Special Report--ENTERPRISE: Management: Retooling
EXPLOITING THE PROMISE OF COMPUTERS
As the Industrial Era gives way to the Information Age, computers are changing the way we work and produce. Nowhere is technology's transformative power greater than among America's small businesses. Computing power that once cost hundreds of thousands of dollars can now be bought for a few thousand by small and midsize businesses. Electronic messages, databases, networks, and other information technologies are eliminating the economy-of-scale advantages enjoyed by Big Business for much of the post-World War II era. Savvy entrepreneurs are using high-tech equipment to reach new customers and exploit market niches.
Trouble is, while the technology payoff is real, many smaller businesses are discovering the returns tough to achieve. Far too often, a business will shell out for razzle-dazzle hardware and software but neglect to invest in training workers to use their new tools productively. Experiences vary, of course, but Nancy Corbett, director of benchmarking services at Coopers & Lybrand, says companies typically spend less than 2% of their technology budget on training. The optimal outlay: between 5% and 7%. "If you don't allocate the dollars and plan for training, the investment won't pay off," she says. Warns Terry Neill, worldwide managing partner of Andersen Consulting's change management practice: "Think about training before you purchase any technology."
HODGEPODGE. Take the experience of Instron Corp., a Canton (Mass.) maker of materials-testing equipment. The $136 million company spent millions of dollars on computers in the late 1980s and early 1990s. Yet some bookkeeping still revolves around a ledger book that's been in use for 25 years. Every day, the serial numbers of components used by one of the company's units are entered by hand. A lot of other pencil-pushing goes on at Instron, too. When it started computerizing, the company bought a hodgepodge of software systems. Worse, few of the 425 employees at the company's main facility were trained to use the new tools, even though personal computers sit on most desks. "This was a classic story, where the company invested in the technology and then just said, `Here, have at it, guys,"' says Mark C. Montlack, manager of manufacturing systems.
About two years ago, senior executives said "enough." Now, they are installing a new corporate information system with standardized hardware and software platforms built around a network of IBM RS 6000 and Novell Inc. workstations. Instron contracted with an outside trainer, Catapult Inc., a national company with offices in Boston, to provide software training for employees, and budgeted between $40,000 and $50,000 from August, 1995 through August, 1996. The Massachusetts Manufacturing Partnership, part of a network of technical support programs sponsored by the National Institute of Standards & Technology, is providing $12,000 in funding to subsidize the training. Says Montlack: "Without the training, we're just not going to be very productive."
That's a lesson more and more companies are taking to heart. True, a 1993 Bureau of Labor Statistics study found that only 52% of businesses with fewer than 50 workers provide training to upgrade employee skills because of technological change, vs. 78% of businesses with 250 or more employees (chart, page 8). But smaller companies aren't neglecting employee training as much as the data suggest. It's just that many are far more likely to rely on on-the-job training and informal instruction. And, facing a shortage of skilled labor, 67% of small and midsize business owners say they now plan on investing in training programs, according to a survey by Arthur Andersen's Enterprise Group and National Small Business United.
The explosive growth of computers in American work has led to a huge range of options for companies trying to get employees up to speed. Vendors and suppliers, chambers of commerce, government-sponsored economic development consortiums--all now offer technology education. Multimedia and online services as a teaching tool for high tech are starting to bear fruit. And importantly, community colleges have become the nation's technical training system. "Community colleges have been very responsive to what businesses and individuals need to work," says Anthony Carnevale, director of human resource studies at the Committee for Economic Development, a think tank in Washington.
High-tech equipment and investment in training is a sure-fire formula for a productivity revolution. Small businesses already generate more than half of all private-sector jobs. As they become increasingly dedicated to developing a computer-literate workforce, productivity growth, which has doubled in the 1990s from the anemic pace of the 1970s and 1980s, could keep climbing. Hard to imagine, but small business could become an even more formidable force in the economy.
"HELP" FILES. What kind of training makes the most sense for a smaller business? The cheapest and most common option is putting someone with technical expertise in charge. For example, although employees of PC Kwik Corp., a maker of software in Beaverton, Oregon, are technologically sophisticated, they still have to learn new programs all the time. "With a new technology, someone plays a lead role in learning it, and then they help others learn it," says General Manager Bruce Schafer. Because many small businesses have a fair amount of turnover, consultants suggest that the designated leader keep a record of frequently asked questions. These questions can be the basis of a "help" file for new employees.
Similarly, the New York City architectural firm Christidis & Lauster does most of its training in-house. Rather than wringing their hands during the real estate slump in the early 1990s, they used the time to test different software systems and to focus on training. "When you have a lot of work and clients, it's very hard to make software switches and you have a lot less time to train," says partner Charles Lauster.
Another common approach is to get training from your computer or telecommunications vendor. Almost all the major players in these industries offer training services for their software. And in this era of corporate downsizing, when Big Business relies increasingly on smaller companies for services, the giants are offering training to their small suppliers. "Get the companies you sell to to help you," says Carnevale. "There are many tricks to the training trade."
Many small companies aren't content with just one tack. Take Diane Dawson, head of Dawson Sales Co., a Chicago food ingredient broker. For some 35 years, the heart of the company had been a moving cabinet with hanging files where sales orders were kept. When Dawson bought a computer system ($25,000 for hardware and $10,000 for software), the package included three half-day training sessions. But that wasn't enough, so Dawson also hired a systems administrator, at a $32,000 salary, to act as a computer mentor. The mentor/office manager stayed for 18 months and got 90% of the system up and running. Productivity is up by about 30%, says Dawson, "because the computer system has cut down on the amount of time we have to spend on data. That's increased the time spent with the customer either on the phone or visiting with them."
In most parts of the country, the local community college or technical college is a rich training ground. Because they are local and practical in orientation, community colleges have turned out to be ideal partners for industries and local businesses trying to upgrade their workforce. Governments are using community colleges to reach small business. For example, the federal government in 1988 created the Manufacturing Extension Partnerships--modeled on the agricultural extension programs of the 19th century--to help small manufacturing businesses adopt new technologies quickly. Currently, there are 42 such centers around the country, typically tied to community colleges. Many states also have their own industrial extension centers and state-funded training programs.
When Frederick W. Taylor published The Principles of Scientific Management in 1911, he helped transform work by breaking every task into its simplest units. Taylor's methods soon became widespread among the nation's businesses and played a big role in boosting U.S. productivity. But he also ended up eliminating learning from work.
In the Information Age, that separation is coming to an end. With computers, everyone is working more closely--manager and employee, producer and supplier, company and customer. In this economy, learning at work becomes a continuous process. But Taylor would recognize the fruits of that change: higher productivity.By James C. Cooper and Kathleen Madigan By Christopher Farrell in New York, with Ann Therese Palmer in Chicago and Gregory Sandler in Boston