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Companies are realizing that enhanced performance requires a bigger training engine.
In the 2004 fiscal year, Palo Alto, Calif.-based Hewlett-Packard Co. (HP) boosted its training budget by $20 million. This fiscal year, the company injected another $25 million into its training budget, bringing the total to $300 million.
Employee development through training is seeing a revival in emphasis and relevance in today’s marketplace. A September 2004 survey by Mercer Human Resource Consulting, Measure the Return on Total Rewards, showed that 49 percent of companies plan to increase their training budgets in 2005, and only 2 percent plan to decrease training funds.
What’s driving the infusion of dollars into a function that, for many companies, had seen leaner days because of the recent recession?
Companies like HP recognize that it is more cost-efficient and competitive to develop talent from within rather than compete for talent on the outside. HR experts and trainers have been arguing for this strategy ever since “the war for talent” dominated the labor market in the late 1990s. Finally, companies are putting their money where the analysts’ mouths are—and it shows in the increased investment in training.
According to the Society for Human Resource Management 2004-2005 Workplace Forecast: A Strategic Outlook report, 82 percent of HR professionals polled say they are “investing more in training and development to boost employee skill levels.”
“Companies are putting more effort into the strategic role of learning in their corporation,” says Brenda Sugrue, senior director of research at the American Society for Training & Development (ASTD), a nonprofit association headquartered in Alexandria, Va. For example, more companies are creating positions like chief learning officer, a title that brings with it as much power as other vice president positions. “The learning function is being treated more like the manufacturing or finance function. There’s more parity of salaries,” adds Sugrue. (For more information on the elevation of learning professionals, see “Meet the New Learning Executive”.)
“Companies are building talent internally,” explains Steve Gross, spokesman for Mercer, which is headquartered in New York. “They found that when people left, they lost not only talent but also institutional knowledge. They don’t want to get caught short, like in the late 1990s. It’s a human capital strategy. If you want to have a ‘build strategy,’ you have to build people,” which means more training.
Training dollars are going different places than they have in the past, say many HR professionals—places that have a clear, bottom-line impact on the business. Training is expanding into areas that support the business, such as knowledge transfer, customer education to sell more products and front-line sales techniques, while still fulfilling new government regulation compliance needs and managerial skills training.
Moreover, new training programs are developed with an eye toward global needs—having employees around the world requires new programs and delivery techniques.
Demographic shifts and changing business needs are redefining how training is viewed and delivered. No longer is training just a specific course dreamed up in isolation in a trainer’s office and doled out to the workforce in a one-time, static environment. Trainers are addressing employees’ need for learning opportunities that are relevant to their current jobs but that also develop them for future opportunities, as well as their need for learning experiences that are interactive and ongoing.
Nowhere is this trend more apparent than in the knowledge transfer initiatives necessary to prepare organizations for the millions of baby boomers set to retire in the next five to 10 years. Many employers are just waking up to the fact that their most experienced and knowledgeable workers will take with them irreplaceable and uncaptured knowledge as they exit.
In 2004, Marilyn Weixel, SPHR, woke up to a looming mass exodus of experienced workers at her organization. She realized that more than 35 percent of her workforce at Raytheon Vision Systems, a national defense contractor in Goleta, Calif., would be eligible to retire by 2009. “In many situations, the person [set to retire] was the only one in the whole nation who knew how to do something. They invented it,” says Weixel, who is senior manager of HR.
Raytheon was in need of a dynamic solution. So Weixel created a training program called Leave-A-Legacy, which formally pairs employees who have vital knowledge—subject matter experts—with high-potential subordinate employees. Since it began, she has heard anecdotally from management that the program has successfully encouraged near-retirees to share knowledge on a daily basis, and it has also given them a sense of purpose. As one retiring employee said, “This program is the first time I believed I was really valued—after nearly 20 years [at Raytheon].” In addition, the program is securing the commitment of high-potential employees by giving them higher-level work.
Unlike labor market shifts related to economic fluctuations, Weixel stresses, “retirements are predictable. You can see them coming and plan.” Raytheon’s plan included working with supervisors to identify key people with irreplaceable knowledge who might leave in the next few years and to identify the right people to receive the knowledge. “Mentoring meant things like involving the [protege] in meetings, bringing them along to meet customers, including them in the design or proposal phase, etc.,” says Weixel.
