Cost-Effective Training for Small to Medium-Sized Businesses

It’s 2011 and most businesses are looking around at their internal talent and heaving a small sigh of relief—relief that the company survived the horrendous economic downturn and relief that they have been able to retain as many key employees as they could. 

Even so, savvy leaders know that as the economy improves, their employees will be looking for what the company is doing to support them—including the key element of employee training and development.  While offering quality learning opportunities to staff is a critical component for talent retention, small to medium-sized businesses often face bigger challenges in providing development and training for their employees.  Frequently, without in-house training staff and always with limited budgets, these companies have had to do more with less, and they continue to do so in 2011 and beyond.

Some Positive Examples

MultiAd, a 200+ person marketing solutions company headquartered in Peoria, IL, has always believed in the power and importance of training its workforce.  However, like most companies of its size, it has relied upon external resources for its workforce training programs.  According to James Douglas, President and CEO, “we often look outside the company for training on subjects we feel will help continuously build and improve the performance of our employees.  Even during the recession, we continued to offer classroom-based programs on topics such as goal setting, performance management, team work and even ‘Changing & Growing - Without Going Crazy!’” MultiAd is a member of AAIM Employers’ Association, a non-profit membership organization serving four Midwestern states, and it receives HR services, including interactive, classroom-based training as part of its membership fees.

MKTG Inc, a 200+ marketing services firm with headquarters in New York City and offices in Cincinnati, Chicago, San Francisco and Los Angeles, while still not large enough to have trainers on staff, has an HR Director with a passion for learning and a “think outside the box” penchant for finding solutions to budget and geographically-dispersed workforce challenges.

Economic Opportunism: Learning & Training for the Future During Financial Crisis

Smart businesses know that economic downturns are a time for investing in the future, so when conditions improve they have the skills needed to grow and thrive once again.

This is perhaps in juxtaposition with the austerity measures being taken, which mean training budgets are being slashed. However, the idea is not to train more, but rather to train smarter.

ROI of Training

Running training like a business involves targeting the funds for workforce development towards those areas which are likely to yield the greatest results and boost to productivity, while streamlining those which are of least value.

For those who need a little encouragement about the ROI of training initiatives, the figures speak for themselves. Research from the University of Pennsylvania found that for every 10 percent of revenue spent on capital improvements productivity increased by 3.9 percent.

In comparison, spending the same amount on human capital yielded an 8.5 percent increase in productivity.

HR Shared Services Trends and Challenges

Shared services increased in popularity over the last ten years as organizations realized the potential to streamline their enterprises and cut costs. This trend was accelerated towards the end of the decade when the economic downturn struck. Figures released by the Shared Services Institute (SSI) in 2010 show since 2007, HR shared services start ups in the United States have been increasing by 39 percent.


"HR shared services is experiencing a second surge in popularity that appears to be quite strong," the report said.


Shared Services Trends 
These HR shared services were said to be as "unique and varied as the organizations they serve," however some clear trends were emerging.


"Virtually every HR service can be found to be delivered through a shared services model somewhere," the report, based on the views of 5,000 United States companies, noted.


Globalization was said to be one of the major trends impacting shared services in the future, as it is with many other business functions.


Just 11 percent of those who took part in the research said they had no intention of expanding their services globally, while 14 percent already had an integrated global model, and 24 percent planned to create one in the future.


Software-as-a-Service (SaaS) applications were also increasingly being seen as favorable by organizations. Gartner predicted last year SaaS would play an increasingly important role within HR functions, particularly in talent management. It is not surprising that its use is now spreading to other HR functions.


Some 80 percent of participants in the institutes' research were said to be open or favorable to SaaS.


Measuring Success of Your Shared Services Model
Despite this clear eagerness to adopt a shared services model and reap the benefits, many were unsure or unconvinced that their efforts were having the desired effect.


"Enabling the transformation of HR's role was listed among the most critical business drivers, yet it lagged behind all others in perceived level of achievement," it was explained.


Around 15 percent of the companies which participated in the survey said their shared services venture had achieved below average results in terms of transforming HR, while less than five percent said the model had not met their expectations in terms of cost savings.


A larger proportion, more than 40 percent said they didn't know or it was too early to tell if their shared services were meeting their expectations. However, this lack of understanding was prevalent across all performance indicators, which led the institute to claim a "valid benchmarking across such a diverse set of operating models remains elusive."

