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WORKFORCE BRIEF #2

COMPANY TRAINING

A key strategy for success.

TRAINING WORKS!

As companies seek to survive, and even flourish, in today's

increasingly competitive global economy, many are finding that

investments in training can improve:

* Employee performance,

* Firm productivity,

* Product quality, and

* Company profitability.

In addition, training is key to companies adopting such high

performance work practices as total quality management, self-managed

work teams, and flexible production.

As part of its effort to increase small and mid-sized companies'

awareness of approaches to improving competitiveness, the National

Workforce Assistance Collaborative compiled the following information on

the benefits of training that many businesses have experienced.

A study to be published in Industrial Relations found that

manufacturing firms with formal training programs experienced a 19

percent greater rise in productivity (over three years) when compared to

companies without such programs. Another study to be published in

Industrial and Labor Relations Review found that increased formal

training significantly reduced the rates at which products had to be

scrapped; companies that doubled their training per employee (from an

initial average of 15 hours) saw a 7 percent reduction in scrap.

***************************************

* Training Supports *

* "High Performance *

* Work Practices" *

* *

* + Total quality management *

* *

* + Self-managed work teams *

* *

* + Flexible production lines *

* *

* + Elimination of quality inspectors *

* *

* + Statistical process control *

* *

* + Just-in-time inventory *

***************************************

In a March 1993 issue of Fortune, Motorola Inc. claimed that every

$1 it spends on training delivers $30 in productivity gains within three

years. Last year, Motorola spent $120 million on education, 3.6 percent

of payroll. Since 1987, the company has cut costs by $3.3 billion - not

by firing workers, but by training them to simplify processes and reduce

waste. Sales per employee have doubled in the past 5 years, and profits

have increased 47 percent.

Training in basic skills shows productivity pay-offs as well. A

study published by the Upjohn Institute in 1993 estimated that the

annual out-of-pocket cost of workplace literacy programs was only about

$1,000 per employee, while many programs resulted in increases of 11 to

17 percent in employees' earnings, and by implication, productivity.

Otto Engineering Inc., an Illinois-based manufacturer of electrical

switches, launched a math and English program in 1988. While classes

for its 120 workers have cost Otto $100,000 per year, productivity has

increased 340 percent since the program began.

******************************************

* Returns on Training *

* *

* + Motorola Inc. reported gains of $30 *

* in productivity over a 3-year period *

* for every $1 spent on training. *

* *

* + Otto Engineering Inc. claims a 340 *

* percent increase in productivity *

* since its training program began. *

* *

* + An Industrial Relations study cal- *

* culated a 19 percent greater rise *

* in productivity over three years *

* for firms providing training. *

* *

* + Upjohn Institute found an 11 to *

* 17 percent increase in productivity *

* for companies participating in lit- *

* eracy programs. *

* *

* + Industrial and Labor Relations *

* Review reported a 7 percent *

* reduction in scrap for companies *

* that doubled employees' training. *

******************************************

Employee Performance

Improvements in employee skills, as well as in such attitudes as

self-confidence, self-esteem, job satisfaction, and morale, lead to

improvements in firm performance.

A study by the Southport Institute for Policy Analysis found that

investments by small firms in workplace education programs resulted in

basic skill gains (reading, writing, mathematics, and other academic

skills), attitudinal and behavioral improvements (motivation, self-

esteem, willingness to take responsibility, teamwork, and communication

and problem-solving abilities), and bottom line benefits (improvements

in product quality and greater firm productivity).

Phoenix Specialty Manufacturing Company, a firm in rural South

Carolina with a workforce of fewer than 150 people, instituted a basic

and job-related skills training program in 1990. Workers gained

increased confidence and satisfaction from meeting their educational

goals; they were more willing to take responsibility for decisions, to

provide informed feedback, and to be active in handling preventive

maintenance. According to one supervisor, these changes led to a

decline in customer rejections to 7 items in 2,000, a rise in the on-

time delivery rate to the "mid 90s," and a decline in material usage by

3 to 4 percent. In addition, bad orders were caught before they got out

the door.

