Looking to Cut Costs in All the Wrong Places

By Dean Prigelmeier, President of Proactive Technologies, Inc.

When employers are pressured to desperately seek costs to lower, most tend to overlook the most obvious that stares them in the face every day: the cost of underdeveloped or undeveloped and, therefore, under-utilized worker capacity. In any other case, management would intervene when a major asset requiring an ongoing investment isn’t able to maximize a return simply because the effort to deploy the asset is incomplete. Instead, they select for cutting the one area that has become the norm: labor itself. They mistakenly make the sweeping mistake of cutting labor to make the short-term numbers look better, choosing to push the underlying issue down the road to a time with the same challenge and greater pressures. What is that old adage of “cutting off one’s nose to spite one’s face?”

In meetings with employers to discuss with them an approach that will quickly develop each worker to “full job mastery” no matter if new-hire, incumbent, a reassignment or just part of cross-training, the reaction is mixed. Many simply have no idea to what degree their longest-term incumbent workers have fully mastered all of the tasks that are assigned to their job classification. Is it 35%? 50%? Surely not 100% since there are no records to prove it. Even if they once had an idea, how many times has the job been changed by new products, new technologies, LEAN process improvements and job redesigns? Remember, these workers become the default trainers of other workers needed.

In most cases, management has been conditioned to believe they have worker development covered, since products do get out the door and services do get delivered. If numbers fall short, it is the worker attitudes not the development process that is criticized. They truly believe that from the moment a worker comes through the door there is a deliberate effort to transfer the complete set of expertise to the new-hire, or incumbent or cross-trainee for that matter. Employers inherently know how important it is to prioritize consistency and quality of products and services as important to maintaining brand image and consumer loyalty. Why the connection between deliberate worker training, organizational development and organizational excellence doesn’t register may have more to do with the effect irrational cost constraints and being measured to short-term metrics has made them prone to ignore their inner leadership voice. In many ways, American employers have institutionalized an unconscious ambivalence toward achieving full return on their worker investment that would completely and consistently develop each worker as a critical part of their business strategy. This strays greatly from sound management practices that built the biggest and best companies – before the rules changed on how success is measured.

It is easy to see why this occurs, given all the distractions management encounters merely in the course of keeping the ship sailing. I truly believe first and second-level managers want to do everything they can to ensure every dollar spent on labor has been maximized for return on investment given the tight, and often unreasonable, constraints put on them by the C-Suite. If prohibited from doing the right thing, it is easier to go with the consensus that someone else is taking care of it. When the numbers reported seem to pass the test, there is no problem. If not, let others shoulder the blame rather than address the challenge head on. Besides, surely educational institutions are developing the best candidates who can hit the ground running. That common belief lets the employer focus on the “more pertinent issues’ of running the business.

This rationalization unravels when the market softens, earnings per share declines and the C-Suite resorts to telling shareholders that cuts are being made to staffing levels to compensate. Watch any business show you will inevitably hear, “Good news for XYZ Company shareholders. They have announced they are laying off 500 workers.” The share price immediately stabilizes or increases. There seems to be no concern of the long-term, lingering effects and collateral damage of such a move, since investors these days focus on the quarterly results. The Interntional Organization of Standardization (ISO) recognized this threat to an organization by requiring “knowledge capture” to ensure companies had the institutional memory and consistent capability to maintain compliance with certification when radical actions were taken that could undermine quality assurance and control programs.

Ironically. employers continue to express their frustration in the quality of the workers they are sent, but seldom reflect on how they reach this conclusion or how the employer has the data to even make such a call. What they may be expressing, instead, is the fact that the firm no longer has a plan or infrastructure to train the entry-level workers that apply; that they only want workers that need no internal training.  Employers convince each other that they are each doing a good job developing a worker to their needs when a candidate with a general skill base is hired since they are in the same situation.

If employers are deferring, entirely, to educational institutions to build “complete and ready” workers for their use, several factors make it difficult, if not impossible, to comply in a meaningful way no matter how hard they try.

