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Educating Tomorrow’s Employees

If anything keeps CEOs up at night, it’s ensuring that their companies will have the right people with the right skills necessary to be competitive. So -what’s business doing to make sure this happens?

Labor markets aren’t tight exactly; it’s the skills mar that’s a challenge. In some industries, companies are already facing serious competition for qualified people. Trends suggest this will become ore acute. The flip side of this is evident in the relationship between the price paid for acquired companies an the book value o their assets beyond the bricks and mortar fours in the official accounting numbers. Brands, distribution channels, and proprietary technology are clear part of this, but increasingly it’s the skills, commitment, and energy of one’s work force that represents a firm’s real worth.

Ensuring that employees possess the skills necessary to compete globally is high on CEOs’ priority lists. According to a PricewaterhouseCoopers survey of growth company CEOs, the percentage of business chiefs that say the lack of skilled workers is the No. 1 barrier to growth increased from 30 percent in 1993 to 65 percent in 1997. A recent study by the National Center on Educational Quality of the Workforce notes that a 10 percent increase in education has a more positive impact on productivity than a 10 percent increase in work hours or capital stock. CEOs participating in the following roundtable discussion, held in partnership with the Virginia Economic Development Partnership, agree that employee education and training tends to reduce turnover. One nationwide study found that people with as little as six days of annual training were more satisfied with their jobs than workers who received little or none. An Aon Consulting study of work force developments found that employees with training push coworkers to keep pace with job demands. Workers in medium-size firms appear most concerned about the adequacy of coworker skills.

In the following discussion, CEOs explore what companies should do to prepare today’s young people to become tomorrow’s employees. Most agree that their firms are increasingly competing on the basis of training and skill-enhancing opportunities. Some also report exploring education partnerships in their respective communities with local schools and universities to align education with job skills.

LEARNING LESSONS

David Dickson (Virginia Department of Business Assistance): Training America’s work force today is the No. 1 issue in economic development. Very closely connected with the education part is the retraining that all of you face or will be facing today. In fact, a recent study by the U.S. Department of Labor indicated that 75 percent of the current work force will need significant retraining in the coming decade.

The good news is that the unemployment rate is less than 4 percent in the country-less than 3 percent in Virginia, but that’s also the bad news. Where do we find our workers? And how do we meet the work force education needs of the business community.

In Virginia, we have a work force of 3.5 million people in 182,000 business establishments-roughly half of our state’s population. We’re continuously looking for better models and approaches to work force development. Virginia‘s Governor Gilmore is in the process of establishing a permanent statewide work force training council that he will chair. This council will have a business focus with a majority of members from the business sector and will be lodged with our secretary of commerce and trade as opposed to with the secretary of education or health and human resources.

The governor also announced new initiatives to help public schools, including investing in 4,000 new teachers and providing $110 million in local construction funds, as well as a proposal for a 20 percent reduction in tuition costs to make a college education more affordable to Virginians. As with most states, we rely heavily on our community college system to promote technical education. In fact, we’ve recently established institutes of excellence in IT, semiconductor technologies, and high performance manufacturing. In central Virginia, where the chemical industry has a critical mass in Petersburg, Richmond, and Hopewell, we’re seeing keen interest in establishing a major apprenticeship program. Lastly, we’re developing a statewide strategy for retraining existing workers.

From a public policy standpoint, work force development is economic development. We’d like to know what advice business leaders have for the public sector in approaching this issue.

John Guffey (Coltec): If states focus more strongly on education in K through 12, corporations are more prepared to take those educated graduates and train them. You don’t earn a living, you learn a living. We’re all undergoing tremendous changes in our companies and they’ll probably even accelerate, so we have an obligation-even if we don’t have the need-to make sure our employees have the skills to meet other people’s needs.