Cultural Challenges

Technical challenges are not the only ones facing HR shared services ventures. Unless staff members are fully on board, cultural differences could prevent the systems from presenting their full benefits.


The UK-based National Trust consolidated its 17 personnel departments into one center a number of years ago. These changes brought about a significant streamlining of operations and cost savings, but the biggest challenge had to do with human resources.


Paul Boniface, director of HR and governance at the Trust, told Personnel Today: "We did have examples of line managers not complying with new processes. Over time, that eroded as they saw the benefits of doing things the new way."


In response, Vanessa Robinson, head of HR practice development at the Chartered Institute of Personnel and Development, told the news provider the key is being open and communicating the changes with employees early on.


Workers must take a long-term view of shared services, however they can be resistance to change— especially if they view it as a way of cutting staff numbers. This can be particularly true within public sector organizations, many of which are seeing their budgets squeezed.


"It's making sure people know what the change is about, good communications, and making sure you set up project teams, which comprise more than the people changing jobs, but a number of key stakeholders too," Robinson said.

Making Sense of the Millennial Generation: What Organizations Need to Know

The "Millennial Generation" - people born in the 1980s and 1990s who are in their teens and 20s today - represents the latest chapter in a long-running tale of generational misunderstanding. Each new generation that enters the workforce is typically viewed by its elders as not sufficiently dedicated to the world of work, posing potentially large challenges to organizations and the way they structure the employment proposition.

The good news is that, just like any classic tale, we have seen it before and know how the story ends - at least one part of the story. A large part of the misunderstanding is due to a natural evolution as generations go through predictable life cycle stages.

Early career labor market experience is typically characterized by a lot of job and career "shopping." Whether voluntary or involuntary, the facts are clear that younger people tend to move around from job to job a lot more than older people. It's partly due to choice, as many are in the process of making up their minds about the kind of careers they want to have.

The other part is due to the nature of how human capital is built and valued in the marketplace. The opportunity cost of job switching is low for young people because they have not yet built up large amounts of occupation- and industry-specific human capital. After working for a number of years, accumulated human capital makes people more specialized in the types of jobs that offer the biggest financial rewards, so their options narrow - and this makes them much more dedicated to specific types of work and organizations, and thus, from the organizations' perspective, more dedicated and reliable. So part of the stereotype is due to expected differences in how young people interact with the labor market, and vice versa.

Another part of the stereotype is due to the ups and downs of the business cycle. Young people who enter the labor market when times are good face more options and can be pickier about their job choices than people who enter the labor market in tough times. Part of this may be temporary optimism that is enabled by a growing economy - optimism that should get tempered during a subsequent bust. That certainly has been the case for the Millennials.

The "old" Millennials - those born in the early 1980s - who entered the labor market during the latest economic expansion in 2002-07 found a relatively healthy economy with many job options. If they have been fortunate to keep their jobs in the recent deep recession, it is virtually certain that their expectations for their careers - and their demands on their organizations - have been tempered at least a little. Yet the pain of recessions is never spread evenly, and those who have been fortunate to keep their jobs have continued to develop skills and accumulate experience that will enable them to put further distance between themselves and other who have not been so fortunate.

While the pain of unemployment often gets spread over more people in younger generations (they typically have higher unemployment rates than older generations), people who lose jobs later in their careers face much steeper challenges finding work that suits their skills and thus greater economic adjustment on average. At the end of the day, the distinguishing feature of recessions is that they create winners and losers within each generation. And it is the differences between those thrown out of work versus those who keep their jobs that are more important defining features of labor market experience than generational differences.

There is a related, but different, economic trend that has been a defining feature of the US and other advanced economies for many years: a growing gap between economic winners and losers among people who in previous decades would have had much more similar economic fates. This trend started in the 1970s and 1980s, leading to greater dispersion of economic success - and failure - among people who one would think should have similar success in the labor market. This means, for example, that people who train and work today as lawyers, engineers, finance professionals, medical professionals, etc. are ending up with much more varied amounts of economic success and failure than their counterparts who chose those same professions in their parents' generation.

That times have changed like this is no accident, and is due in part to widespread deregulation and increased competition in sectors that in previous generations were much more shielded from competition both domestically and internationally. The recent rise of emerging economic dynamos like China, India, Brazil and Eastern Europe with large pools of well educated workers has helped continue the trend. The other contributing factor is organizations' increased use of pay for performance and accountability that create greater differentiation in both rewards and job security.

