Costs Associated With Unstructured, Haphazard Worker Training – Part 2 of 2

Dean Prigelmeier, President of Proactive Technologies, Inc.

Last month’s issue of Proactive Technologies Report’s Part 1 of “Costs Associated With Unstructured, Haphazard Worker Training,” offered a number of examples of unstructured, haphazard and ineffective worker training that I experienced in my early years in manufacturing. We all have had similar experiences throughout our lives to draw on, I am sure. It is still perplexing that – in view of all of the advanced systems, process controls and metrics that keep an enterprise operating competitively – management would assume that such a “hands-off” approach to developing the critical worker component wouldn’t detract from the other metrics. Why would management expect anything more than skeptical results?

“New equipment that leads to decreased output, more workers added but productivity and capacity falling, or more workers producing product but too much of it going into the scrap or rework bin. All of these counter-intuitive outcomes – signs of inadequate or non-existent task-based training – will eventually grab upper management’s attention!”

It is a given that new technology and equipment are dependent on someone learning to either program, service and/or operate them correctly. The incumbent workers, in the job classification before the transition, are the obvious choices for learning. Conceptually, they were doing the work prior to automation with previous version technology and understand the theory and current best practice of the work to be done. These worker’s attained skills will now be tested against the new skill requirements. Unfortunately, training of current workers for even obvious new technology requirements such as setup, operate and changeover of the equipment, is often overlooked or its significance downplayed. Consequently, often the economic benefits that advances in technology are to provide are marginally, or never, realized despite the costly investment.

Until the processes associated with the new equipment and technology are stabilized for maximum efficiency, learning of the processes – from the each worker’s perspective – is seen as fluid and ambiguous. Even if a noble effort is attempted to indoctrinate the worker in the use of the equipment, the erosion of the worker’s skill base compared to the evolving standard practices and technology is ongoing. Multiply one worker’s learning experience times the number of workers needed to operate the equipment  – learning the same tasks in different ways on different shifts from different trainers – the direct costs of training, as well as the opportunity costs of under-utilized “worker capacity,” can be enormous. Calculate this cost for every job classification for which task training is needed and the costs can be “attention-getting.”

A production or department manager that can relate in some way to the experiences shared in Part 1 probably took a moment to reflect on similar problems they encountered. Sadly, once training is considered “completed” and the equipment and/or processes are operational, the most common measure of how effective the training was will be determined by the level of predicted capacity and output/yield realized. It would not be a career builder to put all of one’s faith on any outcome if the inputs are so variable and uncontrolled, but that is what many do thinking there are no alternatives.

If one establishes better control of the training inputs, the odds will be better for a successful implementation outcome. New equipment that leads to decreased output, more workers added but productivity and capacity falling, or more workers producing product but most of it going into the scrap or rework bin. All of these counter-intuitive outcomes – signs of inadequate or non-existent task-based training – will eventually grab upper management’s attention!

We can quantify, fairly well, the cost curve illustrated in the graph if we know the trainee’s loaded wage rate, the trainer’s loaded wage rate, and the length of time it takes to either bring the trainee up to noticeable capacity and self-sufficiency or a decision is made to “wash out” that person and start again. The opportunity costs associated with unstructured, haphazard or non-existent training are a little harder to calculate. But it centers around the cumulative value (to the organization).of all of the things that could have been done, or goods/services produced, if training was effective and completed and the restrained capacity released. The hard costs of training or lack thereof, combined with the cumulative opportunity costs, illustrates pretty well the importance of structuring the on-the-job training. Put another way, for an unstructured experience:

Trainee_{LoadedWageRate} + Trainer_{LoadedWageRate} X Time_{ReachFullWorkerCapacity} = Indirect Cost of Training

Indirect Cost of Training + Opportunity Costs_{Inadequate or non-existent Training} = Total Cost of Training

With Trainee_LWR and Trainer_LWR relatively set, and “full worker capacity” defined as “ a worker being able to perform to mastery all the required tasks for which an employee was hired.”

Time has a big influence on the total cost of training. The longer it takes, the more it costs. Add to that the opportunity costs of low-capacity employees’ output and it could damper business growth, lead to an underutilization of technology, a high “worker investment” with a low return, and add unnecessarily to what is considered traditional labor costs. In most organizations, training is lumped together by accounting as an “indirect cost” which includes time in a classroom, time in front of an online session, and on-the-job training – structured and unstructured.

This term “indirect cost,”  as associated with generic training, needs to be separated out into “classroom/online” training which is clearly indirect and in accounting terms a “liability” and, if structured, “on-the-job training” which is taught on actual product or equipment, or a service taught in a supervised setting, and should be considered an investment; an “asset.” The former is a true indirect cost since the impact on performance has not been demonstrated and may never be witnessed. The latter should be equated to a direct “capital investment” since it is an investment in the worker performance of the tasks needed to support the enterprise. Therefore, an “investment in human capital” is just like one would make as an investment in capital equipment.

Now that the concept of worker training has been analyzed for sources of costs, the question is, “what truly takes less time and keeps cost down, throwing two people together and hoping for the best or a thoughtful, structured and deliberate task-based on-the-job training program for the “accelerated transfer of expertise^TM?”  

By the way, the downward dip at the end of the learning curve in the graph can be explained. Even when an employee is trained to full or near full mastery of all tasks, forces are continually working to redefine the required skills and expertise. Newer technology, process changes, LEAN improvement changes, changes in compliance criteria for quality and safety, job expansion and contraction…all chip away at the relevancy of incumbent worker skills to the evolving job requirements. If nothing is done on a regular basis to recognize and remediate this, workers can become obsolete for the jobs for which they have been currently performing as “experts.” Not only does the employee lose when skills go stale, the employer also loses on its worker investment and any benefits that should have been attainable, such as high quality and safe worker output.

Skill level maintenance can be equated to the preventative maintenance performed regularly on equipment to extend the equipment’s life and return on investment. Skill level maintenance through periodic task requalification/recertification and additional retaining, if necessary, should be seen as the most efficient and effective way to maintain a high level of each worker’s “return on worker investment.”

If employers reexamine how they calculate and measure labor costs (indirect training costs versus direct training investment) and are aware of the opportunity costs of ineffective or non-existent training, discussing how to become more competitive would most assuredly include how to improve their worker training strategy. Directing resources to a training investment for which tangible returns can be expected and measured, and opportunity costs minimized, can contribute a lot to the business model and provide a robust alternative to outsourcing for primarily the reduction of labor costs. The problems expressed above occur outside the country in low-wage labor markets, as well…often to a larger degree as even more barriers to task-based training exist.