Then, Raytheon used third-party coaches to facilitate the knowledge transfer between experts and subordinates. “Most of [the near retirees] are brilliant at what they do, but they don’t have great teaching skills,” says Weixel. “Very often the people receiving the information don’t have the greatest interpersonal skills [either]. The coaches help develop people’s emotional intelligence skills and work with them to ensure that the process isn’t haphazard. Each [team] has a plan, and each plan is unique.” But mentoring is not the only way companies are transferring knowledge. HP, for instance, has created online communities of different professional groups, such as sales and software engineering. “They’re online knowledge repositories for people who do the same kind of work. They post how they do things, solutions and experience,” explains James R. Malanson, director of global development and operations, technology solutions group, workforce development, at HP.
To start a similar community in your company, Malanson suggests, “you need to formally announce these communities to the target audience and have a moderator. Once we’ve gotten them started, they foster the exchange of ideas [and take off on their own].” Such online learning portals are one way the federal government is transferring knowledge in preparation for a mass departure as half of its employees will be eligible to retire in the next five years, explains Frank Russell, president and CEO of GeoLearning, a web-based training provider headquartered in West Des Moines, Iowa, which is working with the government to minimize the impact of this employee exodus. These examples are part of a greater knowledge transfer trend, says ASTD’s Sugrue. “We’re seeing a broader range of learning opportunities. They’re legitimizing formal systems to share knowledge and putting that knowledge into databases for others to find,” she says.
Customer and Supplier Education
Another new direction for training is in customer and supplier education, which, in the past, had been handled by sales and marketing departments. Increasingly, companies are placing customer education under the training department and, thus, the HR umbrella. The driving forces behind this shift are the increased complexity of customer training and the fact that training departments have the infrastructure to support it.
Nearly half of respondents in the 2004 Accenture Survey of Learning Executives reported that their organizations plan to expand training beyond their walls to customers and suppliers.
“Our organization is increasing its [training] funding,” mainly due to expanded external customer training, confirms Ernie Kahane, director of learning strategy at EMC, an information storage and management company in Hopkinton, Mass. “We view it as a key way to improve our total customer experience. Customers who know more will buy more.”
Tom Starr, senior principal of learning services at Convergys Employee Care, an HR outsourcing company headquartered in Jacksonville, Fla., is seeing more client requests for this type of training. “Clients are looking to training as a way to generate revenue,” he explains. This trend appears to be most prevalent in the technology industry.
Another related trend is increased supplier education. More companies are requiring suppliers to reach a greater understanding of their needs and processes to maintain a partnership.
For instance, at Ultra Clean Technology, a designer and manufacturer of gas delivery systems headquartered in Menlo Park, Calif., a significant amount of employee training is mandated by the company’s customers. “We have a lot of product training, provided [and paid for] by our customers,” explains Nelson. It’s important for Ultra Clean employees to understand how their gas delivery systems will be used so they can do a better job of meeting the customers’ needs, he adds. Additionally, companies often require suppliers to obtain Six Sigma or ISO 9000 training for their employees to remain “tier one,” or preferred, suppliers.
Sales and Customer Service
Internally, there’s also a drive to increase sales by sharpening the sales skills of employees—a trend that developed because of the recession, experts note. “Training used to be something you cut when the economy went south,” says Russell. “Now people are looking at it as a strategic tool.” During the recent recession, many companies felt the need to increase revenue by teaching their employees how to sell more.
“HR executives should be investing training dollars in functions that are customer-facing—or critical to the business—where you can measure the impact of the training through metrics like an increase in sales or customer satisfaction,” recommends Starr.
Case in point: Unitus Community Credit Union in Portland, Ore., whose training focus for 2005 is on front-line customer service and sales training. Three years ago, the credit union’s charter changed in response to transformations in the telecommunications industry. The credit union opened its membership to the community, after decades of serving only telecommunications employees, and launched several new branches.
“Now we’re in competition with other financial institutions,” notes Isaac Dixon, SPHR, vice president of HR and organizational development. “We have had to invest more time, energy and money in front-line sales training to grow our business.”
The credit union partnered with a local university for managerial sales training. “We hope that will enable our managers not only to be good advocates but also to train their people on a continuous basis,” says Dixon.
Increased Compliance Training
New government regulations have mandated a flood of compliance training across the country. “We are seeing a significant increase in legally mandated compliance training, such as Sarbanes-Oxley and corporate ethics,” says Russell. (For more information on ethics training, see the
Training & Development Agenda in the February 2005 issue of HR Magazine.)
It’s not just limited to federal regulations. For instance, Weixel is seeing an increase in sexual harassment training among her local HR colleagues as a result of new California legislation. The law, called AB 1825, went into effect in September and requires all supervisors in companies with more than 50 employees to receive two hours of interactive preventive sexual harassment training every two years.