First, the nature of the work itself is in a constant state of flux. Technology advances impact the general skills required of workers to perform tasks necessary as they previously did without deliberate intervention. Lean efforts often move work around in order to create a more efficient flow without realizing it will not be more efficient until the folks being assigned the new tasks have the core and general skills necessary upon which to receive employer-based, task-based training to master the tasks and a deliberate effort is made to train them. Products, specifications and standards change as necessary to innovate new products and improve on existing ones, requiring continuous training to ensure everyone can incorporate them. Without an accurate and complete definition of the training outcome, what does an employer have to share with local educational institutions to ensure they can deliver the closest fitting candidates even if an employer was inclined to share? That 30-year-old job description in the file that was photo-copied from a book of template job descriptions?

Second, the financial economy has evolved to place businesses under stress to provide better short-term accounting numbers regardless of the resultant long-term costs and harm. Especially in the last three decades, employers have been under enormous pressure to make knee-jerk changes to their business strategy when acquired by investors with a strategy not necessarily centered on continued growth of the existing model nor expanding on previous successes. They are more focused on showcasing tangible capital investments and recognizable value calculations that may attract other investment firms to acquire them or their stock. In this type of world, workers are seen only as a cost and any effort to develop a worker and maximize each worker’s potential is seen as a cost to be eliminated.

Third, exacerbated by the conditions described in one and two, those organizations that could help develop the skills of entry-level workers are forced to continually chase a moving, not necessarily predictable, target. Programs designed to develop the core and industry-specific general skills of future workers that take years are often cranking out a labor force irrelevant to employers in the region when the companies move to lower-wage locations with the same, or greater, training issues. Often the hype behind a new company pledging to produce hundreds of well-paying jobs requiring technical skills results in the company moving the entire operation abroad before workers preparing themselves get a chance to finish their program. This frustrates the trainee, the educational institution who made the investment to modernize their equipment and practices, local workforce development agencies who see their efforts go to waste, and economic development agencies who promoted the company and its plans to the public to justify investing taxpayer money in its success.

America has the potential workers it needs to provide the labor for any enterprise that comes along. But not without the employers’ conscious and deliberate contribution to the effort, taking a more serious stake in the outcome that it continually expresses disappointment in without committing to making the process better.

Employers need to change this. They need to re-examine the path of a worker from hiring to full utilization as if they were analyzing a process that produces a product or a machine designed for the process. If an employer expects to hire one worker to perform all the needed tasks that are matched by a comparable wage rate, it needs to first understand what all of those tasks are and the value of those tasks to the company’s operation. Next, a serious analysis needs to be done on how each worker will receive the pertinent training they need in order to reach the employer’s expectation. Not marginally, but completely. That is why the employee was hired (that is the expectation whether described deliberately and completely or not) and for which the employer holds for that worker and those involved in workforce development accountable. Anything less can lead to lower capacity, decreased quantity and quality of work, potential lapses in compliance with engineering, quality, and safety requirements, greater employer opportunity costs leading to reactionary management.

Multiply this condition by the number of workers, whether hired previously or newly hired, and the opportunity cost of neglecting this process can be staggering, leading the employer to voice their frustration and to, often, irreparable harm by knee-jerk reactions to unfavorable and unavoidable outcomes. Finally, surveys of workers show that a primary reason they leave is that they see no path for career growth and that the employer makes no effort to fully develop and utilize their skills.

Decade after decade after decade, we have read reports on how employers are struggling to find skilled workers. In their frustration, employers do things that exacerbate their own challenges, such as cutting training, cutting wages, cutting benefits, exhibiting more authoritarian management styles, and yet the symptoms remain.

