(For best results, view and print this document in 10 point Courier or a similar mono-spaced font.) NATIONAL WORKFORCE ASSISTANCE COLLABORATIVE Focus Groups: Summary of Findings As part of the data collection leading to the development of a strategic plan, Collaborative staff conducted eighteen focus groups in February and March. Focus groups were conducted in: Atlanta; Baltimore; Chicago; Cleveland; Dallas; Detroit; Los Angeles; New Brunswick, NJ; Pittsburgh; and Washington, D.C. Separate focus groups were conducted with small and mid-sized businesses, with union and non-union employees, and with service providers. A list of the dates and participants in each focus group is provided in Attachment 1. Background information on the business and service provider focus group participants is provided in Attachment 2. The results and impressions from these focus groups are summarized below. ONE OF THE PREMISES BEHIND THE COLLABORATIVE IS THAT REMAINING COMPETITIVE IN TODAY'S ECONOMY REQUIRES THAT COMPANIES CHANGE. IS THIS PREMISE TRUE? IS CHANGE REQUIRED TO STAY COMPETITIVE? WHAT TYPES OF CHANGE? Everyone we talked to agreed that change is a fact of life today for small and mid-sized businesses. As one business owner put it, "business is entirely different today." There was general consensus across our focus groups, that companies have to change if they wanted to stay in business. One business owner summarized that companies have to "work smarter, cheaper, and harder." The list of changes necessary for businesses to stay competitive cited by business leaders, employees, and service providers was relatively consistent across the focus groups. The most frequently cited changes included: * Restructuring/downsizing. A number of the firms represented in our focus groups had been involved in buy-outs, mergers, and/or reductions in force. We heard few positive stories from employees about the results of this type of restructuring/downsizing. * Technology. Introduction of new technologies (e.g., external and internal electronic data interchanges, numerically controlled machine tools, etc.) is dramatically changing the way business is done by the participants in our focus groups. * Cross training. Flexibility is seen as a critical success factor for today's small and mid-sized businesses. One of the best ways to obtain flexibility is to develop a work force with flexible skills through cross training. Many of the companies represented in our focus groups were cross training employees. * Employee involvement. The majority of the business leaders and employees in our focus groups cited increased employee involvement in decision making as an important change in their company. Several saw employee involvement as part of a broader change, namely the need to reduce the adversarial relations between labor and management in both union and non-union firms. Open communication is a critical part of effective employee involvement. As one business owner said, we "used to operate on a need to know basis; that has to change." For many of the employee focus groups, self-directed work teams epitomized the changes surrounding employee involvement. * Quality. Efforts to improve quality were cited as another important change. Customer focus was cited as one key to quality. One business owner felt that, for his business, "asking the customer is revolutionary...we don't do that well." Process improvements are another key element in quality. Another business owner stated, you "cannot increase your price, so profits have to come in reducing your costs and overhead associated with making the product" (i.e., by reducing the non-value added time in the manufacturing process). The emphasis being put on ISO 9000 certification was cited across all the focus groups as a third element in the quality change effort. * Employee skill needs. Upon thinking through all of the changes being made in her company, one business leader cited building employees' skills as the biggest need in her firm. Every change creates new skill requirements for employees. Several other business people also commented on the need to build employees' skills, with many lamenting how ill-prepared students coming out of school are for the world of work. After listening to the discussion of change in the companies represented in his focus group, one employee participant concluded that the tougher economy is creating similar demands on all companies: technology is speeding everything up; quality is being pushed down to the production line, and taken away from separate inspectors; employees are being given access to on-line information and data needed for setting up their jobs; and employees are being cross trained to enhance staff flexibility. WHAT HAS TRIGGERED SIGNIFICANT CHANGES IN SMALL AND MID-SIZED COMPANIES? WHAT MESSAGES/METHODS WOULD CONVINCE OTHER COMPANIES THEY NEEDED TO MAKE CHANGES? Everyone we talked to agreed: change is being forced on companies. More to the point, change only occurs if there is a crisis, if the company's survival or bottom-line is threatened. As one employee put it, "crisis overcomes resistance to change." Three sources of crisis were cited consistently across the focus groups: * Competition. The small and mid-sized businesses in our focus groups are facing what for them is an unprecedented level of competition. * Customer demands for quality. Customers are much more sophisticated today. They expect and demand more from those with whom they do business. Suppliers to large companies (e.g., defense contractors, auto parts suppliers) are particularly vulnerable to increased demands for quality. They are typically required to meet quality specifications to remain suppliers. Many are told to reduce costs by X percent or the company will find another vendor. (On the positive side, as part of meeting such client demands, some small and mid-sized businesses have been able to work with the client firms to re-engineer products and/or achieve economies of scale in purchasing.) * Government mandates. The final source of change cited across the focus groups was government mandates. OSHA and environmental mandates were seen as especially onerous by most small and mid-sized