Finding High Pay-Off Training Projects

Most internal training organizations are due for a dramatic change in direction and ambition.

For corporate training groups in large organizations, the past few years have been a time of reflection, accomplishment, abandonment of the obsolete, innovation, creative imitation and above all, redefinition of the role and responsibilities of the training function.

Without a doubt, a handful of corporate universities/internal training organizations have rendered the established agenda of corporate training—its work, priorities and perceived mission—largely obsolete.

They have set the stage for the training function to adopt a new agenda and thereby create unprecedented business value by providing clearer evidence of the impact of training on financial performance.

It has long been known that training must pay its way, but it will do so only if it’s targeted at opportunities to improve the organization’s profitability and productivity.

If firms grow their revenue base and keep their costs under control, they will improve productivity and profits.

Much of senior-level executives’ discomfort with the training function reflects the lack of a clear economic framework for judging the linkages between training and profitability.

Even when the competitive benefits of training and continuous learning are apparent, it’s proven difficult to measure the economic benefits.

Workforce Training and Competitive Advantage

Of late, economists have been developing models that put knowledge (i.e. successful application of information) into the center of the wealth-producing process.

This is because increasingly, say economists, there is less return on the traditional resources: labor, land and capital. The main producers of corporate growth and profits are information and knowledge.

The main task of internal training organizations is to turn knowledge achievements (both internal and external) into gains in both financial and non-financial performance measurements.

Competitive advantage through workforce training and continuous learning has become the “in” slogan with books, podcasts, conferences and seminars devoted to the subject.

Gaining “competitive advantage through workforce training” rests on choosing training opportunities that provide the greatest economic benefit. That should be common sense; why would anyone want to work on low-yield training activities?

Surely no one would consciously target low business-payoff areas. Yet, for whatever reason, many internal training departments appear prone to this affliction.

A High-Yield Knowledge Management/Training Activity

In a well-received Wharton Magazine article, Laurence Prusak, formally Executive Director of the IBM Institute of Knowledge Management, told the following story about how British Petroleum identified and transferred best practices knowledge.

Some years ago, executives at British Petroleum, now BP Amoco—a $5 billion oil giant—noticed an unusual fact…

While studying the company’s performance, they discovered significant disparities in the productivity of oil wells in different parts of the world. Intrigued by the discrepancy, John Browne, British Petroleum’s CEO, asked his associates to find out what was going on. The team that investigated the phenomenon soon found the answer.

It turned out that tiny, seemingly insignificant innovation that the workers practiced—for example, the method they used to remove barnacles from a ship’s hull—cumulatively made a huge difference in results and ultimately oil well productivity.

Enthused by this discovery, British Petroleum set about trying to introduce these high-yield work techniques at all of the company’s oil wells. The initiative should have led to a massive, across-the- board increase in productivity, right? Wrong.

British Petroleum learned to its dismay that productivity did not rise at all. The reason was simple.

The oil workers, who saw these changes as imposed dictation from above, resisted them. British Petroleum had to spend large sums educating (training) the oil workers and persuading them of the need for change.

This time, the effort paid off. The company slashed drilling costs by $47 million per oil well.

"Like most stories," notes Prusak, “this one had a moral: companies that capture knowledge about best practices and share it across the organization can sharpen their competitive edge.”

A Neglected Success Factor: The Role Of Training

Whether or not British Petroleum’s corporate training group was involved with this project is not known, but they should have co-ventured with the group that identified the best practices.

As Prusak indicated, the first attempt to transfer best practices to under-performing units failed. Once the best practices were converted into a systematic, well-organized learning program, productivity and profits soared.

Why “knowledge management” receives all the credit for reducing costs by hundreds of billions of dollars is not clear because both knowledge management and training—in most cases—are responsible for producing these astonishing economic results.

More Evidence

Still, another illustration of increasing productivity and profits through knowledge management and training is provided by Prusak and Thomas A. Davenport, who co-authored Working Knowledge: How Organizations Manage What They Know.

At Texas Instruments, sharing best practices became a strong focus after the concept was strongly endorsed by Jerry Junkins, then the firm’s CEO.

He noted in a shareholder address: “We cannot tolerate having world-class performance right next to mediocre performance simply because we don’t have a method to implement best practices.”

In response to Junkins’ exhortation, Prusak and Davenport describe how the company developed a common set of terms and methods around the sharing of best practices called the TI Business Excellence Standard (TI-BEST).

"Early sharing of best practices  across the firm’s 13 semiconductor fabrication plants (known as “fabs”) had substantially reduced cycle time and performance variability, leading to capacity improvements equal to building a new fab... "

Many internal training groups currently lack the expertise to systematically identify best internal practices that produce significant performance variations.

It is, therefore, essential to link with internal knowledge management groups and hire individuals with demonstrated benchmarking and operations management skills.

None of the headline makers in today’s training publications, with which we are so constantly bombarded, are nearly as important for the future of internal training organizations as the need for identifying internal best practices and developing customized learning programs and continuing learning forums to successfully transfer these practices.

Summary and Conclusions

CEOs and CFOs can immediately relate to training activities that produce economic results. Who can argue with training that leads to hundreds of millions of dollars in improved profitability or produces the equivalent of a new plant or significant cost reductions?

It’s this type of training that will propel training group chieftains to the top of the corporate hierarchy—equal in rank to the CFO, ClO and other functional executives.

Global corporations are learning to use measurement as a way of spreading good practice rather than as a device for performance reviews.

Multinationals are better placed than small firms to carry out internal benchmarking because they have more variety to choose from.

Many organizations have star plants, warehouse/distribution centers, maintenance groups, and the like which are held up as examples to everyone else.

Comparing the performance of different divisions to ensure that the worst performers learn from the best does require in many instances understanding the performance metrics related to the success.

If training groups would work with, say, Best Practices (BPM) groups—internal balanced scorecard implementation groups who really know little about designing and implementing training programs—it's a near certainty that individual and organizational productivity would soar.

Payoffs from knowledge transfer learning programs are high. Training executives who don’t make the effort to capitalize on this aspect of “knowledge management” do more than risk poor performance; they risk their organization’s respect.

In the near future, we will be presenting an ongoing series of articles that relate to matching business-driven measurements with the appropriate training programs in order to achieve visible and quantifiable returns on training dollar investments.

The importance of identifying & spreading best internal practices has never been more important. Come to our virtual conference, L&D Leadership in a Time of Great Change on July 14 &15 to learn how to develop systematic, well-organized learning programs so that more complicated success skills & meaningful ad hoc experiences can be converted into methodologies (or into a system) that can be taught, learned & practiced.