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The Training Imperative

Competitive pressures are forcing more and more companies to get into educating employees. The question is, how?
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Employee training is one subject that Leonard Schlesinger knows coming and going. A former Harvard Business School associate professor of organizational behavior and human-resource management, he used to advise large corporations on their training needs and goals. Today, as executive vice-president of Au Bon Pain Co., a 40-store, $30-million-a-year gourmet fast-food chain based in Boston, he is directly responsible for coordinating one small growth company's in-house training effort. Remarking on this dramatic change of scenery, Schlesinger offers an anecdote about the chairman of a major industrial firm, who, the story goes, had invited a consultant in to pitch him on a variety of employee-training options.

"He steers this guy over to his office window, on the 88th floor," says Schlesinger, "and he points to the people walking around down in the street, small as ants. 'Son,' he says, 'see all those folks down there?' The consultant nods his head. 'Well, I'll bet there are any number of smart, capable, ambitious types among them. Not only that, but there are a whole lot more of 'em walking around in this city, right now. And,' the chairman continues, 'when you consider the whole country, you have to ask yourself one question. Why the hell should I pay to train any of 'em?"

A good story; an even better question. With all the educated talent available, why are companies laying out more dollars than ever before to train and educate their employees? And in smaller companies especially, where resources are more limited, what advantages do these training dollars buy?

There is, in fact, no doubt that corporate spending on employee education is on the rise, although accurate figures are hard to come by. The American Society for Training and Development (ASTD) estimates that the total bill runs about $31 billion annually, more than a quarter of which is spent by smaller companies -- that is, those with fewer than 500 employees. Indeed, a recent ASTD survey found that 87% of smaller companies have educational-assistance programs of one sort or another, and that smaller companies also boasted 14% employee participation, the highest level of any group.

These figures cover only "formal" education, moreover, as opposed to informal, on-the-job training. "Informal education has been around since work began -- the boss teaches the foreman, the foreman teaches the lineman," says Anthony Carnevale, ASTD's chief economist. "It's the money being spent on formal education that's relatively new. Formal education involves books, homework, instruction. Formal training is in response to increasingly complex jobs and sophisticated employees. We can't put a number on just how many more companies are getting into formal education programs, but the numbers are definitely increasing." One indication may be the society's own membership of company-based trainers, which has nearly tripled in eight years, from 17,000 to more than 50,000.

Whatever the scope and causes of the trend, companies that decide to launch training programs face a difficult choice: should they invest the time and money required to establish an in-house program, or does it make more sense to hire outside consultants to do the job?

Such was the dilemma faced by Au Bon Pain. Riding a strong growth curve (with sales increasing 85% a year), the company felt it had to do something. "We were growing so fast that we couldn't find enough employees to fill the jobs available," says Schlesinger, noting that the company's work force increased from 100 employees in 1982 to 800 in 1985. As a fast-food business, moreover, Au Bon Pain had to contend with the problem of high turnover in low-paying jobs.

The answer, management decided, was an education program that would allow the company to recruit from within. Searching for the right one, Schlesinger began interviewing vendors with prepackaged programs. But the more he looked, the more he thought about doing it himself. "The stuff I fell in love with," he sighs, "always [cost] me $100,000 a week to ship 40 people off to a fancy resort, and I can't afford that. You know, it's frustrating. I used to think we couldn't afford to [set up our own training program], but then I started hearing all the pitches and watching all the instructional tapes and I realized, 'Hey, it's 20 grand just to draw a breath."

Schlesinger also grew increasingly concerned about the effect of prepackaged programs on Au Bon Pain's corporate culture. "The single biggest failure for small companies," he says, "is [management] not being familiar with the language and methodology of the program. These programs have specific methods and vocabularies that become part of the way employees behave, and they better not be out of sync with what the rest of the organization is all about."

In the end, Au Bon Pain decided to do its own employee education, tripling its training budget. A job-rotation program allows store employees at the senior-associate and general-manager levels to spend 12 to 24 months in corporate staff jobs. An equipment management program teaches store managers how to repair equipment, thereby reducing the company's maintenance expenses. The company also expanded its standard training program for store operators from two to six weeks. In addition, Au Bon Pain offers a general-management-skills program for all employees, which varies somewhat according to the individual's position.

Despite the cost, Schlesinger believes that the company made the right decision to keep the training process in-house. "When you buy [from an outside vendor], it's a game of caveat emptor," he says. "The basic tenet is, don't prescribe medicine for others that you won't take yourself. Don't, for instance, bring in neat packages complete with videotapes, unless you, the executive, would want to be trained that way. I know I wouldn't -- which is one reason why [Au Bon Pain president] Ronald Shaich, [chairman] Louis Kane, and I teach many of the company's courses."