business owners. Although everyone we talked to may agree that businesses have to change to remain competitive, the participants, particularly the service providers, realize that the vast majority of companies have not made the significant changes needed to remain competitive. Participants had good and bad news about getting the message out to these companies. Several believe that no message will force change -- the individual business leaders have to see the need for change in their companies. However, there was a common belief that businesses learn from other businesses. Therefore, one of the best ways to reach businesses is to form consortia to share examples of success (without burdening the successful companies) and information on available technical assistance. There was agreement that in order to generate additional demand, these success stories should demonstrate an impact on companies' bottom lines. Ultimately, such consortia may also provide a mechanism for sharing resources and costs. WHAT FACTORS SUPPORT OR FACILITATE CHANGE EFFORTS IN SMALL AND MID-SIZED BUSINESSES? WHAT FACTORS ARE THE MOST SIGNIFICANT BARRIERS TO CHANGE? Several of the employee focus groups provided a dramatic contrast between companies that had embraced the changes that characterize high performance workplaces, and companies that were struggling to fit these changes into an organization grounded in a more traditional management style. Employees in the former say they "could never go back to the old way of working," while employees in the latter listen to the employees from the high performance workplaces with a mixture of envy and disbelief. The results across the seventeen focus groups strongly suggest that the difference between the two types of companies is how they prepare for and manage the change process. A few business leaders are proactive -- they have a positive vision for their company as a high performance workplace and they set out on a carefully planned journey to make that vision a reality. Companies with an action plan in pursuit of a vision will encounter obstacles and stumble along the way; several of the companies represented in our focus groups were working through trouble spots in their change effort. Some business leaders have a vision, but lack a plan to make that vision a reality. Several employees expressed frustration that their leaders did not "walk the talk." Other business leaders operate in a reactive manner, implementing changes in response to continually emerging crises with no plan or vision of the cumulative effect of these changes. Employees from these firms tended to be the ones who listened in disbelief to stories told by employees from the high performance companies. There are a series of issues involved in preparing for and managing change. How each of these issues is are handled will determine whether it will support or be a barrier to change. * What to change. The first step in preparing for and managing change is to know what to change. Several people in our focus groups argued that change should be based on a comprehensive assessment of the company, which is used to develop an action plan for change. The ideal action plan should include specific change activities, time lines, and measures for evaluating progress. The high performance workplaces in our focus groups used comprehensive assessments and action plans, the struggling companies used a more hit-and-miss approach. The high performance companies used a variety of methods to develop their change plan. One used a consultant to conduct a comprehensive assessment, another interviewed consultants and then did its own assessment. A third used an existing strategic plan as a basis for change, and a fourth used employee involvement to identify areas in need of change. Yet another relied on competitive benchmarks with other plants under the same parent company as a basis for identifying opportunities for change. Service providers noted that one challenge to a comprehensive assessment is that businesses come to them with an immediate problem they want solved; they seldom come looking for a comprehensive restructuring effort. However, once that problem is solved, the company may consider other services that together would approach a comprehensive change effort. One business owner who has guided several small-business turnarounds commented that small and mid- sized businesses often lack the "intellectual capital" needed to conduct a comprehensive assessment. To paraphrase one service provider, companies want a result -- service providers should help them get that result. As another service provider said, "companies want a problem solved; they do not realize the problem may be training related." We will consider the delivery system necessary to support comprehensive and integrated services later in this summary. * Management Support. For change to succeed, management must support the change effort. Top management support is especially important. Top management has to believe in the change. For many top managers in small and mid-sized businesses, however, the concepts associated with the changes required to become a high performance workplace -- total quality, value-added, self-directed teams, etc. -- are relatively new. These managers are still trying to figure out what these concepts mean for their companies. As one company president noted, he wished there was a "parenting class" for company presidents. He said that issues like leadership, direction, accountability, follow-up, and the ability to bring closure to issues are critical for a business owner, but these intangibles are never taught in a classroom. The culture change required to shift from a traditional workplace to a high performance workplace is also a barrier to achieving top management support. It is difficult for many managers to drop the "us versus them" mentality when thinking of labor and management, or to modify their short-term performance-based concerns by recognizing the importance of investing in training. One human resource manager bemoaned her top management's insistence on concrete performance measures prior to change, wishing management would take what another manager called a "leap of faith." Several service providers commented that without top management's belief in the ultimate value of training and other change activities, companies would put off purchasing services they needed in order to preserve resources. In many companies where resource issues result in change and restructuring, the increased need for training and other services that emerges from change and restructuring may not be addressed due to lingering concern with costs. Thus service providers noted that the demand for free or subsidized services remains high. One service provider recommended leveraging company discretionary funds with federal and state funds to support change. It is important to note that for small and mid- sized businesses, finding time to engage in change activities is often a bigger issue than finding money. Another critical aspect of management support is the commitment to see change through and to stay the course despite setbacks. Focus group participants from high performance workplaces said this was one of the most difficult lessons -- to keep going despite setbacks, to learn from mistakes and redouble the change effort. Discussions in our employee focus groups suggest that several small and mid-sized businesses are characterized by a high level of management turnover. This turnover makes it difficult to achieve the continuity of management commitment needed to ensure successful change. Management at all levels must support the change effort. Several of the focus groups highlighted the importance of first-line supervisors to any change effort. One of the high performance companies began its change effort by creating a team of first-line supervisors. This team's first task was to develop a new job description for their positions as "team leaders." They then went on to identify future opportunities for team leaders as the company made the transition to self-directed work teams. More often, however, companies leave first-line supervisors "out of loop" when planning and implementing change; these supervisors then remain as stumbling blocks in their change efforts. * Employee buy-in. Employee buy-in is a critical success factor in creating a high performance workplace. Both managers and employees said that trust is the foundation of employee support. In many companies, however, there is a long history to be overcome in order to achieve the level of trust necessary for employees to support change. If the change effort is not well managed, it can further erode employee trust in management. Two factors make a significant contribution to securing employee buy-in to a change effort. The first is employee involvement in the preparation for and management of the change effort. All of the high performance workplaces in our focus groups used labor-management committees to design and oversee the change process. For example, one start-up company used labor-management teams to design policies and procedures for job certification, safety, and scheduling. Self-directed work teams now oversee each department in this plant. Another company sent cross-functional labor-management teams on benchmarking trips to other companies to generate support for change and build a knowledge base for the company's change effort. One service provider said that the general rule is to involve as many people as possible in the change effort. The second factor that contributes to employee buy-in to change is open and honest communication. One employee said management should explain the proposed changes to employees, including what changes are going to be made, why the changes are going to be made, how the changes will affect the company, and how the changes will affect the employee personally. Several participants felt that change was especially difficult for older workers. An extra effort should be made to involve older workers in the change effort. Several of the high performance companies said that their employee selection processes are very selective. Once change is underway, it is important to ensure that any new employee will support the change effort. * Follow through. As noted above, management support is needed for the duration of the change effort. One of the ways in which this support is manifest is the level of follow through on change plans and proposals. Follow through may apply to any aspect of the change effort. For example, one employee participant said that his company had instituted an employee involvement program, but never scheduled any meetings. Another cited an instance where he had trained a new shear team for a steel press, but management failed to make the modifications on the press necessary for this team to begin work. Since many of the changes involved in creating a high performance workplace require new employee skills, employees are especially sensitive to companies' follow through on training. Several individuals were particularly vocal about the impact on plant safety of companies' failure to provide training. Employees identified several characteristics of effective training programs, including: * Training before the change is implemented, and follow up training once the change is underway. * Training that is performance-based versus time bound, i.e., training until the skill is acquired versus for a limited time period. * Training that is done in context, preferably in-house, and ideally with in-house trainers and/or employee mentors. * Training that is done on company time for which employees are paid. * Training that is linked to a planned change effort Service providers pointed out that the size of a company has an impact on the cost-effectiveness of training; keeping training affordable is a challenge when dealing with small and mid-sized companies. Since small and mid-sized companies have limited workforce flexibility, it is harder for them to give employees release time. To meet these challenges, service providers suggested pooling companies' resources, making better use of technology (e.g., individualized instruction, using computerized down links and mobile learning labs), and developing new models of training. A final element of follow through that deserves attention is the alignment of company