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1990
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ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
UTILIZING HUMAN RESOURCES FOR STRATEGIC ADVANTAGE:
THE ROLE OF TRAINING
by
Lisa M. Lynch
I.R.I. Associate Professor
of Industrial Relations
M.I.T. Sloan School of Management
WP# 3156-90-BPS
May,
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
1990
UTILIZING HUMAN RESOURCES FOR STRATEGIC ADVANTAGE:
THE ROLE OF TRAINING
by
Lisa M. Lynch
I.R.I. Associate Professor
of Industrial Relations
M.I.T. Sloan School of Management
WP# 3156-90-BPS
May,
1990
UTILIZING HUMAN RESOURCES FOR STRATEGIC ADVANTAGE:
THE ROLE OF TRAINING
by
Lisa M.
Lynch
I.R.I. Associate Professor
of Industrial Relations
M.I.T. Sloan School of Management
May 1990
Prepared for the BPS conference "Achieving Systemic Organizational Change,
1990.
The author would like to thank Tom Kochan for helpful comments
on a previous draft.
May
As U.S. firms continue
to face increasing international competition,
deregulation, technological innovation, and changes
in
the demographic
composition of the work force, they are being challenged to examine the
formation process of their work force
in
Productivity growth
remain competitive.
order to increase productivity and
the United States
in
1980s has lagged behind productivity growth
Germany, Sweden,
cited for this (see Bailey and Chakrabarti,
but given that labor accounts for
could figure out
way
a
to
the 1970s and
There are many reasons
1988 for a comprehensive survey),
percent of
at least 70
make labor
in
countries such as Japan, West
in
and the United Kingdom.
Italy
skill
10 percent
more
total costs,
efficient ...
"we
if
output per
hour of work would
rise
Such an increase
labor productivity would soon pull investment along ...
in
the transitory increase
1990,
by about
in
7
percent even with no increase
discussed
in
productivity.
other papers
But
a
in
this
book that,
if
in
organizational practice
implemented, would improve
necessary condition for firms to gain competitive
advantage through innovative human resource
well educated,
of the major differences
level
and
2).
p.
is
capital.
productivity growth would be impressive" (Blinder,
There are various options and changes
force
in
utilization
is
highly skilled and broadly trained.
between the U.S. and
and general training of the labor force.
its
that the
Unfortunately, one
competitors
This paper
work
will
is
in
the
skill
summarize
recent research that has begun to examine the reasons behind our apparent
corporate disadvantage
practices
in
skill
in
skill
formation and present some examples of best
formation that illustrate possible methods for addressing this
issue.
Part of the reason
why we
are
In
this productivity crisis
is
due
to
our
By defining jobs narrowly and making each
past successes.
many U.S. firms obtained increased productivity through
through the interchangeability of workers with limited
rather than training workers to become multiskilled.
and, as noted
in
job easy to learn,
specialization and
skills
and experience
As technologies change
other papers, the need for cross functional competencies and
problem solving increases, so too does the demand for multi-skilled workers.
Therefore,
growth
in
not surprising that the countries that are experiencing rapid
is
it
productivity today have typically followed an alternative model
which firms provide both general and firm specific
This creates
new type
a
of flexibility in the
skills to their
work place which
is
in
workers.
more
compatible with rapid technological change, new production techniques such as
"just-in-time" and otherwise altered organizational structures.
training for
Broader
skills
workers reduces the need for supervisors and allows the day-
all
to-day management of the firm to be performed by workers rather than
supervisors.
This reduces the hierarchal structure of
a typical
dramatically.
The provision
however,
policy for U.S.
"lifetime
of general skills training,
firm
is
not an easy
firms to implement because unlike Japanese firms where
employment" leads
investing heavily
in
to low labor turnover,
workers and losing them
As the service sector continues
"knowledge workers"
in
to
U.S. firms run the risk of
to competitors.
grow, there
is
increasing need for
professional and technical occupations.
Traditional
educational institutions have not always been able to deliver programs for
these kinds of workers, especially
technological change.
in
those industries characterized by rapid
Highly skilled technical jobs
in
professional occupations
such as computer, mathematical, and operations research analysts are
forecasted to grow by 52 percent and jobs for technicians and related support
occupations are expected to increase by 32 percent by the year 2000
in
the
U.S.