Though many companies already conduct sexual harassment training, the new law may require a change in the target audience, approach and frequency of such training. For instance, the law is quite broad in its definition of “supervisor,” potentially increasing a company’s liability for harassment. Moreover, the law requires that the training be “interactive,” which eliminates stand-alone videotapes or lectures, forcing companies to provide more expensive workshops or role-plays.
Companies with interstate employee reporting relationships may need to train employees located outside of California. This is true for Ultra Clean Technology, which is headquartered in California but has 350 employees worldwide.
“We have a lot of cross-functional reporting relationships—employees in California and supervisors in Texas—so we’re doing the training for all of our supervisors,” regardless of where they’re located, says Nancy C. Nelson, SPHR, HR director, who plans to spend a significant portion of her annual budget to meet this new compliance requirement. “We’ve rolled out mandatory online training courses, and now we’re going to supplement them with brown-bag workshops.”
The ASTD 2004 State of the Industry Report shows that companies plan to spend the majority of their training dollars on managerial training.
“We’re seeing a lot of coaching and mentoring programs for managers,” says Sugrue. “When you consider that employees often rate their job based on how well they get along with their manager, it makes sense to spend training dollars on managerial and leadership training.”
This has been true at Conferon Global Services, an event and meeting management services company headquartered in Cleveland, Ohio. “Over the past two years, our budget for management and leadership development has increased from zero dollars to a healthy budget,” says Joe Henderson, SPHR, senior vice president of HR. One of the “driving forces included feedback from employee surveys that we needed stronger managers. Additionally, some of the legal aspects of managing people have driven us to do more training for this key audience.”
Arizona Federal Credit Union also has enhanced its managerial training program over the past few years. “For years, we’ve had training programs in place that focused on ‘how to do’ things, such as tasks and processes. While these sessions were successful to varying degrees, we recognized that we needed more emphasis—specifically for our managers—not so much on ‘how to do’ but on ‘how to be,’ ” says Jason D. Paprocki, senior vice president of the Phoenix-based credit union.
Additionally, in 2004, the company implemented a formal mentoring program within its management team. “Each manager is matched with a mentor from our senior management team to assist them in furthering their leadership effectiveness. Large group [80 managers] and small group [eight to 10 people] sessions supplement the individual meetings. Our employee development efforts were a contributing factor to Arizona Federal reaching its highest ever member satisfaction rating in a 2004 member survey.”
Globalization Fuels Training
Technology has made it more feasible to provide training on a global scale, saving companies millions of dollars in employee travel and time away from work. For instance, HP puts traditional classrooms online for its global workforce. “We have virtual classrooms where you can see employees in Singapore and the United States learning together, using a white board with private and group chats,” says Daisy Ng, vice president of the company’s workforce development and organization effectiveness. And as global communication increases, more companies are finding that employees need to improve their cross-cultural communication skills. “We have a facility in Shanghai, China, and we need to avoid unnecessary misunderstandings,” says Nelson. “We have invested training dollars in effective conflict resolution, effective e-mail communication and communicating across cultures.”
Training through simulations has flourished in the cyberspace environment. HP offers virtual laboratories where employees can view equipment assembly, repair and troubleshooting solutions. “We have a lot of expensive equipment [that would be difficult to move to a site],” Ng explains. “We can have hands-on training for employees in China, and a virtual lab with a screen. It’s very effective.” Employees in China can learn how to fix a supercomputer through step-by-step online laboratories.
E-learning has proliferated because it meets the needs of a changing global workforce. “Statistics show that 40 percent of the workforce consists of part-time and contract employees, not traditional full-time employees. How can you reach these audiences? They want access to training 24/7. The delivery of the training has to be flexible, on demand,” says Russell. Training can create a corporate cultural bond among employees spread across the globe, he adds.
Moreover, nothing compares with e-learning for speed or abundance of content. “The number of learning opportunities is what will become increasingly important. Smart information delivery needs to be embedded into your applications. You need to increase the competency of the individual and decrease the amount of time it takes to get there,” says HP’s Malanson.
“It wasn’t that many years ago, when a competitor could come out with a new product and it would take months to train everybody globally for the sales force to understand the objections to the product,” he says. “Now we can see an announcement and have information to our sales employees around the world within an hour.”
Kathryn Tyler, M.A., is a freelance writer and former HR generalist and trainer in Wixom, Mich.
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