Why is it so hard for an employer to be self-critical of a process that is incredibly important to the overall operation and is noticeably insufficient? Why is asking the question seen as taboo – furthering the institutionalization of this ambivalence and the responsibility for improving? The process internally has been often divided up among departments, which are not designed to communicate effectively with each other, and which see themselves as not responsible for training. Engineers write process documents often at a level that that are neither readable or repeatable by the average worker due to deficient entry-level reading and comprehension levels. The human resources department is seldom informed to the level of reading requirement needed when interviewing new hires for employment.

Quality control creates quality documents to support the effective, standardized performance to the engineering work instruction, again, sometimes not considering the readability and repeatability of the document itself. If a company has an environmental, health, and safety department or program, often documents meant to help a worker more safely perform the work their being instructed to perform in the previously mentioned two documents appears in a third document and the correlation is missed – especially by new hires, who are trying to assimilate this disjointed information to learn how to perform and work to a level the employer will view as worthy of continued employment.

Often the most prevalent form of worker development is the informal, haphazard, and confusing one-on-one experience of “Bob, this is Jim. Why don’t you show them around.” We know this is partially effective because eventually products get produced and services get provided. But what records are kept? Does Bob know the standard way of performing the task or does Bob have his own way of doing it through shortcuts discovered over the years? We know Bob is the closest thing available to an expert in the performance of the task and that’s why they were selected to train new-hires, but is Bob a good trainer? If so, is Bob allowed to be a good trainer? Bob is under pressure to maintain levels of output while trying to bring a new-hire up to speed. The new-hire is trying to assimilate everything they see and hear from multiple sources into a coherent process as quickly as they can – often afraid to ask too many questions for fear it will be taken as a weakness.

We do know that for however long this takes to informally bring Jim up to speed. Bob and Jim are being paid; Bob very well because they’re near the top of their scale and Jim being paid well because they were just hired at a competitive wage rate. It is seriously in the employer’s interest to expedite this “transfer of expertise” so Bob can go back to work with somebody as capable working beside them. Anything less is seen growingly as a cost and less as an investment. Multiply this experience by every new hire or person being cross-trained and it is not hard to see the waist in what should be a deliberate, purposeful training transaction

It doesn’t have to be this way. Proactive Technologies works with the employer to set up a structured on-the-job training infrastructure for each job, so each worker new-hire, incumbent and cross-trainee can reach full job mastery and full worker capacity, as efficiently, quickly and completely as possible. This allows for the employer to reach for full utilization of each worker and a much higher and recognizable return on investment with much lower opportunity costs. Supervisors can now manage a team knowing each worker is as capable as the next.

The data and information derived from the process of setting up the structured on-the-job training infrastructure can be shared with the local, educational institutions so that they can evaluate their current programs for updates and stimulate the development of new programs that would benefit the employer through producing entry-level candidates with higher, more relevant, core, and industry-specific general skills upon which the employer can build. The information can also be shared with local economic and workforce development agencies so they can better plan for meaningful outcomes. Many states provide training grants to offset the investment to setup and implement a structured on-the-job training system with reimbursement for the training that is delivered and documented – eliminating any excuse for keeping the status quo.

All this seems simple, yet everyone seems locked in their corners doing their own things and not being realistic with the real training needs of workers. Employers own a large part of the neglect; educational institutions unfortunately have to follow the employers lead which is not clear an often contradictory. Conversely, educational institutions have to be careful overmarketing their capabilities to produce workers “ready to hit the ground running” if they lack the data to know where the ground is. Workforce development agencies want to help both parties provide workers that can count on a meaningful, sustained employment, but they, too, our dependent on the focus of the employers and their educational partners.

It is long past time that each party take a step back and critically assess their role in this overall process and make the improvements necessary to make local and regional economies, more stable, thriving, and self-sustainable. We have done it before. This train needs to be put back on the right track.

 

If you recognize these challenges and have shed your fear of even looking for other solutions, check out Proactive Technologies’ structured on-the-job training system approach to see how it might work at your firm, your family of facilities or your region. Contact a Proactive Technologies, Inc. representative today to schedule a GoToMeeting videoconference briefing to your computer. This can be followed up with an onsite presentation for you and your colleagues.