At the same time the majority of new
(U.S. Department of Labor, 1989).
workers
will
women who,
be minorities with the highest high school dropout rates or
have historically been underrepresented
as a group,
occupations with the largest amounts of on-the-job training.
companies
programs
their
will
in
Therefore,
find themselves required to develop costly internal training
order to remain competitive and to cope with the
new workers
The
those
in
skill
in
A
McKersie paper.
development policy
human resource innovations presented
structured
well
is
needs of
this
paper are
the next decade.
acquisition and formation issues discussed
closely linked to the
skill
a
acquisitions or
skill
necessary precondition for
that seeks to more fully utilize labor.
a
human resource
Thus, the investment
training,
links selection,
the Kochan and
in
human resource strategy
training must be seen as an essential part of an overall
management strategy that
in
in
workers'
human resource
career planning,
compensation, performance appraisal and employment security.
This paper summarizes the findings of
1989b) on the role of the private sector
in
the
in
the U.S. and expands on Lynch (1989c).
summary
of the trends in the
a
more detailed survey (Lynch,
skill
development
workers
of
The paper begins with
demographic composition
of the
It
discusses who needs training, who provides training, who pays for
in
the private sector
in
It
sector training
concludes with
in
a
then
it,
some
the United States and finally, the
structure of training programs provided by the private sector
countries.
brief
workforce and
the implications of these trends on the training policies of firms.
innovative 'trainers'
a
in
other
brief discussion of policy issues for private
the U.S..
WHO ARE THE WORKERS OF THE FUTURE?
Seventy percent
of those projected to
be working
in
the year 2000
in
the U.S. are already
in
the Department of Labor (1989), there
composition of the work force.
force
will
By the year
the labor force.
will
2000, as forecasted by
be several changes
in
the
For example, the age distribution of the work
change quite substantially.
the 'baby bust'
Specifically,
will
continue with young workers aged 16-24 representing only 16 percent of the
labor force
in
the year 2000 versus 19 percent
share of those 35-54
be aging resulting
will
the work force rising from 40 percent
in
However, the relative share
percent by 2000.
will
baby boomers'
At the same time the
1976.
1988 and 24 percent
in
of
in
in
in
the
1988 to 49
workers over the age
of 55
remain constant over this period of time.
Women's labor force participation
representing 47 percent of
percent
in
composed
1988 and 41 percent
2000.
in
in
1976.
of minorities will also increase
percent of the work force
Hispanics
workers
all
will
will
go from
7
in
2000,
continue to rise with women
the year 2000 as compared with 45
The share
by 2000.
up from
11
Blacks
percent
percent of the labor force
Asians and other remaining minorities
of the labor force
will
in
in
will
represent 12
1988 while
1988 to 10 percent
in
increase from 3 to 4 percent
from 1988 to 2000.
All of
these compositional changes are the result of two factors
characteristics of
new entrants
into the
those who leave the work force.
exiting the labor force from
now
year 2000 while the number of new
This represents an dramatic increase
the labor force and
it
of
of white males will be
entrants who are women, Afro-American, Hispanic or Asian
percent.
the
work force and the characteristics
A higher percentage
to the
-
in
will
be almost 70
the diversity of workers
in
poses many challenges with regards to training.
WHO NEEDS TRAINING?
Given these demographic changes and changes
in
product demand and
technology, who needs training?
There are four primary types
These include new entrants
need training.
into the labor force,
of
workers who
permanently
displaced workers, employed workers, and long-term unemployed workers.
New
entrants into the labor force are made up of three sub-groups, each with
varying stocks of
skill
and new
skills
These groups are composed of
needs.
young people entering the work force for the
women)
into the labor force
first time,
who may have worked
educated but have been out of the labor force for
immigrant workers who come with
and proficiency
a
variety of
the past and are well
in
a
re-entrants (e.g.
period of time, and
levels,
skill
work experience
English.
in
The second type, permanently displaced workers, may have been
displaced as
result of technological
a
demand due
or to changes
in
deregulation.
The third type
who need
change
in
their industry or occupation,
to increased technological competition or
of
workers includes those who are employed but
training for promotions, maintenance of already acquired skills, or
new jobs due
redeployment within the firm.
to
with training needs
is
The
the long-term unemployed.
final
Obviously, the range of
company and government training programs that need
four types of workers varies substantially.
category of workers
to be
provided to these
For example, as mentioned earlier,
the occupations which are expected to grow the most over this period of time
are
in
high tech areas which require post-secondary education and/or training.