Josh Weston (Automatic Data Processing): I visualize three subsets of education, of which training is the least relevant. Training is how you do this job or the job you’ve been promoted to. Education itself is of more importance, and more important yet is, for lack of a better word, development, which encompasses education, values, and behavior. If we’re having a serious conversation about the next millennium, even though we each have company problems with our current work force, our highest priority should be looking to the next generation. Do it right from the beginning-starting at pre-K, not K, and don’t only think of one subset. If you don’t get it right there, the ability of people past 12th grade to benefit is inhibited compared to what it would be if their pre-K through 12 had preset the conditions.

From a personal standpoint, I think I got more benefit out of my 7th through 12th years of education, than I got out of college and post-college study.

Jane Friedman (HarperCollins): What I see in educating the young is that it’s K through 12 that is absolutely essential. I speak to that not necessarily from the standpoint of the people who work for me editorially-the ones who actually do need the continued education-hut the warehouse workers, who absolutely need to learn in K through 12 because that’s where they’re getting their basic skills. Without that we have nothing.

Frank Liguori (Olsten): We evaluate probably a quarter of a million people during the course of the year. We look at their skills and try to match them to the needs of the client companies we serve. Many times, we try to upgrade skills and to cross train. But if those employees or those prospective employees come to us without basic skills, without basic knowledge, we can’t do much with them.

Lee Delp (Moyer Packing): We focus on college rather than K through 12, and we also focus on it in a vacuum. Stable vs. unstable families, as well as other factors, can make a huge difference. Two children in the same education system coming from different home-life situations-stable vs. unstable-will show a marked difference in terms of educational development.

Matthew Kissner (Pitney Bowes): The tragedy of that is then we’ve lost a generation. We have many single parents who are employees. As a way to bridge the gap, we have a “Know How to Know” program where we teach study skills to the parents and the children, together. Because those K through 12 children will look to their parents, who have come through an inferior system, as role models; we need a stopgap to get us through.

Alan Weinberger (TechnologyNet): Another problem we have is the media. At the K through 12 ages, few kids are not susceptible to the media-and that was before the Internet. It’s an unbelievable problem we have not settled in our homes, and whatever the school does, the home is more important, and parents really lose this battle.

Ed Rust (State Farm): Stressing the local adoption of high academic standards for K through 12 and assessment testing for those standards at 4th, 8th, and 12th grades and in between as appropriate are tools that have been effective-some degree of accountability within the school system. And when I say standards, that’s not just for students; it’s for teachers.

When I talk that way with school teachers in our local school, the idea of being held accountable for the performance of a group of kids-particularly when there’s a social economic change going on in the classroom and no parental involvement-scares them to death. Their feeling is, “I’m doing my best. I’ve got other mandated issues coming down from the school board. I don’t have the time or resources to achieve the kind of results you want and you’re gonna hold me accountable for something beyond my control?” It’s like holding someone accountable in our own businesses for a result when they don’t have the tools, responsibility, or authority to get that accomplished.

A youngster is only in front of a teacher five days a week, nine months out of the year for six or seven hours. Outside experiences, the attention at home, or after-school activities probably have as much of a positive or negative impact on development.

Weston: Two caveats. You left out site-based authority-you can’t run an education system from some central site. And the family is important, but we’ll lose the value of this gathering if we give short shrift to what can and should be done in the educational system. Across our country, there are thousands of little anecdotal pilots. The only thing that will ultimately matter is large-scale replicability.

As citizens, we can make noise and sometimes succeed. In our town, we made noise and got a better superintendent of schools. Chicago is no longer a test tube.

Liguori: Over the last 15 or 20 years, the divorce rate has been very high. You have more homes where two parents work and more single parents. It’s not enough to drop your child off at school and say, “Educate my child.” It really has to be a partnership between the government, the education system, the teachers, the parents, the work force, and the employers.

Norman Harbert (Hawk): Cleveland has been a disaster. And, like most school systems, the answer has been to throw money at the problem without making the fundamental changes to make it work. Mayor Mike White is now going to make those fundamental changes. He got rid of all of the school boards that were just trying to continue in the jobs they were in. You have to follow Cleveland along with Chicago or Wisconsin and realize that the bureaucracy has really limited the ability of people to make change. They don’t want to see innovative types of things occur.

