Skills Management in a Medium-Sized Manufacturing Company

Target Training investments:
Results, Return on investment and Intangibles

Description

This medium-sized manufacturing company is located in Quebec. It has changed owners five times in the past fifteen years.

From 1995 to 1997 the owners invest more than $180 million in a modernization project and, at the same time, decrease the workforce from 1100 to 650 employees.

Challenge

In order to remain competitive, the company must increase its productivity. Human resources development will play a huge role and the present training system is unable to respond to this challenge.

The solution must address:
an analysis of the demographical situation
the need to identify and document best practices and transfer them to junior employees
the limited investments available for training and
the desire to include all levels of management in human resources management.

Objectives

The two objectives set by management as training’s role in increasing mill productivity are:
to increase paper machine efficiency
to decrease rejects

These objectives are refined to take into account production, maintenance, human resources and union issues.

The Process

The company decides to create a partnership with HUMENG International Inc. to help with the transition to a skill-based approach to human resources development and purchases HUMENG’s software, TransliaisonsTM TL4 to manage the process. Project execution and implementation on the shop-floor is accomplished in three phases:
1. development of skill and equipment profiles and informing of key players
2. pilot project in a target department
3. roll-out to other departments
The outcomes of these phases are:
skills required for jobs and/or equipment are identified and documented
automated training needs analysis by comparing job skill profiles to employee skill profiles
best practices for each skill are identified, crystallized and documented
generic skills are transportable from job to job, department to department and equipment to equipment
quarterly report of competency level (by job, by department, by equipment)
ISO documentation is incorporated into best practices to avoid duplication
a bridge is created between the payroll software and TransliaisonsTM TL4 to automate the production of the Law 90 report
projection of training needs and minimum human resource requirements to support the succession plan
documentation and management of formal and informal training by job
centralization of budget preparation and decentralization of training execution

Results

The results for the company are documented and presented in two categories:

Qualitative Results

1.   Questionnaire

Questionnaires are circulated to managers, trainers, those responsible for training in each department and employees.
Conclusions:
Managers
    training is more complete
    training is targeted to real needs
    employees are more competent
    there is a better transfer of information
    the cumulative effects of training are beneficial to the company
Trainers
    training is more complete
    training is better structured
    training material is more adequate and specific
    employees are more competent
Learners
    each employee has an individualized training plan
    employees participate in the training and in the identification of their training needs
    training is better structured
    the new system is much preferred over the old system

2.   Return on Investment

The return on investment attributable to an improved training system is difficult to document. The cause and effect relationship between increased productivity and training is practically impossible to prove, although there is a definite correlation.

Management decides that those involved in the process will estimate, by consensus, the return on investment.

For three (3) consecutive years, mill productivity increases by $5 million annually. A group composed of managers, foremen, trainers and production employees is asked to identify to what the increased productivity is attributable.

Conclusion:
The group estimates that:
50% of the increased productivity is due to « fine tuning » of the technology
20% of the increased productivity is due to a better communications strategy
10% of the increased productivity is due to supervisors that are better trained on skills management
20% of the increased productivity is due to training

This 20% attributed to training represents $3 million over three years.

Quantitative Results

Thanks to improved targeting and tracking of training, the company is able to document a decrease in training costs. The following table presents, in hours, the average cost of training in 2000, 2002 and 2003.

Table 1 – Average training time by department

The following graph shows average training time for production jobs in the line of progression. Job A is the entry-level position and Job L is the most senior position.

Graph 1 – Average training time for production jobs

The following graph shows the cost in dollars ($) to train an employee on a vacant job in the line of progression and the total cost of training replacements for all jobs below the vacant job. For example, if the employee occupying Job E retired in 2000, it cost $10,000 in training to replace him/her. In 2002, it cost $4,000. The cost of training to replace the top job in the line of progression (Job L), is 42.8% less in 2002 than it was in 2000.

Graph 2 – Cumulative workforce replacement costs by job

Retirement projections to 2008 are: 79 production employees, 41 maintenance employees and 33 supervisory employees. Based on the production department experience, the savings in training costs to replace only the production jobs can be estimated at $1,968,000.

Conclusions

All key players in the company agree that the skill-based training system is profitable. It already contributed to an increase in productivity of approximately 20% per year for three years. Also, a $1,9 million savings in training costs from now to 2008 has been estimated for the production department.

The company concludes that:
training has become an investment
thanks to the skill-based approach to training and the use of TransliaisonsTM TL4, training investments are efficiently targeted
best practices have been documents and transferred to junior employees
the Human Resources department has become strategic
it is more self-sufficient with respect to training
there is no going back

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