However, minorities, who
will
represent an increasing percentage of new
entrants, are not well represented
in
these occupations at the moment and
they also have much lower high school and college completion rates than their
white counterparts.
to enable these
Firms
will
need to develop more general training programs
workers to get on track within their organizations.
Companies
in
the U.S. extensively train their workers, but their
training policies have focused primarily on developing formal training
programs both within the firm and off-site for young workers, re-entrants,
those who are being promoted, those needing skills maintenance, and those
who are being redeployed.
Firms also provide extensive informal training to
new workers, but typically with
who
is
receiving
and how much
it
it,
who
costs.
is
little
providing
knowledge
it,
of
work
In
the U.S.
in
is
being done,
it
takes,
Seldom do firms assess the economic returns to
Most of the firm-provided
quite specific to the particular needs of the firm or
More general training
site.
is
and when, how much time
either their formal or informal training programs.
training
how much
is
left to
what workers acquire on their own
the education system before they enter the work place, or to training they
receive from schools (community colleges or night schools), or proprietary
institutions,
school and
In
such as vocational and technical institutions, after they have
begun
to
work.
summary, there are four groups
training needs.
New entrants
of
workers who have very different
typically need more general skills training (such
as quantitative skills) that are relevant for a broad
group
of
employers, while
those already employed need more firm specific skills development.
summarizes the differences
these workers.
left
in
Table
1
the need for general and firm specific skills for
TABLE
Who Needs Trainina
1
limited
resources or access to training providers) and firms are reluctant to
pay for most general training then we run the risk of
market failure
a
in
the
provision of general skills development.
While there have been few representative samples of firms with
regards to their training policies, Bartel (1989), Barron
et.
Bishop (1989) have found using company based data that:
more
likely to
al.
(1987) and
large firms are
provide training than small firms; formal training programs are
just one part of a well developed internal labor market; and large employers
appear to be paying for
a
portion of general training costs
in
the U.S. but
those firms with higher turnover rates lower the amount of general training
provided.
Table 2 presents
skills
a
summary
of the distribution of general
by who pays and who provides training:
TABLE
Who Pavs/Who Provides
1.)
and specific
2
General Skills
Firm Specific Skills
develop
policy which balances the training needs of different types of
a
workers with the constraints faced by those who pay and provide training.
WHO RECEIVES TRAINING?
There has been
relatively little empirical
work on the impact
of
private sector training on the careers of workers compared with the numerous
studies on the impact of government training programs.
The few studies
that
have been done have used data from surveys of individual workers and
company based surveys
(Lillard
of these studies can be succinctly
not a significant difference
any type
of training,
job training than whites,
unemployment;
(4)
summarized as follows:
(1) while there
the probability of males and females receiving
(2)
holding
nonwhites are less likely to receive on-theall
other characteristics constant; (3) the
company provided training drops when there
is
high
not completing high school significantly lowers the
probability of receiving training;
(5)
company provided training
portable from employer to employer for young workers;
(6)
not very
is
being
in
significantly raises the probability of receiving on-the-job training;
managers, professional and technical employees are most
company provided training; and
of
is
males are more likely to receive on-the-job training and
females off-the-job training;
likelihood of receiving
in
The findings
and Tan, 1986 and Lynch, 1989a).
(8)
union
(7)
likely to receive
rapid technological change
employment increases the probability
a
of receiving in-house
in
the industry
company training
programs.
The
rates of return to training on
wages are quite substantial.
For
example. Lynch (1989a) finds that the wages of young workers with training
rose
11
percent per year whereas an additional year of tenure on the job
without any training only raised wages by 4 percent.
Mincer (1989) has
found similar rates for young workers who receive training but finds that
10
older workers
who receive
their wages.
In
training receive only a 3.6 percent increase
summary, although there needs
to
in
be even more information
gathered on the provision and returns to private sector training, we can say
that while the individual returns to this type of training appear to be
substantial, this training
This variance
in
unevenly distributed across individuals and firms.
is
the amount and type of training firms provide, together with
the relatively high turnover rates of American workers, has lead to the
concern that there
INNOVATIONS
IN
'underinvestment'
is
TRAINING
THE
IN
training
in
in
the U.S.
U.S.
This section briefly highlights some specific examples of innovations
training programs
in
in
the U.S., including the successes and difficulties that
The firms described here are not the only
these programs have encountered.
innovative organizations
in
the U.S., but the experiences of these
organizations captures some of the key organizational issues surrounding
private sector training.