systems. For example, the performance evaluation system should support the change effort. If managers are expected to support employee involvement, then managers' performance evaluations should include items on responsiveness to employees. * Equity. For change to succeed, it must be seen as fair and equitable. Two elements of equity emerged from our focus groups. First, preparation for change should help everyone involved determine "what's in it for them?" To illustrate, change may mean increased profitability for the company, which means employment security for employees. Cross-training means flexibility for the company, and, in high performance companies which use pay-for-knowledge compensation plans, better pay for skilled workers. The second element is whether the benefits of increased productivity are shared across the company. All of the high performance companies in our focus groups had profit sharing or bonus plans in which profits were distributed equally across all members of the company. Companies struggling with change either had profit sharing or bonus plans that did not deliver (for example, one company could not agree with the union on a date for determining profits), did not have any profit sharing or bonus plans, or had plans that awarded management only. (Employees in one focus group said their company declared a loss, but awarded the CEO a $57,000 bonus.) * Supportive culture. The final issue involved in preparing for and managing change is the creation of a supportive company culture. Employee participants suggested the test of a supportive culture is whether employees are treated with respect and dignity. Are managers willing to help? Do managers have a real understanding of employees' work rather than a theoretical understanding? Are employee skill assessments confidential? Are employees trained so they can retain their jobs? Some of the worst stories we heard were of companies in which employees must ask permission to go to the bathroom (and sometimes cannot get permission) -- a practice that does not reflect an atmosphere of respect or dignity. It is also clear that the changes going on in the workplace have created significant levels of stress among management and labor, especially in those companies that have not prepared for and managed the change effort. Employees are putting in significant overtime (in one company, up to 20 hours of overtime a week for the last two years) and are stretched to the edge. As one business owner acknowledged, "the eight hour work day doesn't exist in business -- period!" A supportive culture recognizes the limits of physical and mental capacity. MANY SMALL AND MID-SIZED BUSINESSES SEEK OUT ASSISTANCE TO SUPPORT THEIR CHANGE EFFORT. WHAT ROLE DO SERVICE PROVIDERS -- VENDORS, CONSULTANTS, COMMUNITY COLLEGES, TRADE ASSOCIATIONS, ETC. -- PLAY IN SMALL AND MID-SIZED BUSINESSES' CHANGE EFFORTS? The ideal role of the service provider is to facilitate the preparation and management of the change process in small and mid- sized businesses. Based on our focus groups, it is clear that many service providers perform that role admirably. Business leaders and service providers had a common vision of what was required of service providers. These requirements include: * Clear Expectations. The foundation of a successful relationship is the establishment of clear expectations up-front. This is true for both the company and the service provider. * Honesty. Honesty is also critical to an effective service provider/company relationship. Several business leaders commented that many service providers are not the experts they claim to be. Some business people use pilot projects to assess a service provider's skills before engaging the provider in a full change effort. Several service providers admitted that while there is a demand for quality services, not all of the available services are of quality. Most of the service providers in our focus groups recognize the value of hard numbers in assessing value, and make every effort to provide quick results to their clients. A few have gone so far as to rely on performance contracts, a concrete method for establishing credibility up front. Further, the majority of service providers we talked to have extensive mechanisms to ensure their organizational and staff capacity is up-to-date. Still, there is a recognized need for a more comprehensive professional development and/or certification system for service providers. * Business experience. Many of the service providers commented on image problems surrounding service providers. For some, it is a problem with being "government," for others an academic or a "university type." It is not surprising, then, that both service providers and business leaders emphasized the need for service providers to have business experience to legitimate their services. * Customized services. Each business owner knows his or her business is unique. Therefore, business owners want service providers who can deliver customized programs tailored to their companies' unique needs. One element of customized service is the content of the service. Most service providers have a variety of on-going activities (e.g., benchmarks, focus groups, on-going dialogues) designed to determine the business community's needs and establish the general menu of services appropriate to that community. Beyond this, quick, on-site assessments are critical to the development of customized content for a specific client. For service providers, the ability to adapt off-the-shelf programs to fit the needs of a specific business is a essential skill. A second element in the delivery of customized services is the process in which the service is delivered. Here, the responsiveness of the service provider comes to the fore. For example, many small and mid-sized businesses cannot afford to send employees away to class. Many businesses also operate around the clock. Can the service provider deliver services on-site at any time of the day? * Commitment. The final requirement for a successful service provider/company relationship is the full commitment of the service provider to the company. Several business people stated that they expected a service