Investments In Training And Development_Charles R. Greer

Specific investment approaches will be examined in this section, beginning with new approaches, which result in enhanced “employability” of employees.

Investments in Employability

While there have been dramatic declines in the prevalence of employment security policies, some companies are now investing in their human resources by providing developmental experiences that make employees much more employable should the employment relationship end. These developmental investments might include the provision for growth opportunities, a learning environment, training, and retraining. Having a workforce that is characterized by its employability is probably a necessary prerequisite for corporate survival. General Electric’s experiences provide an example of the new employability approach. In the aftermath of General Electric’s workforce reductions of 25 percent, there was recognition by its chief executive officer (CEO) Jack Welch that the company would have to attract quality employees with desirable achievement opportunities instead of job security policies. Welch, who was widely regarded as one of the most, visionary and effective CEOs, was strongly criticized for his actions as indicated in the following passage:

Welch says that when he took over, the need for change was obvious, and he moved quickly. He was vilified as heartless in his zeal to reshape the corporation by eliminating jobs, earning himself the nickname “Neutron Jack.” When Welch left a GE facility, the story went, the building was still standing but the people were gone.

Interestingly, Welch stated that strong managers, like him, produce the only real job security in the current environment. His rationale was that such managers make the major structural changes necessary to increase their companies’ competitiveness and ultimate survivability, often through the elimination of unneeded jobs. Conversely, he argued that weak managers, who do not take such actions, endanger the competitiveness of their companies, ultimately causing the loss of jobs.

Because the types of experiences that result in future employability (e.g., valuable learning experiences and progressively more challenging assignments) are typically not the result of chance, and are instead the product of intentional developmental programs, they involve resource allocations or monetary outlays and will be considered as investments in this discussion. Kanter’s description of the employability concept is summarized in the following discussion:

If security no longer comes from being employed, then it must come from being employable. In a post-entrepreneurial era in which corporations need the flexibility to change and restructuring is a fact of life, the promise of very long-term employment security would be the wrong one to expect employers to make. But employability security—the knowledge that today’s work will enhance the person’s value in terms of future opportunities—that is a promise that can be made and kept. Employability security comes from the chance to accumulate human capital— skills and reputation—that can be invested in new opportunities as they arise.

Bruce Ellig, the former Vice President of Human Resources for Pfizer, has provided another view of the concept of employability and the respective obligations of employers and employees:

It is hard to argue against a position that says individuals have a responsibility to be the best they can be to improve their employability, and employers have a responsibility to ensure they are getting the best results from each employee before terminating them. This means that the employer has an obligation to coach and counsel as well as to provide appropriate training programs. Training programs provide the opportunity to improve existing skills and/or acquire new ones. It is the employer’s responsibility to make such opportunities available; it is the employee’s responsibility to take advantage of them.

Current Practices in Training Investments

As indicated earlier, heavy investments in training will be necessary for future strategies and competitive advantage. Nonetheless, U.S. companies seem to lag behind the practices of companies in several other industrialized countries. For example, a study by the Congressional Office of Technology Assessment reported that “auto workers in Japan receive more than three times as much training each year as workers in American-owned assembly plants in the U.S.” U.S. workers not going on to college do not receive the training of their counterparts in other industrialized countries. In contrast, technical workers in other industrialized countries are often trained in well-developed apprenticeship programs. Approximately 59 percent of the German workforce has been trained through apprenticeships. In Japan, new employees often receive months of training by their employers. Japanese companies are investing in human resources by training these workers.