In
the previous section four types of workers were identified
need training.
The long term unemployed are
government programs
in
the U.S.
so
I
will
traditionally trained
who
through
focus on private sector training
programs directed towards the other three groups
of workers.
attention will be given to the obstacles that need to be overcome
Special
in
order to
increase the diffusion of these types of firm training policies.
New Entrant Training
.
Designing training programs for new entrants,
especially minority youths
who have
post-secondary school,
particularly challenging.
of Boston,
is
not completed high school or gone on to
however, has offered training
in
basic business skills to 10 to 15
new inner-city employees every year since 1973
Center (see Hargroves, 1989 for
a
The Federal Reserve Board
in
their Skills Development
complete description).
11
The participants
in
program were primarily minority, female and young and the program trains
this
The
these individuals for entry-level clerical positions within the Bank.
participant were first involved
new
in
an academic program to learn basic skills and
At the same time they are given temporary work
clerical skills.
assignments so that they could begin to acquire valuable work experience.
Once basic
skills
were acquired the trainees tried
a
specific job and
if
the job
match was successful they were transferred to this job, otherwise they
The average cost
returned to the Skills Center.
The Bank concluded
$7000.
that while the savings of such a program were not
large the program did ensure
One
tight labor market.
a
sufficient supply of clerical
of the difficulties the
quantifying the costs and benefits of such
"savings" of such
a
program.
a
program was
calculation of the immediate costs
is
Training for the currentiv employed.
very sophisticated approach to
organization.
skills
very
a
is
all
of the
as difficult
and development.
the short run while the
This problem
relatively straightforward.
of evaluation serves to limit greater diffusion of
a
in
in
in
to identify
Quantifying the returns to training
long term gains are often elusive to quantify
years
workers
Bank had, however,
as attempting to quantify the long term benefits of research
The
per worker was
of training
programs such as
this.
IBM has developed over the
development within
its
This "Systems Approach to Education" tries to divide the
training process into a series of manageable steps and facilitate careful
decision making and budget planning at each stage to maintain cost control of
training.
IBM has developed detailed curricula for every major job category
and the company uses classrooms, interactive videodiscs,
self
self
study, supervised
study, computer-based training, tutored video and satellite classrooms (see
Casner-Lotto, 1988 for additional information) for
of the
key features of this program
is
its
12
its
training programs.
flexibility to
One
adopt to the different
needs of the employees and the company.
Displaced and Redeployed Worker Training
Approach"
a
is
While the IBM "Systems
.
useful model for skills development associated with natural
promotion within an organization, other innovations
in
training have occurred
in
organizations that find themselves redeploying workers due to changes
Three examples
product demand or technology.
initiatives include the
deal with overstaffing
discussion of this).
in
in
1985 introduced
the company (see Kochan
The process was divided
of "available" employees;
program
types of training
experience of the computer, telephone and auto
For example. Digital
industries.
of these
in
et.
"Transition Process" to
al.,
1988 for a complete
into three stages:
1.)
selection
counselling and training; 3.) exit from the
2.)
to another job at
its
DEC
DEC found
or outside the company.
employees were unwilling to take the risk of training for
a
that
many
new occupation
since they were convinced that the downturn would be short and that they
would be recalled to their old jobs.
offered training chose this option.
therefore,
is
An important
15 percent of those
lesson from this case,
that most employees do not respond well to training opportunities
that are presented to them
commitment to
Thus only about
skills
in
upgrade
a crisis
situation.
It
takes an ongoing
to create a successful training
and development
program.
However, the company found that the Transition Process had
preserved
its
resulted
in
reputation as a firm committed to employment security and this
higher morale and loyalty during
a difficult
period.
Both the auto and telephone industries have reached innovative joint
company-union agreements with regards to the
role of training in the
organizational changes both of these industries are undergoing.
For example,
BellSouth and the Communication Workers of America agreed to a Career
Continuation Program which took workers who were about to be
13
laid off
and
enrolled them into this program with pay and benefits.
program reimbursed up
to $2500 for items
courses both within and outside BellSouth.
In
addition, the
such as tuition and books for
The program was an attempt
to
maintain a commitment to the employees to preserve jobs but at the same time
implement
changes
in
massive reorganization of the company due to deregulation and
a
technology (see Lynch and Osterman, 1989 for additional
information).
