HELPING WORKERS TO WORK SMARTER From carmakers to chipmakers, companies struggling to raise quality and lower costs now treat training as a capital expense just like new factories. The rewards can be huge.
By Michael Brody

(FORTUNE Magazine) – BEFORE THE LINE began to roll last winter at General Motors' new truck plant in Fort Wayne, Indiana, each assembly line worker received 400 to 500 hours of paid training. Electricians and other skilled maintenance workers got 1,000 hours apiece -- the equivalent of almost six months -- with full pay and benefits. All told, training for the Fort Wayne work force came to more than a million hours. The cost: an estimated $23 million in wages and benefits alone, and millions more for instructors and facilities. The factory itself cost $500 million. Though the amount of training the Fort Wayne workers got is extraordinary by the standards of most industries, it represents a powerful new trend. As service companies have done for years, manufacturers making everything from tires to semiconductors are now spending heavily to teach workers new skills and upgrade their old ones. In a study last year for the Department of Labor, the Rand Corp. found that nearly 40% of U.S. workers have taken part in training programs while on their current jobs. Rand also concluded that the training increased earnings more than any other type of education and sharply reduced the likelihood of unemployment as well.

Many companies are coming to regard training expenses as no less a part of their capital costs than plant and equipment. Anthony Patrick Carnevale, chief economist for the Washington-based American Society for Training and Development, a professional group, estimates that corporate expenditures on formal training and education, away from the office or shop floor, now total roughly $30 billion a year, or almost a third of what the U.S. spends on all college-level education. That's a conservative estimate, Carnevale says. When you add wage and benefit costs, the total may well match the $238-billion annual bill for all public education. Less than 1% of that goes for remedial teaching to make up for the failures of the American educational system. Most reflects the demands of the second industrial revolution spreading through the U.S. The factory Henry Ford created is scrap, even if some backward managements haven't realized it yet. At the turn of the century industrial engineer Frederick W. Taylor's hated inspectors, stopwatches in hand, tried to turn jobs and workers into irreducible, brainless minimums of time and motion. But today's workplace is filled with sophisticated machinery, and it is increasingly organized to make workers responsible for what they do. The workers at Fort Wayne, for example, learned how to handle the plant's new equipment and master new quality-control techniques. But they were also schooled in such subjects as team production systems, group problem-solving methods, and the tough competition their products would face. Companies are starting to see clear payoffs from such efforts. Two years ago Motorola decided to raise its training outlays by $20 million. Says Motorola training head Bill Wiggenhorn, who came over in 1980 from Xerox, a pioneer in training: ''Just as when you buy a piece of capital equipment, you put aside money to maintain that equipment, we required that 1.5% of payroll be put aside to maintain the competency level of the employees.'' With the pace of technological change accelerating in semiconductors and electronic communications, Motorola's key markets, that figure is now running about 2.6%, or close to 1% of sales. Much of the training has been tied to plant and office automation, as well as to bringing in production process control techniques aimed at reducing defects virtually to zero -- the permissible rejection rate at each manufacturing step is 3.4 parts per million. In any given year almost a third of the company's 90,000 employees get a total of two million to three million hours of training; taking into account training expenses, wages, and benefits, the cost amounts to around $90 million. The results have been dramatic. Says Wiggenhorn: ''We've documented the savings from the statistical process control methods and problem-solving methods we've trained our people in. We're running a rate of return of about 30 times the dollars invested -- which is why we've gotten pretty good support from senior management.'' Motorola's demand for perfect components is also leading it to train workers for key suppliers, many of them small- to medium-size firms without the resources to train their own people in such advanced specialties as computer- aided design and defect control. That program, started last year, has so far spread to 32 of the several hundred key suppliers Motorola invited to participate. Among the companies taking part is one Japanese-owned firm, SEH America, a leading producer of the silicon wafers used to make computer chips like the Motorola 68000 series in Apple computers. For SEH, the U.S. subsidiary of Shin-etsu Handotai of Japan, Motorola trains workers in statistical process control and team problem-solving. Some companies, caught up in the toils of restructuring, are spending a substantial part of their training dollars to help workers move into new jobs. IBM, whose ''no layoffs'' policy forced it into major retraining commitments years ago, now spends around $750 million a year on corporate schooling. That's more than the entire budget of Harvard University. Earlier this year Big Blue created a new position of corporate vice president for education. Lew Gray, the senior marketing executive who holds the post, coordinates the retraining of thousands of production workers and managers who might otherwise be laid off, so that they can take new jobs in marketing. Retraining, too, can pay off: A study by the Work in America Institute of Scarsdale, New York, a research outfit, has found that retraining existing workers for new jobs is more cost-effective than firing them and