Weber Metals, a manufacturer in Los Angeles, provided a variety of

training classes, including English as a second language, math,

spelling, computer literacy, and GED (General Educational Development)

preparation. Workers felt better about themselves, enjoyed the

camaraderie of working in teams, and were more self-assured. Because of

employees' improved speaking, listening, reading, and math skills, the

company experienced improved communications, improved production

reports, a reduction in errors, a reduction in scrap from 20 to 2

percent, and a safer work site.

Wm. Dudek Manufacturing Company, a small Chicago business, provided

English as a second language and math skill classes to its 30 employees.

Employees gained increased self-confidence and job satisfaction, while

the company gained better communication among employees, employees able

to work independently and as part of a team, increased worker loyalty,

and improvements in sales volume, profit, work flow, and on-time

deliveries.

The United Auto Workers-Ford Education, Development and Training

Program raised employee job satisfaction ratings to 75 percent. This

program, a joint effort in education, training, and worker empowerment,

has also contributed to increasing productivity at Ford by 36 percent

since 1980, a factor that led to Ford's stock value rebounding

dramatically over the past decade. In addition, for the first time in

years, a U.S. auto maker was able to reclaim the title to the best

selling car in America with the 1992 Ford Taurus.

******************************************

* Training Improves Employee Performance *

* *

* + Reading, writing, and math skills *

* *

* + Communication skills *

* *

* + Problem-solving ability *

* *

* + Motivation *

* *

* + Willingness to take responsibility *

* *

* + Ability to work independently *

* *

* + Ability to work in teams *

* *

* + Confidence *

* *

* + Company loyalty *

* *

* + Self-esteem *

* *

* + Job satisfaction *

******************************************

Firm Productivity

Training efforts can boost firm productivity by:

* Increasing efficiency,

* Reducing costs, and

* Cutting waste.

Superior Technical Ceramics Corp., a small manufacturer in Vermont,

developed and delivered a basic skills and technical training program

that dramatically decreased the time engineers spent setting up work

stations and supervising workers, and improved production efficiency.

Delta Wire, a small, family-owned manufacturing company in

Mississippi, instituted a functional context basic skills program that

enabled workers to record and interpret information on a control chart,

and communicate about that information properly. A year after the

program was introduced, Delta Wire's non-conforming material decreased

from 6 or 7 percent to 2 percent, and its productivity increased from

70,000 to 90,000 pounds per week. In 1990, the company was awarded

"best in class" from Goodyear, its largest customer.

Rockford Process Control Inc., a custom metal-assemblies maker in

Illinois, credits training with helping it improve productivity and

expand its business. In the late 1980s, Rockford Process Control began

sending its 60 employees to Rock Valley Community College. The

employees studied just-in-time production, problem-solving, and other

techniques that helped Rockford cut defects, increase production, and,

according to founder Paul Colloton, land Honda Motor Co. as a major

client. Rockford's workforce has increased to 125, and, by year end,

its revenues are expected to double from its 1990 level to $12.5

million.

**************************************

* Training Contributes to *

* Increased Productivity *

* *

* + Increased production *

* *

* + Improved sales volume *

* *

* + Increased profit *

* *

* + Improved work flow *

* *

* + Decreased time spent supervising *

* *

* + Decreased customer rejections *

* *

* + Decreased defects *

* *

* + Decreased waste *

* *

* + Decreased scrap *

* *

* + Increased on-time deliveries *

**************************************

Product Quality

Companies seeking to retain existing clients and attract new ones

are using training to improve product quality and increase customer

satisfaction. The United Auto Workers-Ford Education, Development and

Training Program mentioned earlier reduced production costs, cut

absenteeism, and boosted product quality by 52 percent.

New York's Corning Inc. and the American Flint Glass Workers Union

jointly operate a total quality management program that includes

continuous on-the-job training and a multi-skilled, team-based system of

production. In this program - which enables the production line to be

rapidly altered to produce different products - 25 percent of an

employee's first year is devoted to training in the range of skills

required on the job. The program is credited with helping the company

turn a projected $2.3 million loss into a $2 million profit.

Gilroy Foods Inc., a small food product company in California,

introduced a large-scale technical training program linked to an

employee career ladder. Company benefits included improved product and

service quality, as well as increased equipment utilization, increased

productivity and value added per worker, and reduced recruitment costs.

Company Profitability

A number of companies have found that training can play a large

part in helping them to avoid downsizing and stay in business.