One
of the
advantages of this program was that there was
cap on how many weeks an employees could participate.
predetermined period they had not transited into
severance was reduced by the number of days
a
If
new job
at the
end of
a
their final
The hope was
the program.
in
a
that the employees would feel that they were making a financial investment
in
the program as well as the company and that this would increase the
effectiveness of the program.
The auto industry since 1982 has
also had joint training
the skills development of active and displaced workers.
For example, the
UAW-Ford agreement established an employee development and
program that differed from the
training
well established internal training
the company such as apprenticeships.
programs for
programs
in
Instead, this program provided tuition
assistance for new job training outside Ford, assisted active employees with
advice and programs for their future both within and outside Ford, and
training and counseling
in
high school completion.
program was that the company agreed
in
in
The auto industry has been
the U.S. for the provision of general skills training but
not clear that this
industries or
of this
to finance general skills training to
employees who might eventually leave the firm.
path breaker
One unique feature
is
a practice that
should or
smaller firms.
INTERNATIONAL COMPARISONS
14
will
be emulated
in
other
it
a
is
There are some distinct differences
training institutions
in
one of the primary forces behind
1989 and Prais and Wagner,
The West German system
skills
For example, the West German
the United States.
system of vocational training schemes, or
importantly,
the training policies and
countries such as West Germany, Sweden, Great Britain
in
and Japan from those
in
dual system',
its
high productivity growth (see Disney,
its
1983 for reviews of the West
trains individuals
in
Training
over their career.
in
German system).
but perhaps more
specific skills,
teaches young workers that they
it
often cited as
is
will
have to learn many new
West Germany, however,
restricted to the apprenticeship scheme for school leavers.
is
not just
There are many
other types of training programs which the government has created to assist
adult workers
in
wage subsidies
government for
all
where the training
addition, the
a
In
voucher system for training, and
institute
The
of the costs of training.
subsistence allowance which
through
a
to firms providing on-the-job training.
certified training course
in
These include
retraining.
is
earnings-related
is
Adults may enter
reimbursed by the
individual
in
a
may
the form of
a
also receive a
grant of loan,
government supports individual firms providing training
wage subsidy which
Sweden, training
is
is
paid to the firm.
just one
policy to promote full employment.
component
of a
very broad economic
Since the early 1980s there has been an
expansion of resources devoted to providing in-house training programs to
prevent job losses (see Standing, 1988 for
training).
In addition,
training for men or
a
review of the Swedish model of
there have been subsidies given to firms who provide
women
in
occupations that are over- represented by one
sex or the other (Sweden has greater occupational segregation than the U.S.
even though the female/male wage differential
is
around 90 percent).
the most innovative and controversial policy was the passage
15
in
Perhaps
1984 of
legislation creating
"Renewal Funds" whereby large establishments must put ten
percent of their net profits into
a
fund for research and training.
Rather
than raising taxes and using the revenue to provide government training
programs, the government has instead required firms to set aside
designated explicitly for training.
encourage firms
The approach, therefore,
regard investments
to
regard investments
in
in
training the same
a
minimum
Sweden
in
to
is
way that they
research and development.
The current government
in
Great Britain has recently proposed
dramatic reforms to promote employment growth into the 1990s (U.K.
Department of Employment, 1988) that focus on the importance
sector training.
year 2000
in
workers have
of private
Noting that seven out of ten of the employed workers
Great Britain are already employed and that most of these
left
school at the minimum age of 16 and have not acquired any
qualifications since then, the
government has established Training and
Enterprise Councils (TECs).
These councils
programs
at the local level.
their local labor market,
manage training programs
will
expanded job growth and the
identify prospects of
for
plan and deliver training
Specifically, they will assess the skill needs of
availability of appropriate training
programs
the
in
local area.
They
will
then
young people, the unemployed, and employed
adults requiring new knowledge and technical retraining.
additional support for small firms.
will
the
in
There
At least two-thirds of the
be top management employers and the remaining members
will
also be
TEC members
will
be senior
figures from local education, training and economic development agencies, and
trade unions who support the aims of the council.
mandatory
role for
There
any group other than the employers.
from the German system where there
is
a
mandatory
than employers, especially the trade unions.
16
is,
This differs then
role for
In fact,
however, no
groups other
the British government
states that
where
it
hopes to "place 'ownership' of the training and enterprise system
belongs
it
-
with the employer" (U.K.
Department
of
Employment, 1988
pp. 40).