What we’re unique at compared to any country in the world is competition. And when you get competition of one kind or another, you upgrade your public school systems versus the private. But if you have no competition and a bureaucracy, the people who suffer most are minorities coming up through the K through 12 grades.

J.P. Donlon (CE): Michael Ovitz and Ted Forstmann are not of the same political persuasion. And yet both support public education and vouchers because both believe that only competition will give us reform fundamentally at the K to 12 level.

Weston: If you took a vote here, charter schools and vouchers would probably all get pretty hefty support. So I don’t think it’s a good use of our time to keep talking about something we pretty much all agree on. The tougher thing is even if you had the competition, there are other big issues that retard the public sector from doing what the public sector should do, and you’re never going to get rid of the public education sector. Competition alone won’t shape it up because tenure protects all the teachers and the political environment protects all the administrators.

Arnie Pollard (CE): What did they do in Chicago to deal with those other issues besides competition?

Weston: They broke the mold. The head of education there is not a superintendent of schools; he’s the CEO. That gets a lot of connotations across. They got the state legislature to give Mayor Daley authority to do things that most state legislatures don’t let you do. Paul Vallas, who’s been there three years, is the CEO, so this is not a flash in the pan that started two months ago. There are standards, no social promotions, and if you’re not up to snuff, mandatory summer school.

If you’re a teenager and you’re pregnant, when that kid comes along, there’s child care at the school. You stay in school. They have practically zero second pregnancies in the Chicago school system. They feed the kids breakfast and dinners compliments of the Department of Agriculture. There’s 92 percent average daily attendance. Disruptive kids are put into a special school. The CEO can fire principals; he can fire teachers. Teachers have to apply for the privilege of earning money in summer school. Folks on tenure with $60,000 don’t need the money. The right ones-the energetic ones making $30,000-apply.

Harbert: Cleveland is just starting. But one of the first things Mike White did was to find out what Chicago did because it is considered a success and Cleveland has been moving in the wrong direction.

Ronald Watson (Custodial Trust): All of us seem to agree with the idea that a disciplined, well-run, tightly administered school system might get some higher results. But the model you are describing is very authoritarian. And I don’t think most of you would run your business in that style. What’s missing from this discussion is a description of a culture where the parents want it to succeed, where they work with the teachers, where the teachers want it to succeed, not out of fear, but because they’re getting support from the administration and the parents.

Harbert: We run our businesses with high expectations, and non-performers leave. Having high expectations and expecting performance is not necessarily authoritative. The other side of that coin is that outstanding performers-in an industry or teachers-are the first to know when the system is supporting those who don’t perform, and they become discouraged. What you’re doing is empowering them to succeed. That’s why Chicago‘s working.

Friedman: Why aren’t we doing this everywhere right now? I agree that it’s very important that a strong family structure helps children, but we can’t control the divorce rate. We spend less time with our children because many of us can’t make enough money unless both parents work. So although I don’t necessarily agree with authoritarian rule, I think we have to do something extreme. We have lost one generation. We can’t afford to lose another.

Rust: How do parents know if the school or the class that their children are in is performing? What are the benchmarks? It’s like financial statements with Xs and Os instead of real numbers-just pass and fail.

Friedman: That’s key because we give our own employees performance ratings. They get a raise if they’re excellent; they kind of stay where they are if they’re doing an adequate job and if they’re not doing an adequate job, they don’t get a raise, and sometimes they get fired. I’m not aware that that’s what happens with teachers because we haven’t had these basic guidelines as to what to do with the people who are in charge of our children’s futures.

Donlon: One of the things we need to discuss is how companies deal with educating the work force they’re developing. One of the first things Larry Bossidy showed me about AlliedSignal was the former technical center where the company wanted to develop the skills of its people. Fred, would you tell us a little about that?