Shelby Die Casting Company, in Mississippi, was considering closing its

100-employee facility. The company introduced a skills enhancement

program that enabled it to adopt self-managed work teams and total

quality management, keep its operation in business, and produce its

first profits in six years.

At the end of 1985, Motorola Inc. had decided to move all

production of cellular phones to the Far East. The general manager in

Illinois convinced the corporation to grant him 1 1/2 years to increase

cellular phone productivity and quality. He redesigned the phone,

adopted new production techniques, and altered human resource practices.

To support these changes, he instituted programs to upgrade the skills

of the hourly workforce. Together, all of these changes - including

training - turned the company around and were impressive enough to keep

the plant open.

United Electric Controls, a small manufacturer located outside

Boston, provided structured and informal training on just-in-time

inventory, single minute exchange of dies, and mistake proofing the

means of production. Because of improved production methods and

internal education and training, the company has not had any significant

layoffs in the past three years.

**************************************

* Training Improves *

* Product Quality *

* and Company *

* Profitability *

* *

* + Corning Inc. increased product *

* quality by 52%. *

* *

* + Gilroy Foods Inc. improved prod- *

* uct and service quality. *

* *

* + Shelby Die Casting Co. saw its *

* first profits in six years. *

* *

* + A Motorola cellular phone plant *

* was able to stay open. *

**************************************

STEPS TO START TRAINING

The value of training is supported by both general research and

anecdotal reports. Returns on investment exist for both technical and

basic skills training, for large companies and small ones, and across a

wide range of industries. Even more value can be gained when training

is linked to the adoption of high performance work practices.

Before launching a training program, you should:

* Assess your current situation,

* Determine whether you need to make more comprehensive changes -

such as work restructuring, and

* Ascertain how training would fit within this larger effort.

Companies do not have to work alone. You can get help for both

assessments and training from a variety of sources, including:

* Community colleges and other public and private education

institutions,

* Manufacturing extension centers,

* Business and trade associations,

* Unions, and

*Consulting firms.

Before purchasing assistance, though, check references, and be sure

that the service providers you select have been successful with

companies like yours in the past.

***********************************************************

* Benefits to Employees *

* Company (and joint company-union) training programs *

* benefit both companies and employees simultaneously. *

* Training efforts that increase firm profitability can *

* boost employee compensation, and, by ensuring firm *

* viability, keep workers employed. *

********** **********

* Training offered by Corning *

* Inc. and the American Flint Glass *

* Workers Union enabled the company *

* to pay good wages to its employees. *

* *

* Employees who successfully *

* completed the training offered by *

* Superior Technical Ceramics Corp. *

* received promotions that greatly *

* increased their earnings. *

* *

* A basic skills training pro- *

* gram at Delta Wire led to productivi- *

* ty improvements for the firm and a *

* $1.50 per hour increase in bonus pay *

* for employees. *

* *

* Training contributed to an *

* increase in the size of the workforce *

* at Rockford Process Control, Inc. *

* *

* Training programs at Gilroy *

* Foods Inc., Wm. Dudek *

* Manufacturing Company, and Shelby *

* Die Casting Company improved *

* employees' advancement opportunities. *

* *

* The United Auto Workers- *

* Ford Education, Development and *

* Training Program enabled workers to *

* share in productivity increases *

* through a profit-sharing plan. *

* *

* The combination of restructuring and *

* training at Motorola Inc. and United *

* Electric Controls kept the plants *

* open and the workers employed. *

*****************************************

Terri Bergman

January 1995

The National Workforce Assistance Collaborative builds the capacity of

the

service providers working with small and mid-sized companies in order to

help

businesses adopt high-performance work practices, become more

competitive, and ultimately advance the well-being of their employees.

The Collaborative was created with a $650,000 cooperative agreement

grant from the Department of Labor to the National Alliance of Business.

Current partners on the project

include the Institute for the Study of Adult Literacy at Pennsylvania

State University, The Maryland center for Quality and Productivity, and

the National

Labor-Management Association. The Collaborative provides assistance in

four

areas: employee training, labor-management relations, work

restructuring, and workplace literacy. For more information, contact

Bernice Jones at the National Alliance of Business. (202) 289-2915.

.