Apprenticeships That Make Money? Not as Impossible as it Seems (part 2 of 2) – Setting Up an Apprenticeship Center

by Dean Prigelmeier, President of Proactive Technologies, Inc.

In the first part of a two-part article entitled “Apprenticeships That Make Money? Not as Impossible as it Seems (part 1 of 2)” appearing in the Proactive Technologies Report, I discussed what seemed to be the obvious differences in European and U.S. apprenticeship models. I suggested that visionary U.S. business leaders consider creating a revenue-generating “apprenticeship center” within the organization to cover the costs of the apprenticeship and, in some cases, make money. How could that be accomplished? In continuing the discussion I would like to offer a possible strategy.

American manufacturers turned to lower wage labor sources, such as Mexico, China and India, during the last 30 years to lower their production costs in the hope that they would be more profitable. It is now understood that with lower wage costs comes additional supply chain costs which can, if uncontrollable, erase some or all of the gains a lower wage level might offer.

But what if some of the services or operations to manufacture products or sub-assemblies that were, or are to be, off-shored could be done internally – at the labor cost of “training wages” as done in Europe – using equipment that would otherwise have to be idled, sold or shipped? What if those training wages could be furthered reduced by state grants? Could employers find that the source of lower wages is in their own back yard?

Although the following approach for determining if an apprenticeship center/cost-reduction center is right for your organization is simple, it should be scalable to any organization with slight modifications:

Step 1: Review Product/Service Line and Flow: First, list the products and/or services that the organization offers in order to gain a perspective of the scope of opportunities. Rank the top 10, 20 or 30 items on the list based on logistical complexity (number of stages in the supply chain that are currently being performed outside the facility and those stages that are performed inside but the organization is considering for outsourcing); Review those flagged items for training progression opportunity (stages that are a logical prerequisite for learning more complex stages that are to remain and be performed internally) and labor unit cost  (historical labor costs of each stage, whether performed internally or externally).

Step 2: Job/Task Analyze The Job Classifications At Each Step of the Product Flow: Identify the job classifications associated with the flagged stages in Step 1. Perform a job/task analysis on those job classifications (“job analysis” to list the tasks that make up the job classification, “task analysis” to identify the best practice procedural steps of each task as well as prerequisite core knowledge, skills and abilities and other pertinent requirements).

Step 3: Rank Each Task for Each Job Classification: Rank each task of each analyzed job classification based on “level of learning difficulty” (how hard was it for the average worker to learn the task), “frequency of performance,” (how often it is performed) and “consequences of malperformance” (what is the worst outcome if not performed correctly). Take the average of these three factors as the “task ranking.”

Step 4: Select the Tasks That Are More Suitable for Trainees Based on Ranking: Review the task ranking from Step 3 with the stage cost to perform (outsourced or in-house) in Step 1 to determine which tasks may be good candidates for the structured on-the-job training component of an internal apprenticeship program. Envision value/cost savings-rich opportunities if the tasks are: A. performed in a controlled, in-house setting as part of an apprenticeship program; B. performed with an “apprenticeship wage” that progresses as the apprentice masters these tasks on the way toward more complex tasks required of the job classification. The collected knowledge, skills and abilities data in Step 2  – required by the trainee in order to learn the task – can be used to select relevant related technical instruction content and to more accurately select sources of delivery, whether online, in-house, private training provider or local training institution.

Step 5: Determine a Strategy for Segregating Those Tasks and Equipment Into an Apprenticeship Program:  If you made it this far, you probably are well aware of the opportunity to the organization this presents to cut the internal costs of training by focusing some of the lower ranked tasks of each job classification into a training lab. Now you must lay out a strategy for “rearranging the furniture” to accommodate an apprenticeship program internally, and whether there are truly significant economic reasons for doing so. This idea will have to be sold to upper management, so having your ducks in a row is a must. Calculate your investment to set up the center and the ROI (return on investment) over a 3, 5 and 10 year period to make your point. You might even explore state grants or tax incentives for establishing and implementing apprenticeships which could offset your start-up investment or lower your implementation costs. Many states currently have goals for creating new apprenticeships and are providing monetary support to employers.

We know that the internal “apprenticeship center” concept works. In part 1 of this article I gave an overview of the European approach, and some of the temptations to resist. It is worth consideration given the rising costs and risks of extended supply chains. Some notable advantages are:

1. Paying a worker a “training wage” that progresses to the normal wage after the worker masters more of the required tasks of the job is based on value derived;
   1. It is fair to the employee by providing a fair wage and concentrated training opportunities;
   2. It is fair to the employer by allowing them to pay for only the value that they can derive from each worker as they progress;
2. Bringing processes inside provides better control of process output and quality;
3. Bringing processes inside shortens lead-times for prototyping, product introduction or innovation;
4. Risks of supply chain disruption due to weather, political and/or social unrest and war are reduced or eliminated.
5. Having a well-run internal training center can lower product/service labor costs while lowering the organization’s overall internal training costs;
6. Ensuring a worker’s mastery of tasks as they lead to more complex tasks, once an apprentice gains fulltime status, surely will help to increase output quality and reduce scrap/rework;
7. Keeping the intellectual property and trade secrets internal can extend product/service life-cycles and ongoing competitiveness.

Once the apprenticeship center is operational and becomes just another department of the operation, you might explore making it a supplier to other smaller operations in the area. Bringing in revenue in addition to the cost savings can make the center sustainable. Maximize the center to your business model, but avoid allowing your accounting department to focus on it as a profit center alone.

UPDATE: Starting in around 2016, Läpple Automotive began undergoing changes with the death of its last family leader and installation of a new management team. Having the foresight and concern to protect the apprenticeship center he helped develop and manage, Gunther Hauser worked to secure the necessary permits from the government to continue the center’s operation as an independent center. The Heilbronn Germany apprenticeship center continues to operate with the original instructors and with a high level of enrollment, serving employers throughout the region.

For more information on how these models can be created, click here.