organization by those who know and care about the company the most. This is a symptom where HR still lacks the power to effect change within their organization.

Executive Coaching: A Growing Trend
A Comprehensive Summary of the China Coaching market published in 2015 shared the following: "The positioning of coaching as part of leadership development to support the development of individuals, Executives, Leaders, and High Potentials is increasing and provides positive 'momentum' for coaching in China." 72.1% of companies surveyed found that coaching more or less fulfilled companies expectations. However, 18.6 revealed that companies were totally fulfilled with expectations pertaining to coaching.

The research also found that Coaching in China is maturing – one indicator is the rising overall satisfaction level among clients with coaching services

In more and more cases companies are expecting coaches to hold coaching qualifications and credentials from recognized coaching bodies. [The vast majority of coaches have gone through a certification program, and Internal Coaches are increasing their certification significantly (from 56.5% to 74.3%).]

It was further noted that Coaching in China is becoming more 'localized,' with a significant increase of Chinese coaches, continued decrease of Non-Asian coaches, and greater participation by Chinese companies.We expect the requirements for coaching will only continue to grow in the China marketplace.

Investment in Training
1997 to 2017 has exhibited historic growth of magnanamous proportion. Although recent years have witnessed a less robust economy, companies continue to invest in their hi-potential talent and already existing managers.

Many a reader can still remember the significant business downturn during the global econmic crisis that impacted the training industry. Not only the investment in training was affected, but businesses overall were faced with tougher economic times. An excerpt from our 2008 Training Industry research reflected those tough economic times:

"…the impact has been significant to organizations. Some organizations have indicated that they had cancelled all training. This would include cases where staff went abroad and other cases when teams would come to China to train staff. Many expressed that travel budgets were being suspended or curbed".

The confidence level in the economy did not return until 2010 when we saw companies starting to reinvest in their training budgets and developmnet of talent. Despite being a slow down in the econonmy, companies would describe still a "tightening of their belts' however without foregoing training.

Another significant impact on the industry occurred with 2003 and the challenges with SARS. A retrospect of that time revealed the following, "In 2003 the survey results indicated that training providers lost an average of 25% of their expected business due to SARS, but their profit numbers contradicted this claim. this was largely due to the inflated expectations for 2003 (which period exceeded 25% growth), the takeoff in training after September, the cost-cutting durng the SARS period in fact resulted in higher profits in 2003 which exceeding 2002 levels."

"41% of Training Providers stated that SARS impacted their 2nd quarter results, but no overall 2003 results. 35% of the Training Providers during that time indicated their profits for 2003 would be less than planned. Another 21% with clients from industries that were least impacted were pharmaceutical, automotive and real estate, stated that SARS had no major impact on their business in 2003".

These were heartfelt times in China and organizations were glad the SARS epidemic quickly became part of the history books with a sense of normalcy returning to the business.

Customization of Programs: Still a Need for Organizations

We have seen over time the importance of access to customized programs in the market place. Training buyers felt there were too many standardized programs and insufficient customization available to organizations.

Many felt it was critical to have the ability to modify programs and make them more applicable to their business and/or industry. Over the years, the feedback we have received from the TD Readers suggested a sense of 'rigidity' among service providers in limiting the amount of major changes they were willing to make within their core program offerings. There are also financial considerations to the push and pull of truly customized programs. Organizations are often not willing to pay for the 'curriculum development' that goes into customizing a learning initiative.

As a result three options have come into play: i. Off-the shelf programs; ii. Tailored programs (somewhat modified to appear customized) and iii. Customized.

Companies still recognize the importance of Training Providers having strong business experience coupled with industry experience. It was emphasized that the most successful programs were offered by organizations that had a 'breadth and depth' of knowledge and experience. There will continue to be a need for program customization to ensure the 'right fit' for organizations to fulfill training objectives.

Professional Trainers

One marked changed is the access to more professional trainers in the market place. In 2002, 45% of companies surveyed felt there were not enough suitable trainers available in the market place. It was felt that, "the training content of Training Providers varied considerably from company to company."

In the 1990's and early 2000's the provisions offered by Foreign Training Providers was limited. In most cases, training entities were primarily offering their courseware exclusively in English. Course materials were often translated into Chinese and the use of consecutive interpretors was common place. Over the years more and more foreign training companies have made targeted adjustments specific to the Chinese market. Trainers who worked for foreign companies quite often created their own start ups and have generally done very, very well. The transition to localized 'mom and pop shop' firms has been supported given the industry in general has a low barrier to entry.

More recently there has been a leveling out in the number of Training Providers, although in Shanghai the rise of independent trainers is impressive. A significant number of companies have disappered from the market due to heated price competition, higher operational costs and lower returns on investment and globally branded companies changing from licensing agreements with local partners to setting up shop under a wholly owned foreign investment structure to build nationwide organizatoins taking advantage of the promising downstream economies of scale and more than likely positive profits. These companies also have the wherewithall to incorporate latest technologies along side their services reducing the actual face to face trainers required.

In today's market more skilled Chinese trainers are available compared to previous years. Many of these professionals have left their corporate life to pursue opportunities as a free lancer or to work with a Training Provider in the sunset portion of their careers..