Taken together, these three issues - natural life cycle evolution, business cycle ups and downs, and growing dispersion of economic winners and losers - mean that there are real economic issues that Millennials face that organizations should be aware of. But whether and how organizations should respond with policies specifically targeted toward the Millennial Generation is another matter.

Existing HR programs and policies that address the different needs of single versus married people, old/late career versus young/early career, etc., should be sufficient to address the early-career life cycle issues the Millennials currently are facing. The other two trends do not necessarily require different HR programs and policies. They do, however, highlight the importance of recognizing that generational stereotypes often take too much attention away from the fact that it is difference among people in the same generation that often are much larger and more important than the differences between generations.

Recognizing the growing capriciousness of the labor market - things are more varied and random today - and what that means for both current and prospective employees will enable organizations to approach each person with the right perspective and compassion needed to engage and motivate each person. And that applies to both the Millennial Generation and their older brethren.

The other feature that distinguishes the Millennials from older generations is the widespread use of social networking and other new technologies that are the latest rage. This of course is to be expected because new technologies are always adapted much more quickly by the young. Yet the widespread adoption of these new tools by the young is not necessarily the issue on which organizations should focus. On the one hand, there always are new technologies, and we have to ask ourselves, How does this technology really change the way we can do work around here? If the new technology is just the latest version of an electronic water cooler - a place for people to gather and gab - then no response may be the right response. On the other hand, each new technology - the telegraph, telephone, cell phones, internet, etc. - eventually does change the way people interact in fundamental ways.

The issue that organizations need to address is how the new technologies can change the nature of work for everyone, not just the younger generation. The younger generation is the place to go to see what is possible with new technologies. But the real power to transform organizations lies in whether and how the technology changes the way we communicate, think and organize work in all corners of the organization. If the potential is high, then attending to the opportunity of new technologies should be given very high priority, and members of the Millennial Generation can be invited to help lead the task teams charged with exploring and acting on alternative scenarios. If the potential is low, then the new technologies should not be ignored, but they also should be put in perspective and not be allowed to dominate the conversation to the exclusion of other changes that could be more important (globalization, regulation, supply chain, etc.).

Training: The Best is Business-Driven

Many internal training organizations must really start to reinvent themselves––or face the prospect of significant downsizing.

CEOs and CFOs are now demanding investments in training deliver maximum value to the organization.

Translated, this means training budgets are being put under the microscope. Training costs––their identification, measurement, and control––are an area of concern because it's difficult to monetize the return on training investments.

Yet training costs, after all, do not exist by themselves. They are always incurred––in intent at least––for the sake of a result.

What matters therefore is not the absolute cost level but the ratio between training dollars spent and their results. But––and this is a big “but”––results must be business- driven.

There are many different ways to define what is meant by business-driven results.

For the purposes of this article, we will discuss two specific ways––namely:

(1) Quantifiable measurements related to business processes and;

(2) The use of strategy maps to identify the skills needed to carry out an explicit corporate strategy

Monetizing Training Results: An Example and Its Lessons

Oral and written mastery of a subject is important. But from the perspective of the organization, the only real test of training is its impact on business performance.

Here's a concrete example. And we'll have you as the old statement goes, "walk in another's moccasins.”

Let's assume you are a manufacturer of Styrofoam coffee cups used in vending machines. Lucky you!

You want to improve the quality of your coffee cups. Why? Because the costs associated with scrap, return shipments, field service calls, and customer complaints from the vending companies are devouring your profits.

Careful study reveals four major quality problems with respect to your Styrofoam coffee cups. The problems can be classified as:

• Coffee cups that are too large (this results in customers feeling cheated, that is, they are getting less coffee than expected)
• Coffee cups that are too small (this results in coffee overflowing the cup…making an unwanted mess)
• Coffee cups withcracked lips (this results in a coffee cup looking like it was chewed by a rodent)
• Coffee cups with pin holes at the bottom of the cup (this results in a leaking coffee cup)

These are the performance measurements that must be improved. Measurements define what we mean by performance. They largely dictate where efforts should be spent.

Let's further assume that, for whatever reasons, far too many of your coffee cups have one or more of the above-mentioned quality defects.

Greatly simplifying, you need to dramatically reduce the percentage of coffee cups with quality defects.