hiring new ones -- not to mention the difference that retraining makes to employee morale. COMPANIES supplementing their in-house training staffs have become the biggest clients of two-year community technical colleges around the U.S. Ralph Dosher, manager of corporate education for Texas Instruments in Dallas, says that because of rapidly changing technologies, TI can no longer hire technicians straight out of high school. Today it prepares young workers for such jobs as computer-aided drafting by sending them to a local technical college full time for one year on full pay, then letting them work part time and go to school part time for another year until they get an Associate in Science degree. TI production line workers moving up to jobs as electronics and computer maintenance technicians are going back to night school for retraining at company expense. Partly as a result of such programs, almost two out of five workers under 35 have some college training -- twice their parents' rate -- and millions are going to night school classes for more. All states have been upgrading the mathematics, computer science, business, and engineering programs of their colleges to lure high-tech companies concerned about the educational level of the local work force. A 1985 report for the Carnegie Foundation found that 80% to 90% of all corporations offer tuition reimbursement plans, most for job- related learning. Retraining workers for new roles in a revamped workplace is easiest when there's no union determined to preserve entrenched power structures and insist upon obsolete job classifications. But the workplaces that need retraining programs most are often those where labor relations have historically been bad. One case in point: GM's Van Nuys assembly plant, which builds Pontiac Firebirds and Chevrolet Camaros in the San Fernando Valley, north of Los Angeles. For years Van Nuys was a political battleground where a militant local union leadership fought what seemed to be the inevitable closing of the last American-run assembly plant on the West Coast. Now GM and the UAW have got together to try to emulate the spectacular production success of NUMMI -- New United Motor Manufacturing Inc., the Toyota-GM joint venture at Fremont, in Northern California. As at Fremont, the union and the company have been retraining both managers and workers in Japanese-style team production methods. Their goal: raising productivity and reducing defects to Japanese standards, which NUMMI is now approaching after two years of production. Harried foremen are no longer pushed to move as much metal as possible down the line and let inspectors at the end worry about defects. Instead they have been retrained as ''group leaders'' responsible for maintaining quality standards in the parts their section receives and the work it does. Selected workers who had little responsibility in the past have been trained as team leaders who will head small groups of workers responsible for producing & defect-free work in a series of assembly steps. Since all this took place while cars were rolling down the line, ''the logistics became a little mind- boggling,'' says plant manager Ernest Schaefer. GM recently finished rotating alternate groups of 350 workers and supervisors into training classes over a ten-week period, filling in for them with second-shift workers recalled from layoffs. The workers who returned from training did so-called homework -- spotting production problems, discussing how to solve those problems with the techniques they had learned, and spreading the gospel to the unconverted. In the weeks before the changeover to the team system, the new leaders helped train the balance of the plant's 2,160 first-shift workers. THE RANK AND FILE appears to be converting, despite a lawsuit by leftist holdouts. Last year the local union approved the contract calling for the shift by a bare 52% to 48%, and many workers remain skeptical of GM's intentions. But the sporty Toyotas, Nissans, and Hondas clogging Southern California's freeways are tangible evidence of the pressure the plant is under to find more competitive ways to build its muscle cars. UAW western regional director Bruce Lee, who has worked closely with Toyota to make NUMMI a success, has pushed hard to make the UAW-GM partnership at Van Nuys work. The California Employment Training Panel has helped out with $20 million in funds under an innovative program set up in 1983 that in effect diverts unemployment insurance funds to finance training that will hold down jobless rolls. The money helps companies hire and train unemployed workers, or retrain workers threatened with losing their jobs unless they learn new skills. Unlike many state and federal make-work efforts, the California program lets employers pick their own trainees and choose whether they want to train in- house or use local colleges. It pays up only for workers who complete training and succeed in holding jobs. The program has encouraged such experiments as the $1.4-million mobile classroom operated by the Los Angeles City College system, a trailer filled with computer-controlled lathes and other modern equipment that is trucked out to aerospace plants to retrain assembly workers as skilled machinists. According to state training head Steve Duscha, such state-funded programs, working out at an average cost of $2,600 per worker for 410 hours of training, have slashed trainees' periods of unemployment and boosted their wages by an average of 55%. Duscha says the data gathered so far show that the program is saving the unemployment insurance system several times its cost. If those numbers hold up, California's cooperative approach to training could be of interest in Washington, where lawmakers are looking for ways to ease protectionist pressures by providing money to retrain workers threatened by imports. Even executives who have trouble believing that any government program could turn a profit are finding in their own plants and offices that investments in human capital have a high payback.