Investing in People Development in Times of Crisis

When facing a crisis, whether economic, geopolitical, hostile, a health pandemic, or a disruption in the organization, companies respond defensively and are compelled to remove costs. Learning and development (L&D) budgets are the first to be eliminated (Walvadkar et al., 2022). However, evidence is persistent that the opposite proposition is true, and in fact, organizations that focus on developing their human capital during economic downturns can sustain performance, build resilience, and develop long-term sustainable competitive advantage (Beckenbauer et al., 2023).

From a Resource-Based View (RBV) perspective, competitive advantage is sustainable when it is built on resources that are valuable, rare, inimitable, and non-substitutable (Barney, 1991; Hoque, 2025). Human capital management considers the collection of knowledge, skills, and abilities that employees possess as one of those resources. As calamities strike and external resources become scarce, it is the internal resources or capabilities that matter (Kwiecień, 2022). Strong internal abilities allow organizations to develop, innovate, and respond to challenges. This view is supported by evidence; in fact, companies that maintain or increase their training expenses during downturns experience faster productivity and profitability than their counterparts that reduce training expenditures (Kim & Ployhart, 2014, pp. 361-389). Thus, development initiatives should be seen more as invested capital and less as operational costs.

Take the 2008 global financial crisis as an example. In the face of a less-than-ideal economy, companies such as Procter & Gamble and IBM chose to invest in employee development (Lazonic, 2013; Mwanawasa, 2016). IBM, for instance, increased the number of its internal training and leadership development programs, enabling it to shift to high-value services and continue growing its revenue (Cappelli, 2015). Firms that laid off employees and cut budgets for their development programs found that during the recovery period, they lacked sufficient talent and suffered significant losses in innovation (Johnstone, 2024).

The COVID-19 pandemic has underscored the need for continuous learning. Organizations that McKinsey & Company surveyed in 2020, especially those that focused on upskilling and reskilling their employees, were more likely to exhibit greater adaptability and resilience and to achieve a positive economic outcome (Billing et al., 2021). The crisis compressed the time for the digital transformations that economies and businesses have needed and required employees to quickly learn new skills. During such times, businesses that focused on employee digital skills training, leadership development, and well-being were better able to manage the crisis and maintain employee engagement (Claire, 2023).

The development of people is a key factor in implementing organizational resilience, which is the ability of an organization to manage and overcome challenges (Lengnick-Hall et al., 2011). Resilience is defined as the ability to absorb shocks, adapt to change, and recover from adversity. The development of people is a key factor in building an organization's resilience. Resilience results from the development of employees' problem-solving skills, emotional intelligence, and adaptability (Cerit & Şimşek, 2021). Leadership development focused on crisis management and decision-making can prepare organizations to better navigate disruption (Jing & Yang, 2025).

Commitment and values demonstrate investing in people during crises. Social exchange theory describes this scenario and indicates that employees exhibit increased engagement, loyalty, and effort when they feel supported (Cropanzano & Mitchell, 2005; Muse & Wadsworth, 2012; Santillana & Echalar, 2025). These psychological contracts between employers and employees become more relevant in uncertain workplace situations. Employees who feel supported are less likely to leave the company or become disengaged (Schmitt et al., 2012), thereby reducing turnover and the loss of critical organizational knowledge.

Employee well-being is equally important. Development interventions are needed to offset the eventual increases in stress, anxiety, burnout, and declines in performance and health that accompany crises (Raghuwanshi, 2025). Research by the World Health Organization (2019) shows that $1 spent on mental health interventions yields a $4 improvement in health and productivity. This detail demonstrates the economic and ethical reasons for investing in people.

Continuous learning is the foundation of innovation and agility. In changing scenarios, to remain relevant, organizations must change and improve their products, services, and internal processes. To do this, employees must be able to learn and unlearn (Saha et al., 2020). Training that enhances innovation is training that enhances creativity, critical thinking, and collaboration across functions (Fared & Darmawan, 2021). Skills in analytical thinking, active learning, and complex problem-solving will be among the most important for the future and for the future of work (World Economic Forum, 2020). Skills in these areas will be needed for organizations to remain relevant as they adapt to changing scenarios. Investing in these skills will be needed during crises.

There is a high hidden cost if organizations opted not to invest in their human capital development. Although training budgets may be cut in the short term, they will create skills gaps, decrease productivity, and damage organizational capacity in the future (Dychtwald et al., 2006). Pfeffer (1998) stated that a lack of investment in employment will decrease organizational performance and exacerbate a competitive weakness. On the other hand, high-performance work systems that focus on training and empower employees are thought to achieve higher productivity (Dorta-Afonso et al., 2021).

In terms of Strategic HR, development activities are designed to align with organizational objectives, as crises create new opportunities. This may include identifying and articulating future needs, enhancing the instructional framework to include more digital technologies, and integrating development activities with other talent management functions (Shan & Wang, 2024). Many organizations have used virtual learning environments and microlearning to sustain training during interruptions. These initial adjustments address the current challenge and prepare for a more flexible, scalable learning system in the future (Vegliante et al., 2025).

Leading through the crisis requires sustained investment in people development. Leaders must defend the human capital value proposition and ensure that the focus is on addressing specific business needs (Dirani et al, 2020). This means that training is viewed as a cost to the business rather than a value. Continued investment can be empirically justified when valid and reliable data on learning outcomes and the resulting business performance are available (Bassi et al., 2002).

To conclude, allocating resources to employee development during crises has ample support from theorists and practitioners alike. Such efforts bolster organizational resilience, continuity, innovation, and employee engagement. Although it is not unusual to trim development budgets, the literature points toward the myopia of such a decision. Organizations that prioritize employee development are better equipped to navigate ambiguity and are likely to be stronger post-crisis. As the nature of work changes, an organization’s ability to learn and adapt will be a determining factor in its survival.

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