The
basic educational system
very general
level of
skills to its
Therefore, more firm-specific
that instruction
is
in
Japan focuses on providing
a
high
graduates (Sako and Dore, 1988).
skills
must be taught
at the firm level.
Most of
done by the supervisor who has the responsibility of
teaching and motivating subordinates.
Some firms even measure
group's
a
performance by what percentage of the workers can do multiple tasks.
Interestingly, most off-the-job training
As
correspondence courses.
component
in
Germany,
in
Japan takes place through
skills testing
There are testing centers
of training.
is
an important
every prefect
in
in
Japan.
Under Japans' Vocational Training Law, prefect governors can authorize
training programs developed by employers,
Local
and national governments are also required under
financial assistance to employers
These take the form
training.
in-house
financial assistance to
of traineeship loans,
incentive grants for paid educational
is
As
Japan, to try to pool their resources than
in
U.S. firms face
way
in
a
in
done by large firms, but smaller firms are more
POLICY ISSUES FOR PRIVATE SECTOR TRAINING
the
in
and professional advisory and institutional services (Inoue, 1985).
the U.S., most training
likely,
this law to provide
and employees participating
firms with less than 300 employees,
leave,
unions, and employer associations.
in
the U.S..
THE U.S.
IN
variety of issues and challenges as they reexamine
which they train and retrain their workers.
The
mass production which generated narrow job definitions, low
reliance on informal training of firm specific skills
is
old model of
skill
levels,
and
not an effective
structure for newer production techniques which require multiskilled workers
17
a
such as those described
addition,
the MacDuffie and Krafcik paper
in
as the service sector continues to
"knowledge workers"
grow there
in
this volume.
increasing need for
is
professional and technical occupations.
in
If
entrants into the labor force or older workers with limited general
not have the qualifications for these
new technical
In
new
do
skills
jobs, firms will have to
decide whether to train these workers or to hire qualified workers outside the
firm
(if
This
they are available).
a
is
Japanese firms where "lifetime employment" leads
firms run the risk of investing heavily
in
to low labor turnover,
that can supply the necessary skills (although even
"skills-gap"
is
mismatching").
"skills
is
not addressed,
in
will
to
to those countries
Europe one of the major
Whatever decision
U.S. firms
U.S.
workers and then losing them
Another option would be to move production
competitors.
policy Issues
because unlike
difficult decision
is
made,
if
the
continue to have low productivity
growth.
Given the variety of workers who have training needs and the range of
types of training that they need (from firm specific to general training) as
shown
in
Tables
1
and
that will be effective
"menu"
until
of options for
2,
in
it
is
not possible to identify one training strategy
improving competitiveness.
Rather, there exists
employees and employers to choose from.
now, U.S. firms, especially those
in
a
For example,
manufacturing, have relied on an
informal system of training workers with workers learning "on-the-job".
However, workers who want
to enter into the
growing technical and
professional occupations are not going to be successfully trained
informal system.
There are few training centers prepared
technical and professional workers.
firms,
have chosen to invest
in
these companies have difficulty
this
to train these
new
Therefore, many firms, especially larger
the training of workers in-house.
in
in
But often
justifying or evaluating the various training
18
programs they offer.
A large part
of this
is
due
to the difficulty in
the costs and benefits of various training programs.
For example, do the costs
of training include just the direct costs of providing teachers,
tuition to run a course,
measuring
materials,
and
or do they also include indirect costs such as lower
productivity and wages paid during training?
How does
a
company measure the
costs of informal training?
For those who choose to train in-house many develop their programs
with the assistance of outside training vendors.
Typically, the vendors are
asked to evaluate the effectiveness of their training course.
Apart from the
moral hazard problem associated with having the vendor evaluate the course,
the evaluation criteria often focus on how "happy" the participants were with
the course rather than on actual measures of post training performance.
While
it
is
important to evaluate the effectiveness of training programs, many
firms are reluctant to do this because they are concerned that a formal
cost/benefit analysis
will
not measure the longer term benefits of training.
However, firms make these sorts of evaluations for investments
development
all
the time, so perhaps
it
in
research and
would be appropriate for firms to
evaluate training investments the same way they consider evaluating investment
decisions
in
R & D.