There are some notable exceptions to the U.S. tendency to lag behind the Japanese and Germans in employee training. One of the most progressive examples of investment in training technical and production workers is provided by Corning, Inc. Corning’s experience demonstrates that a company can earn high returns by investing in human resources. At one point, Corning faced a common dilemma of many U.S. companies in that its foreign competitors had acquired the same technology that had enabled it to be dominant in the past. Given its competitors’ lower labor costs; it had to adopt a different approach unless it moved its production facilities overseas. Corning decided that to compete on a global basis it would need a world-class workforce. It reopened a plant in Blacksburg, Virginia, and staffed it with 150 production workers from a pool of 8,000 applicants. Although most of those hired had completed at least one year of college, Corning invested in extensive technical and interpersonal skills training. Training took up 25 percent of total working time during the plant’s first year of operation. The plant’s empowered workers take on duties previously performed by managers and use their broad range of skills in a team-based approach. An intensive emphasis on skills is maintained as workers must master three skill modules within two years in order to retain their jobs. In contrast to the narrow job definitions in many U.S. plants, the Corning plant has only four job classifications instead of the previous 47. Because of the workers’ broad skills, the plant can retool quickly. The result is that during the first 8 months of operation, the plant made $2 million in profits in contrast to an expected $2.3 million start-up loss. Because of these successes, Corning is adopting the same approach in 27 other factories.

Some other well-managed U.S. companies also have invested heavily in training employees who work in teams. These companies include A. O. Smith, Boeing, Cummins, Ford, General Electric, IBM, Kodak, Motorola, Polaroid, Procter & Gamble, and Xerox. Another example of a company that invests heavily in training is the Dana Corporation. Like Corning, the Dana Corporation has used training as a means of gaining an advantage vis-à-vis its competitors. In a recent year, Dana invested $10 million in training 8,500 employees with the expressed purpose of enabling them to meet competitive needs. Companies in Fortune’s best 100 companies to work for also provide extensive training:

So the 100 Best are making major investments in employee education at multimillion-dollar facilities and through generous tuition-reimbursement programs. On average, the 100 Best lavished 43 hours of training on each employee . . . Some companies have begun to advertise these learning labs in their recruitment materials. At brokerage firm Edward Jones (No. 11), new brokers are immersed in 17 weeks of classes and study sessions at a cost of $50,000 to $70,000 per head. “We consider training an investment rather than an expense,” explains Dan Timm, a principal at the St. Louis Company.

On-the-Job Training

On-the-job training is another way in which an employer may invest in human capital needed for strategic advantage. Such investments may be made by structuring a job so that employees learn while they work. For example, employees’ skills may be increased by learning how to perform new tasks or operate new equipment. Employers may structure jobs so that these skills may be learned from other employees. They may also give employees time to learn new procedures or how to operate new equipment through self-instruction, such as by reading technical manuals, or by learning new software through self-instruction. Employers may also absorb the costs of lower productivity while workers lacking relevant skills learn through interaction with skilled employees or through trial-and-error processes.

Gary Becker has noted that on-the-job training’s impact on workers’ productivity levels is frequently underrated. Likewise, economist Lester Thurow argues that on-the-job training provides the bulk of skills used on the job while formal education serves a signaling function of communicating to employers the trainability of job applicants. Economists calling attention to the importance of on-the-job training point out that a worker’s productivity is determined by the capital intensity of the job; type and extent of on-the-job training provided; the worker’s ability to learn from the training, which is signaled by education; and how the jobs are structured, such as their promotion possibilities and responsibility level. The contribution of on-the-job training to productivity has also been hypothesized to vary according to occupation as a result of differences in such factors as the rapidity of skill obsolescence and difficulty of job tasks. The contribution to worker productivity of on-the-job training has been verified in an empirical analysis of governmental employees with on-the-job training being measured by the employees’ years of job experience.

Investments in Management Development

The continued development of managerial personnel is a critical strategic issue in most organizations and a particularly difficult challenge given the massive shifts in strategy. Before considering management development, it is useful to quickly review some evolving and forecasted trends in the managerial environment. It is clear that organizations are becoming less hierarchical and that many middle-management positions have been eliminated. Further, larger numbers of workers are better educated and many are professionals. As a result, they expect to participate more in decision making. In the future, more work is expected to be performed in task force or project teams, power will be shared, managerial status will be deemphasized, and leadership responsibilities may be rotated. Because of the participative aspect of these empowerment trends, many professionals and highly educated employees may have more exposure to managerial responsibilities and may develop related skills as a natural part of their work.