provider to "become a part of the company." They do not want a one-shot service; they want a service provider who will work with the company for the long haul, for the duration of the change effort. The company expects to grow in the change effort, and it wants a service provider who will not only help build the company's capacity, but also grow with the company through the change effort. The service providers we talked to translate the "commitment" requirement into a recognition that the relationship is the key: how a service provider works with the company is what is important. One service provider talked about "working the relationship": keeping her ears open when on site, constantly inquiring and providing feedback, and addressing any problems as they emerged. Both business leaders and service providers also recognized that personality plays a significant part in creating and sustaining a successful service provider/company relationship. While many service providers are doing an admirable job facilitating the preparation and management of the change process in small and mid-sized businesses, the focus groups suggest that significant work is needed to ensure the delivery of comprehensive, integrated services to small and mid-sized businesses. There are three areas which deserve attention in enhancing the capacity of the delivery system for technical assistance to small and mid-sized businesses: * Mechanisms for sharing. One of the most consistent requests from all groups was for sharing of information and resources to support change. Both business people and service providers would like to know what others are doing to facilitate change. What works? What doesn't work? What and where are the benchmarks for different processes or programs? What performance measures are used to monitor program progress? Who provides services in what areas? Participants hoped the Collaborative could help leverage existing resources to facilitate change in small and mid-sized businesses. Business participants in our focus groups commented that there is a lot of information available, but the information is not organized or accessible. While business people get a lot of mail from service providers, they do not know how to determine the quality of these service providers. For their part, many service providers would welcome information on how to better work with small and mid-sized businesses. Both service providers and businesses would like easier access to government information (e.g., Department of Labor and Department of Commerce data). Costs are a significant issue for small and mid-sized businesses. Participants in our focus groups said that mechanisms are needed to promote resource sharing. Suggestions ranged from federal and state incentives for change, through cost sharing of programs across companies, to information on where to get available resources (e.g., federal and state grants). Several participants hoped that the federal government would engage in its own cost sharing by more closely coordinating program activities across departments (e.g., the Departments of Labor, Commerce, and Defense). Participants agreed that the Collaborative could provide a critical service by facilitating the exchange information and resources among businesses and service providers. They suggested that hard data be shared through such media as an electronic database, a directory, and/or a newsletter. They also recommended that forums be established for a more personal exchange of information. * Linked Services. The discussions with high performance companies in our focus groups indicate the value of comprehensive assessments and integrated action plans to guide a change effort. The illustrations reveal that what may start as a work restructuring effort ( e.g., manufacturing cells) quickly becomes concerned with issues related to labor management relations (e.g., pay for knowledge), literacy, and/or technical training (e.g., production scheduling). What alternative strategies are there for delivering such integrated services to small and mid-sized businesses? Regardless of the alternative, the focus groups reveal that the services should be regionally based and easy to access. The focus groups provided illustrations of a variety of alternative delivery models. These included: * A full service provider; * A formal consortia of service providers; * An informal network of service providers; * A consortia of companies organized according to industry or common supplier; and * A service integrator that conducts firm assessments and pulls together appropriate service providers. * Marketing. One of the most consistent messages across the business and service provider focus groups was the need to educate and inform businesses about the need for change. There was also a need to inform businesses and service providers about the programs and services available. The focus group participants provided a plethora of illustrations and suggestions for marketing services. These included working with trade and professional associations, quarterly videos on service providers, a technical assistance hot line, service provider fairs, a newsletter with success stories, radio ads providing an 800 number and a fax response, and a dedicated cable channel. CRITICAL ISSUES: 1. The solicitation creating the Collaborative identifies service providers as our clients. The focus groups indicate that many businesses want to guide their own change efforts. The employee focus groups support the Collaborative Board's and Councils' request to consider the effect of change in the workplace on both the firm and the individuals in the firm. Who are the Collaborative's clients? 2. What are the value-added services the Collaborative should develop and provide to address the needs and concerns emerging from the focus groups? 3. How do we balance the Collaborative's role as a national entity with the need to empower regional change efforts? 4. How do we establish a level of quality and validity to the information provided by the Collaborative? 5. What is the best way to ensure that the Collaborative remains responsive to its clients? Stephen M. Mitchell Terri Bergman National Alliance of Business