While in-house training programs may be effective for currently
employed workers, the training issues associated with new entrants are closely
linked to the quantity and quality of the educational system that these
workers come from.
community and
local
Therefore the establishment of links between the business
schools
may
result in
firms would be more able to invest
ability to learn
young
would be higher.
in
upgraded schools and consequently
incremental skills training because the
One example
Boston Compact which was an agreement signed
19
of such a
in
program
is
the
1982 between business
public educators and local government officials to improve the quality
leaders,
of education
in
order to enhance the
levels of Boston high school
skill
This program has been so successful that
graduates entering the workplace.
the National Alliance of Business has replicated the Compact
in
ten
metropolitan areas across the country.
In-house training programs and business/school links
sufficient to address
all
The encouragement
training needs.
will
not be
and
of regional
industry consortia to clearly identify training and workforce needs and
communicate these
to local
community colleges and vocational educational
schools or proprietary institutions could greatly assist the skills development of
displaced workers and those currently employed.
In
particular, smaller
companies have limited resources to provide training, but at the same time
often have the greatest training needs for multiskilled workers.
employment growth
continue to be
In
in
the U.S.
in
Most of the
the 1980s and 1990s has been and
small businesses.
By pooling
programs that provide the training for common
can greatly improve their productivity at
a
will
their resources to set up
skills
needs these smaller firms
modest cost.
have had much more experience than U.S. employers
in
Employers
working
in
Europe
in
confederations to develop these kinds of programs.
Another option that has been proposed
in
the U.S. to assist firms
wish to train their workers but who do not have the resources to do this
to give various tax breaks or subsidies to firms
who
train.
who
is
While this may
address the problem of how to encourage firms to provide more general
training
when labor
of policy.
mobility
is
high, there are some limitations with this type
For example, should firms who receive subsidies be monitored to
make sure that they are using the money
would not have otherwise provided?
for training or for training they
Are subsidies alone sufficient
20
to help
Would expansionary macroeconomic policies be more effective
smaller firms?
in
raising the skill levels of workers?
Much
training
-
of the recent policy discussion has focused on "privatizing"
to shift the
i.e.
burden
of training
and development
to private
While there are advantages of this strategy such as
sector employers.
increased relevance of training programs, there are possible dangers to
As discussed
training policy the relies exclusively on the private sector.
earlier in this paper,
firms have an incentive to provide very firm specific
training but are more reluctant to make massive investments
One option
development.
encourage
a
to
joint participation
encourage more
--
of this
is
the consultation of workers
is
a
supplement
to
general skills
for public policy to
adminstration of any training subsidies granted to firms.
insure that subsidized training
in
in
the design and
This would help
and not
a
replacement for
Perhaps some demonstration projects
the firm's specific training expenditures.
should be encouraged along these lines.
Employers, schools and government are not the only players who could
participate
in
Labor unions should also consider
the provision of training.
becoming more vocal advocates
in
labor uses to represent current
it
is
members and
important to note that
implement what appears to be best practice
how training
fits
within
other words, no firm
training unless
it
expanded
joint
This could be an important component of the activities
training programs.
Finally,
collective bargaining for
is
a
it
in
new members.
to recruit
would be
a
mistake to simply
training without understanding
broader human resource management strategy.
likely to
have
a
successful investment program
has a corresponding commitment to
In
in
human resource and
competitive strategies that require multiskilled, committed and motivated
workers.
Moreover, no firm
will
achieve the
21
full
returns to an aggressive
human resource development
policy unless
it
has a concurrent strategy to:
Destablish employment security provisions and 2) to fully
utilize
the skills by
providing opportunities for workers to solve problems, influence their work
environment, and share
the benefits of improved productivity and corporate
in
performance.
Regardless of the specific training policies selected, there appears to be
a
need
at the state
by firms,
efforts
and/or national
state
local,
other training institutions
in
level for
greater coordination of training
and federal governments, unions, schools and
the United States.
Our major economic
competitors have developed comprehensive plans to train and develop their
workers so that they
will
be able to respond to the demands associated with
new technologies and increasing international competition.
towards greater coordination
in
1992
has been proposed
it
Communities Commission documents that
Dimension' of 1992
this
will
a
in
various European
major part of the 'Social
be to expand training programs.
that "the process of introducing
is
As Europe moves
The reason behind
new technologies would be
economically more viable and socially more acceptable
if
accompanied by
effective training and greater motivation for both workers and managerial
staff"
same
(see Venturini,
in
the area of
1988,
skill
The U.S.
pp. 95).
formation
if
it
will
be challenged to do the
hopes to remain competitive.
22
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24
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Date Due
03
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18
NOV.
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