An important management development approach has been to rotate managers through successively more challenging assignments. Frequently, these job rotation programs seek to provide a broad view of the organization and as a result, may involve interdepartmental or cross-functional assignments. Use of job rotational programs is positively correlated with company size and is used most in transportation and communications and least in service industries.

Advantages of job rotation include the development of generalists, avoidance of over dependency on one supervisor, the challenge of new assignments, avoidance of dead-end career paths, cross-fertilization of ideas gained in other settings, increased interdepartmental cooperation as a result of the establishment of personal networking, and evaluation by different superiors in different settings. From a strategic perspective, a major advantage is that such programs develop a pool of managers who have been exposed to an area of the business who can then provide management talent in the event that there is an unexpected or sudden increase in the level of business in that area. Such rotational programs are also widely used for high-potential or fast-track managerial personnel.

Conversely, the disadvantages of such job rotational approaches include the institutionalization of short-term perspectives because of frequent changes in assignments as one is “rotated out,” underdeveloped peer relationships, reduced loyalty to the organization if rotations are too frequent, expense when the rotation involves a geographic move, and personal impact on the employee and family. Other disadvantages include productivity losses due to the learning time required after each new job assignment, and the complications of rotations involving geographic transfers of dual career families.

Aside from job rotational approaches, other methods of management development include sending high-level executives and less senior high-potential managers to executive development pro-grams at leading universities. Shorter in-house training programs for less senior managerial personnel and more junior high-potential managers are quite common. Use of residential university pro-grams has been found to be most likely in the financial industry and least likely in services.

More systematic approaches toward in-house and off-site management development programs have been recommended by human resource practitioners and scholars. In some organizations, such approaches are evident. From the author’s personal observations of in-house programs for project managers in large banks and insurance companies, several companies are taking an investment perspective in systematic developmental approaches. Such programs involve high-level management in the analysis of the skills needed and in pilot tests of program content. They are also conducted on a continuous basis, as opposed to one-shot training sessions. They also utilize customized cases and materials, involve participants in exercises in which skills are developed and practiced, provide exercises in which participants apply program content to real problems that they currently have, and communicate either implicitly or explicitly that the managers are of critical importance to the organization.

Although these positive trends have been observed, a continuing problem exists. Management training is still an early casualty of budget cuts when companies encounter economic downturns. Unfortunately, in many organizations, management development is given a low priority and is viewed more as an avoidable cost rather than an investment. Where management development has to be “sold,” it is important to build in several of the components just noted to include specification of the results expected and how they will be measured. Given the expense of some pro-grams such as executive MBA programs, it will be important to be able to determine the returns on the investment. Unfortunately, most cost-effectiveness studies of development programs have focused only on individuals and not on organizational impact or have used only subjective measures of organizational impact.

Prevention of Skill Obsolescence

Technological change is often a cause of skill obsolescence in engineering, science, and the professions. Because of the rapidity of change, the knowledge half-lives in electrical engineering and computer science are five years and two and one-half years, respectively. In addition, other professionals and managers run a risk of having their skills become obsolete because of changes in technology and methods. Technological change appears to affect individuals differently, as some grow and develop along with new technology while others fall behind. Because technological obsolescence can limit an organization’s strategic alternatives, obsolescence in this area can be devastating and companies should have a strong incentive to invest in its prevention.

A model using both expectancy theory and human capital theory has been developed to explain such differences in individuals’ responses to changing technology. Given the critical strategic impact of technological change, such explanations should be of value to strategists. The model identifies motivation, along with individual, organizational, and external factors as determinants of whether individuals will develop the skills needed for new technology. Employees’ expectations of their ability to acquire new skills and the perceived reward instrumentality of such skills help explain employees’ motivation for skill acquisition. Such motivation is also related to the expected costs of investing in skill acquisition and the length of time for returns to be accrued. Nonetheless, the payback period can be misleading as there are several individual difference variables, such as breadth of interests, education, aptitude, and personality variables, that also affect individuals’ acquisition of new skills.