The blend of business and consulting experience has bode well with this group of professionals. More and more Chinese trainers are able to deliver both in English and Chinese which is an asset. Foreign Trainers are still sought after in particular if they have had solid business experience both in China and abroad. In some cases companies require English language trainers to suit the needs of teams where both foreignors and Chinese teams and leaders work together.

Companies continue to see the value in trainers having a balance of business experience coupled with possessing the competencies of a qualified trainer. It is our understanding that few trainers have attained professional designations with training bodies such as a Certified Professional Facilitator or a memberships with organizations such as the International Association of Facilitators.

It is expected that the requirements for recognized facilitation designations will become common practice as well as an expectation by globally minded organizations.

Key Requirements for Training

As we reviewed our 20 years of research data we have also found a significant shift in what factors influenced buyers when making decisions regarding training. In 2003, 71% indicated that the training price was a key influencing factor.

If we look at our more recent research, there was a greater focus on importance of quality content along with the importance of measuring ROI for the training dollars spent. Price is a less of a factor when it comes to decision making for buyers. Perhaps people are finally listening to one of the TD Letter to the Reader statements: "The bitterness of poor quality still remains after the sweetness of low cost is forgotten".

Composition of Company Types Purchasing Training Services

Another key change in the industry is the type of company purchasing training services. This is an area that has also seen siginificant change. For many years, MNCs were the major company type for outsourcing training services.

We have noted during the last severals years this has started to change, and in a significant way. State Own Entreprises and Privately Owned Entreprises are investing more in training today compared to previous years. It is expected that this is primarily driven by the same challenges as faced by MNCs: the need to attract and retain talent in an increasingly competitive market place. Secondly, many organizations are now looking beyond the China market for key market opportunies which then requires a different skill set from teams and their respect leaders. Also, as mentioned above there is now a larger compliment of experienced bilingual trainers available to service local company needs at a competitive quality standard.

In 2002, we noted only 45% of the companies surveyed (Training Providers) considered training as their primary offering, many were providing services beyond the training scope. This has changed substantially over the years. Today companies are much more specialized with core competencies focused solely on traning and development.

It was also noted, in earlier years it was challenging to not only operate in China, but also company registration was difficult without demonstrating significant capitlization. Post 1997, regulations for education related companies and instutitons in China were increasingly exposed to a more robust regulatory environment. Today it's actually easier for organizations to register as a company offering consulting services. Company registration requirements, specific to educational and training services are more stringent than ever before, especially if one falls under a not-for-profit or non government organization NGO status.

Conclusion

In summary, it has been an exciting 20 years, especially for Universal Ideas being sustainable as the intersect between the supply and demand side of China's Management Training sector. Training and Consulting Services are certainly one of the industries that continues to mature in China. There is also a sophistication and level of professionalism that is evolving in the industry. Local Training Providers are gaining a great foot hold in the market, as smaller home grown companies (both local and foreign) are now moving into many years of experience and operations in China.

What Can we Expect in the Future

1. An Industry that will Continue to Develop: Further development and sophistication in the industry both in terms of Client (Buyers) understanding and knowledge building in the area of training services along with more professional, industry experienced Training Providers will continue to evolve.

2. Continued Innovation in Program Solutions: There is an expectation that Training Providers will bring more innovation to their program development and product solutions.

3. Blended Learning: Organizations are seeing the value in taking a blended learning approach in their approach to professional development. Blended Learning will continue to include a) on the job learning, b) mentoring and learning from those more experience, c) immersion in action learning projects, d) participating in customized executive coaching programs, and finally e) a continued need for workshop (face-to-face) programs. E-learning solutions will continue to try and fit into this framework, however the develoment of e-learning has not met the pace of growth that many of us expected.

4. Coming to Terms with Artificial Intelligence: In a recent article published by Harvard Business Review, it aptly describes, "There is a need to develop training and recruitment strategies for creativity, collaboration, empathy, and judgment skills. Leaders should develop a diverse workforce and team of managers that balance experience with creative and social intelligence — each side complementing the other to support sound collective judgment.

While oncoming disruptions won't arrive all at once, the pace of development of [Artificial Intelligence] is gaining ground, and the implications more far-reaching than most executives and managers realize. Those managers capable of assessing what the workforce of the future will look like can prepare themselves for the arrival of AI. They should view it as an opportunity to flourish."

We hope you have enjoyed this year's review of the industry as we looked back over the past 20 years. Universal Ideas expresses our gratitude and appreciation to all those who have collaborated and supported our efforts for the past two decades. With our collective efforts, we have been able to year after year, offer key insights related to the Training Industry. It has always been our mission to produce a quality publication of value to both providers and buyers within the industry.

Naturally, we are proud of our achievements, and sincerely thank you for your ongoing loyalty. We look forward to sharing with you our insights and continued research in how the industry will unfold over the next twenty years.

Please just always remember that: "Learning Has to be Greater Than the Rate of Change".Your investment in training your valued associates is a demonstrated way to keep your organization sustainable.

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