Optimizing the impacts of investments in training: Example of a project

Author: Marie-Pascale Nadeau, Project Manager and Instructional Designer at HumEng International

To follow up on our article on the impacts of investments in training, here is an example of a skills management project in a medium-sized manufacturing company over a 3-year period and its result.

Description

This company is situated in Quebec. In the 15 years preceding this project, it changed ownership 5 times. Immediately prior to the beginning of this project, management invested more than $180 million in a modernisation project while significantly reducing the workforce, from 1100 to 650 employees.

Challenges

After making the following observations:

• Significant ageing of the workforce.
• The state of the current training system cannot deliver the increase in productivity necessary to remain competitive.
• There is a need to identify and document the best practices in order to pass them on to new employees.
• The limited workforce development budget must be targeted more efficiently.
• All management levels must have responsibilities with respect to workforce development.

The company’s management decided to implement a new training structure.

Objectives

The two main objectives established by management in order to measure training’s impact on the company’s productivity were:

• To increase the production machines’ efficiency
• To reduce non-conformities

These objectives were refined to take into account the specific realities of production, maintenance, human resources and labour management relations. Management decided to implement a new training structure based on skills.

Process

To help with the transition to a skills-based workforce development system, the company’s management decided to partner with HumEng and invest in a learning management system (LMS) to manage the process. Implementation on the shop floor is divided into three phases:

1. Development of job and equipment skill profiles and coaching of key players
2. Pilot project in a key department
3. Deployment in the other departments

Results of the process:

• Identification and documentation of necessary skills for each job and/or equipment
• Automated identification of employee training needs by comparing employees’ skills with the necessary skills for a job
• Identification, documentation and crystallization of best practices for each skill
• Generic skills transportable from one job to another, from a department to another and/or from an equipment to another are delivered through online training
• Trimestrial skills rate reports (by job, department and equipment)
• ISO documentation integrated into best practices, eliminating duplication
• Links created between the payroll software and the learning management system (LMS) in order to automate the production of Bill 90 (1% Law)
• Identification of training needs and minimal workforce in order to support the succession plan
• Documentation and management of formal and informal training for each job
• Centralization of training budget preparation and decentralization of training execution

Gains

The company’s gains are documented and presented under two categories:

Qualitative Gains

Questionnaires are given to managers, trainers, those responsible for training in each department and employees. The following are opinions that are expressed the most:

From Managers

• Training is more complete
• Training is better targeted at real training needs
• Employees are more competent
• Better transfer of information
• Beneficial cumulative effects of training

From trainers

• Training is more complete
• Better structured training that is available any time via online training
• Training material is more appropriate and targeted
• Employees are more competent after the training

From learners

• Every employee has a personalized learning plan
• Every employee participates in his/her development and in the identification of his/her training needs
• Better structured training
• The new system is preferred by far to the old one

Return on investment

The return on investment generated by the more systematic organization of training is difficult to quantify. The causal relationship between the increase in productivity and training is almost unprovable, but there is a correlation. This relationship is established through consensus among key participants in the company.

During 3 years, an increase in productivity of $5 million a year was documented. A group made up of managers, supervisors, trainers and production employees were asked to identify the causes of the increase in productivity.

Results

The group estimates that:

• 50% of the increase in productivity was attributable to improvements in technology.
• 20% of the increase in productivity was attributable to a better communication strategy.
• 10% of the increase in productivity was attributable to supervisors being better trained in skills management.
• 20% of the increase in productivity was attributable to training (this works out to more than $3 million dollars in increased productivity over 3 years).

Reduction in the average training time per department

Thanks to better targeting and follow-up of training, including online training, the company was able to document a decrease in training costs.

For example, in 3 years, the production department’s average training time decreased from 281.6 hours to 160.9 hours. This reduction applied to all 12 jobs of the production line. The technical services department saw its training time decrease from 240 to 217.6 hours.

The finishing and shipping department’s average training time went from 167.5 hours to 133.3 hours in 2 years.

Reduction in cumulative replacement costs
When an employee retires, there are costs involved in training an employee for the vacant position in the line of progression, but also for training for replacements for all the jobs below the vacant one. This is what is referred to as “cumulative replacement cost”.

This company’s production department has 12 jobs in the production line. In the past, if the person holding the 5th position in the line retired, the cumulative replacement cost was $10,000. After 3 years, this cost was reduced to $4,000.

Therefore, for a retirement of someone in the 12th job, which is the highest position in the line of progression, there is a potential savings of 42.8% of the cumulative replacement cost.

When the skill management project was implemented, retirement projections indicated that in the next 5 years, 79 production employees, 41 maintenance employees and 33 supervision employees were going to retire. Based on the production department’s experience, we can extrapolate that savings in cumulative replacement costs to fill production jobs will be of $1,968,000.

Conclusion

All the key players in the company agree that the skills-based training system is profitable. It has contributed to an increase in productivity of 20% by year over 3 years. Moreover, $1.9 million will be saved in cumulative replacement costs in the next 5 years.

The company therefore concludes that:

• Training has become an investment
• Thanks to a skills-based approach and the use of the learning management software (LMS), training investments are well targeted
• Best practices were captured and transferred to employees via online training
• The Human Resources Department has become strategic to the company’s competitiveness
• It is more self-sufficient with respect to training
• There is no turning back