Ground-Zero Training

Who says small companies don't train employees? The hot ones always have. And in today's economic environment, even the CEOs of young and resource-scarce companies are discovering the payoffs

Five or 10 years ago this article would have been very short. Back then it was easy to describe training programs in small U.S. companies: most didn't have any. With a few rare exceptions, most small-company executives would have told you formal training was a luxury they couldn't afford. Big companies had training programs; small companies hired already-trained workers, or their employees learned on the job.

Times have changed. I first realized just how much when, a year ago, my assignment at Inc. was to spend several months looking for exemplary small companies. I started calling business experts in various locales and fields, asking them about the small growth companies they found most interesting and impressive.

Here's what happened: somebody would recommend a company; I'd then call the chief executive, do an exploratory interview, and discover that one of the interesting things about the company was its extensive in-house training program. The first time that happened I thought it was a fluke, but it quickly became a pattern I couldn't ignore.

What was going on here? I knew most small companies in the United States didn't have training programs. I'd read all the dire reports about how America's skills shortage was strangling our productivity growth. Meanwhile, a disproportionate share of the hot entrepreneurial companies were providing training to their employees.

Had that always been the case? I wondered. Had we just never noticed it? As I paged through old issues of the magazine I discovered that a number of companies we had held up in the past as models of good management had made a commitment to training early on -- and had gone on to make a name for themselves. They included companies like printer Quad/Graphics, retailer Crate & Barrel, and restaurateur Lettuce Entertain You Enterprises. Last year's national Entrepreneur of the Year winner was Jerry Ehrlich of Wabash National, in Lafayette, Ind., a company with an extensive training program.

Perhaps, then, a few savvy entrepreneurs have always recognized that investing wisely in training when a company is small pays off in growth and financial success. What's new is that today more smart small companies are making that connection and starting their own training programs. For example, researchers at the Southport Institute for Policy Analysis, in Washington, D.C., recently studied just one type of training in small companies: basic-skills programs they dubbed "workplace education." The researchers found a dramatic increase in the number of small companies starting such programs over the past three years. It is still a new trend: the institute reported that, at most, only 3% to 5% of all small companies have workplace-education programs, but an additional 20% want to start them.

A number of factors account for that change in attitude, including the increased interest in total quality management (TQM), which, however much a buzzword, almost always emphasizes employee decision making. Even companies without formal TQM programs find that today's fast-changing, information-overloaded markets favor a company whose entire work force can solve problems and make good decisions. Then, too, the aging of the baby boomers means there are fewer new workers and fewer job hoppers. Those two factors make it more profitable for companies to train the workers they have, since employees are less likely to leave and are more difficult to replace.

Enough theory. In the real world, abstract speculation about our changing economy is not what drives owners of small and midsize companies to begin training programs. Instead, the CEOs I talked to started training programs to meet some very real-world, concrete need. In some cases that need was a dramatic one -- like survival. Mike Plumley, for instance, realized in the early 1980s that if his family's $30-million rubber company, which supplies the automotive industry from Paris, Tenn., didn't improve the quality of its products, it wouldn't stay in business. So he decided to begin a modest training program, which has since become a broad-based effort. As quality improved the Plumley Cos. prospered, and today the business reports sales of more than $80 million. "Training employees was not something we decided to do out of the generosity of our hearts," Plumley says. "It was something we needed to do to survive."

But in many cases, the need for training is more subtle. For example, like most company owners, Ray Tom wants to find good employees who will grow with his business. But in Tom's case, there's a big challenge: many of the jobs at his company, the Print & Copy Factory, in San Francisco, consist of operating copy machines -- nobody's idea of a glamorous career. So Tom has developed a comprehensive training program for machine operators. They can go through the program at their own pace and move along a career path that can lead to jobs in management or copy-machine maintenance. Today, Tom says, about 70% of his managers are people who started in entry-level jobs at the company.

In some cases CEOs decide training is the only way they can gain the competitive advantage they want. At Cooperative Home Care Associates, a $4-million home-health-care company in the Bronx, N.Y., president Rick Surpin knows his company's sole product is the service its home health aides provide. To Surpin, that means the company should invest as much in training as it can afford. Similarly, the Tattered Cover Book Store, in Denver, wants to be known for friendly customer service. So the company puts all new employees through two weeks of training that includes topics such as body language and the best phrasing to use in answering customers' common questions.

In the end, then, all the CEOs who swear by training have the same bottom line: they train because they've decided they must to build the companies they want. In a world of increasingly fierce global competition, a world where many other countries have a better-trained work force, it is a lesson more entrepreneurs will be learning. Bill Nothdurft, author of a book called SchoolWorks, comparing the school-to-work transition in a number of countries, tells a story that sums up the attitude of overseas competitors. Nothdurft remembers being astonished when he interviewed the CEO of a tiny German company ("It really was not more than just a corner garage") and discovered the substantial investment the owner had made in employee training. When Nothdurft pressed him for the reason he spent so much on training, the German appeared confused. "He just sort of looked at me and blinked a couple of times and said, 'Well, what would the alternative be?' "