A number of suggestions have been offered for the prevention of obsolescence. One suggestion is to provide challenge, particularly of a technical nature for technical specialists, in all phases of their careers. Individuals who face such challenges are less likely to become obsolete in later career stages. Likewise, responsibility, authority, participation, and employee inter-action also appear to be related to the prevention of obsolescence. Periodic reassignments requiring new learning also help to prevent obsolescence and facilitate development. It is important to prevent employees from becoming overspecialized. Although the organization may benefit in the short term, excessive specialization may be exploitative and not be in either the individual’s or the organization’s long-range best interests. Organizations can explicitly encourage employees to stay abreast of developments in the field by incorporating knowledge acquisition activities and accomplishments in performance evaluation and reward systems. Organizations also can set goals for updating knowledge and reward such goal accomplishments. In addition to these suggestions, funding attendance at conferences and providing time to read professional literature can help to prevent obsolescence.

An example of one company’s intensive efforts to prevent obsolescence is provided by Hewlett-Packard. The company’s approach with its engineering workforce has involved the establishment of cooperative programs with universities. In one year alone, 1,000 Hewlett-Packard employees were able to take courses at Stanford University while another 200 took courses at California State University, Chico. Although Hewlett-Packard is a company involved at the leading edge of rap-idly changing technology, it also will be important for other companies in lower-technology industries to make investments in their current employees. As the rapid rate of technological change continues, the problem of obsolescence will need continued attention.

Reductions in Career Plateauing

Career plateaus occur when employees have occupied a job in an organization for some period of time, have mastered all aspects of the job, and have low prospects for promotion. Eliminating or reducing the incidence of plateaus is important because they have the potential to create resentment and a sense of futility. As a result, there may be reductions in productivity. Plateaus are a natural consequence of a lack of organizational growth or change. They also occur because of the pyramidal shape of organizations and organizational inflexibility. Other, more employee-specific causes of plateaus are the personal choices of employees, lack of career skills resulting from naive perceptions of organizational realities, and lack of requisite skills for promotion.

Employees also may lack appropriate skills because changes in the external environment and resultant shifts in strategies may not have been anticipated in a company’s managerial development programs. In such instances, the company may be forced to hire managerial talent from outside. Aside from the expense of external hiring there may be detrimental effects on morale. Further, those brought in may not have sufficient knowledge of the primary business to be effective. A lesson to be derived from such situations is that investment in developmental programs is not sufficient for the avoidance of plateaus. Instead, alternative future strategic scenarios must be considered in the planning of developmental assignments in order to have promotable managers.

Another cause of plateaus is related to developmental programs. Companies sometimes make inflexible decisions about which employees should continue in management development programs or those who should be placed on a fast track. Sometimes, these decisions are based on performance during the early stages of an employee’s career. Further, the decision may be made in the manner of a single elimination tournament in which one failure to be promoted or one unsuccessful performance may cause a manager to be taken out of the developmental program. Those left out of developmental programs or fast-track assignments are often relegated to dead-end career paths and become plateaued. In essence, the early identification of fast trackers may become a self-fulfilling prophecy. Furthermore, perceptions of being plateaued tend to have the greatest detrimental impact on job satisfaction and company identification for employees who have less rather than more tenure on the job.

Plateaus also may be avoided by more deliberate identification of stars (outstanding performers with high potential) and solid citizens (satisfactory or outstanding performers with less potential). More developmental assignments, challenges, and lateral moves for both categories can produce a pool of qualified managerial talent that should enable the organization to be more flexible and adaptive to strategic needs. Job rotation for plateaued employees also can reduce frustration and increase the chance for improved performance. The stress associated with career plateauing also may be reduced by managerial actions that provide recognition and appreciation in the absence of promotions, job enrichment, mentoring assignments, and lateral transfers that provide growth opportunities also may be helpful in this regard.

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Reference :

- Charles R. Greer (2003), Strategic Human Resource Management, (2nd ed.), Upper Saddle River, NJ: Pearson Prentice Hall.