Fred Poses (AlliedSignal): People have lots of mobility, so you’ve got to give them a reason to stay with your company. You can make your company a great place to be by creating an environment where people continue to learn. At a minimum they think, “I’m going to be more valuable if I lose my job or I want to switch jobs.” We want to have 40 hours of training for every employee each year. Think of that as a $100 million investment. We want our learning to be tailored to our people and to drive business results. At the end of the day , I’ll bet our buildings are not much different, our technology is not that dissimilar, and our machinery is almost always bought by the same company. So what’s the discriminating factor between your company and our company? It’s how effectively we can educate, skill, motivate and train our people.

If we do lousy on cash flow, we start to think about educating people on cash flow. And we tailor our training to those people who can influence cash flow. Unless you give people the skills and tools to do something about achieving the high expectations we’re all setting, you’re just going to have frustrated employees.

But we do a lousy job of team effectiveness; we forget that people work together, and we don’t put enough effort into team dynamics, conflict, diversity.

Pollard: Do you measure the results from your $100 million investment?

Poses: You can tell the difference between businesses that get high productivity and poor productivity by how they deploy the tools to get it. And we measure employee satisfaction-we ask our people, ‘Do you think we’re giving you the skills and tools to be effective?’ So I think we have some metrics, both quantitative and human.

Kissner: It’s very hard to measure effectiveness unless you’re going to measure something like classroom hours trained, which I don’t think means anything. It’s the least effective method according to the experience we have. We look at a broader range of what we call development assignments where we deliberately assign people to multi-geographic, cross-functional teams to give them exposure to teamwork in complex settings. So classroom training is only one part of the tool kit. It’s a whole recipe of experience we try to create for people as we build general management strengths.

Weinberger: We’ve found that Outward-Bound expeditions where you get groups and you go outside the classroom setting are most effective. When you’re out in the field doing things as a group, that’s where the unknowns come up and you really get to know people.

BUILDING BLOCKS

Rust: Whether it’s 40 hours in a classroom setting or something else, it’s a lubricant for the mind to keep people in the process of thinking and aware of what’s going on in the world around them. It helps them adapt to changes that you have to go through as an organization. For years, we’ve had a good tuition-aid program that’s helped us, I think, in the success that we’ve enjoyed.

Look at the things that we struggle to understand-just where is the Internet going? What does e-commerce mean to our businesses? Look at what we’ve done in terms of intranet applications and relationship building with vendors and suppliers. We can be accused of being myopic, because the U.S. accounts for 99.99 percent of our sales and the rest is in three Canadian provinces. Recognizing that about five or six years ago, and the growing international implications for some of the things going on in our business, we consciously expanded the activity of our officer ranks across the country to be more involved in a variety of settings.

We worked with the Darden School down at the University of Virginia to run through all of our agency field executives to give them the tools to help make that transition from hands-on managers to a broader team leader of a group of 35 to 40 agents. That was a very positive move. Once every 18 months, my senior staff and I go through a prolonged seminar in an international set-ting to open up our perspectives. The world is changing so fast; none of us can afford to sit back on our laurels.

We’ve used not only Internet-based programs, but also a rather extensive interactive distant learning program. This afternoon, when I’m back in the office, if I wanted to communicate with 1,200 locations, I could probably touch 50,000 of our 70,000 employees.

Youssef Nasr (Hongkong Bank of Canada): We’ve developed a learning center with CD-ROMs on PCs and intranets as well. But what you don’t have is the personal interaction. That’s the one deficiency in these things.

Rust: We’re not sitting across the table and can’t physically shake hands afterward, but we do have that Q&A interplay where we can tie in all of our offices across the country and bring in a couple of key resources and have that interactive play for one or two hours.

Liguori: Technology is changing so rapidly, it’s putting an enormous amount of pressure on businesses all over the globe. We’re serving tens of thousands of clients every year. We custom train, upgrade skills, and try to match those needs. That reflects a lack of skills and training in-house. But I don’t think it’s for lack of attention or commitment. Things change so rapidly; it’s almost too much to keep up with.

Poses: I think anyone who outsources training is making a fundamental mistake.