Of course, most companies don't have the luxury of an executive vice-president who is an expert in organizational development. Moreover, they may have specific training needs that are better addressed by outside specialists. In the case of Sanderson Farms Inc., in Laurel, Miss., management perceived 20 years ago that -- in order to keep pace with its industry -- the company would have to expose workers to changing marketing methods and production technologies. "Our industry is very automated," explains president and chief executive officer Joe Frank Sanderson Sr., who helped his family-run company grow from a small farm-supply business into an approximately $130-million-a-year integrated poultry processor. "We started sending people off to various specialized seminars, but a lot of them turned out to be a couple of college professors pulling you in there for two days so they could unscrew the top of your head and try to pour something in."

Sanderson finally turned to consultant Hyler Bracey, whose company, The Atlanta Consulting Group, developed a customized program for the poultry company. For the next two decades, as Sanderson Farms grew from 500 employees to 1,600, and from 25 supervisory and technical people to 250, the Atlanta consultants held regular seminars for company employees. Recently, however, Bracey suggested that the job could be handled just as effectively in-house -- and at substantial savings, given Sanderson's training budget of more than $100,000 a year. Sanderson concurred. Now, Don Carter, director of organization development, handles the company's training needs, with occasional assistance from The Atlanta Consulting Group.

To be sure, many small companies lack the financial resources, as well as the management expertise, to set up either an in-house or a custom-made training program. For them, a prepackaged program may be the only alternative to doing nothing at all.

A case in point is JMT Electronics & Controls Inc., of Gastonia, N.C., a 28-person, $3-million-a-year distributor of electrical and electronic components, which bought a standardized training package in hopes of upgrading the skills of its sales force. "Five or six years ago, we'd have never spent money on that sort of thing," says Tim Grooms, JMT's vice-president and the son of the founder. "When you're newer, you just want to get out there and sell. But our main business was changing [from television receiving tubes to electrical control systems]. As we changed, our sales force was hitting a lot of peaks and valleys. We just couldn't get any consistency. I thought a course might take the hit-or-miss out of selling."

As it happened, Grooms's next-door neighbor, Terry Ainsworth, represents Wilson Learing Corp., which offers a program in "Counsellor Selling." JMT signed up, at a cost of $9,000. The program consisted of a three-day seminar in the conference room of a local hotel, attended by 10 of JMT's salespeople. They watched videotapes, participated in role-playing, and studied workbooks -- all designed to teach them how to identify and meet a customer's needs. "Anyone with a brain can learn the technical specs of our products," says Grooms, "but knowing the customers' needs is something else. . . . Our salespeople had been having trouble pinpointing where they were in the selling process. After the course, they were better able to see selling as something that happened in stages. They could figure out what stage they were in, which gave them more control over the sale."

Grooms credits the course with helping the company to find new customers, boost revenues, and achieve greater selling consistency. He was so pleased with the results that he ran a second course six months later (at about half the price of the first). He plans to spend $7,000 on a third Wilson course, this one for the entire company. The goal: team building.

If JMT Electronics is at one end of the training spectrum, Solectron Corp., of San Jose, Calif., is at the other. In 1979, the electronics-assembly company was facing a severe management shortage. Its ability to attract top managers had fallen far behind its steep growth curve. That it was growing at all was a minor miracle -- two years before, losses had amounted to $30,000 a month -- but morale was sinking, and turnover was high. Into the breach stepped Winston Chen, a Harvard Ph.D. and former manager of thin-film tape-head technology at IBM in San Jose. Chen, now president and CEO of the $70-million-a-year enterprise, brought with him a strong bias toward internal training and a firm belief that the company would have to develop its own leadership potential in order to survive.

"People didn't plan, they didn't monitor performance, they didn't communicate correctly," says Chen. "The managers acted like dictators, and the people on the line hated it. It became almost impossible to recruit new talent. Our inefficiency was killing us."

Chen became the driving force behind Solectron's Entrepreneur University, a two-year "Masters of Management" program geared toward training managers in the skills required to run a $50- to $100-million company. Offering some 200 seminars a year, from inventory control and financial management to Japanese manufacturing techniques, Entrepreneur U. holds daily classes from 7 a.m. to 8 a.m., and the teaching staff represents all quarters of Silicon Valley's academic and entrepreneurial establishment. Participation is voluntary. "I don't force people to do it," Chen says, "but there's probably some feeling around here that it's good to attend." Employees are paid for their classroom time. The company underwrites the program to the tune of about $250,000 annually (or .25% of revenues). About 60% of that goes to staff salaries and guest speakers, 25% to supplies, and 15% to office space and training rooms.

So far, the return on that investment has been impressive. Over the past six years, Solectron has grown from 15 employees to nearly 1,500. Of the company's 200 managers, 70% are graduates of Entrepreneur University. Says program director Marjorie Quon, "Winston has been our spiritual leader in this. He created the training function, and training has made us a team. Those morning meetings pulled us through all the hard times."

Which may help to answer the question posed by the big-company chairman in Leonard Schlesinger's training story. Why pay to train any of 'em'? It may be a matter of survival.

Last updated: Mar 1, 1986




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