The outside source will be gone tomorrow, and good luck. You may want to get people in to train the trainers, but you want training to be delivered by your people. You want to own it.

Liguori: We are not a training company. The amount of revenues that we get from training is infinitesimal, less than one-tenth of 1 percent. But we’re training in order to generate the skills, which is telling you there’s tremendous need out there and the need is not being met by a lot of the client companies because they can’t keep pace with it. Look at what’s going on in IT. The Y2K problem has created enormous pressure. We have a division that just deals with IT and 3,500 people on assignment everyday. If we had 6,000, we could have 6,000 on assignment each day. There are not enough people to go around, and the needs are enormous. So training has become an integral part of our business, but it’s not the business we’re in.

Friedman: When we talk about educating our children and going back to initial values and the basics, what do we mean by the basics? Because the basic basics are changing as we sit at this table. What was a basic an hour ago is not going to be a basic a day from now. One of the things that I’m looking at is how to recruit diversity. The other is retention. In IT, retention is almost impossible, because every other industry pays more for IT talent than publishing. And that’s a great bother to me because we are now very much an IT business.

We’re actually putting together this Publishing 101 course for people in-house so that they can learn about other aspects of the publishing business. We put our marketers in with our editors and our IT people in with our salespeople and encourage the young people in various areas of the business to learn all about publishing. To learn what a P&L is, to learn what the business aspect is. My intention with this is retention. If you make people happy and show them the opportunity, you may be able to hold on to your good employees.

Watson: A company that has a tradition of people staying for long periods of time can afford to train because it can afford to recoup the productivity benefit of that. In the parts of the world where turnover is extraordinarily high, you can’t afford to train. You must buy the talent and simply use it until it goes somewhere else. What is the right motto? Are those in high turnover areas still committed for historical reason to high training or is there a calculus here that we simply have to lay off more of the training cost investment burden on the employee if they intend to walk away with it?

Weston: It could be that a more effective investment in various dimensions in people begets more longevity-although maybe not 50 years more. And, if not more longevity, then it certainly gets more productivity.

Most of the illustrative comments here have to do with educational training needs around technology, an area where whatever you knew yesterday is irrelevant tomorrow. Only high school kids understand the Internet because everybody else graduated too long ago. But there are some basics-such as plain, clean communication, oral and written, and the ability to unbundle a complicated dialogue. These pertain to everybody and I find that anyone in our company who doesn’t have them-which is the majority-gets a reduced effectiveness out of their input. We’ve seen some senior executives who couldn’t do a simple 15-minute presentation well. We sent them to finishing school and now instead of seeing 50 slides that don’t make a point, you see 10 slides that make two points. So I think the basics are as fundamental as knowing what the Internet is going to do in 2004.

Guffey: I think you can create an environment of curiosity. It isn’t something you have to force on people. There’s an appetite to learn. And if you train people and they go somewhere else, that’s not all bad either. You know we’ve got some of Larry and Fred’s employees in our company. I question the effectiveness of companies that have had a culture to keep people for lifetime jobs.

THE TRAINING GAME

Watson: The point I was trying to make was not that we shouldn’t train, but that if you’re going to make a big investment in training, you better have the kind of environment that the employee wants to stay with. A compensation system, a promotion system, and so on that encourages people who have gotten this training to keep it invested in your shop rather than walking somewhere else.

Mario Giacone (Computing Concepts): What we do is kind of enslaving. We guarantee employees who have been with us one year two weeks of training. There are ranges from the high-level, advanced engineer to the PC support person. Annual investment on an advanced engineer could be upwards of $20,000 in training. It’s a big investment, especially if they’re going for higher certifications. So we typically say, if you stay with us a year, we’ll pay for your training for the year. If you leave within the year, you have to repay us for the training. That’s how we get our investment back within our own firm. We had less than 5 percent turnover last year.

Harbert: We have profit sharing,

About JP Donlon

JP Donlon
JP Donlon is the Editor-in-Chief of Chief Executive magazine.