(For best results, view and print this document in 10 point Courier or a similar mono-spaced font.) NATIONAL WORKFORCE ASSISTANCE COLLABORATIVE Employee Training Briefing Paper DEFINITION Technical training is training designed to improve the ability of individuals to meet job requirements. It differs from educational programs in that it is directly tied to job performance, not the ability of an individual to be a better member of society or a more well-rounded person. It presumes workers have adequate basic skills to support their performance on technical, job-related tasks. In practice, however, the distinctions between literacy/basic skills training and technical training become blurred, particularly in high-quality workplace literacy programs that teach literacy through the functional context of the job, and high-quality technical training programs that integrate literacy and skills training. Definitions of technical training vary widely. Some experts, such as Anthony Carnevale, define it narrowly to include only the training to develop, install, and maintain new technology. Federal policy makers tend to define technical training as any training designed to improve a worker's performance on the job that is not literacy/basic skills training. This latter definition could include technical and skills training; professional training; training to meet regulatory requirements placed on the workplace; customer interface training; and managerial, supervisory, and executive training. The National Workforce Assistance Collaborative must determine whether it wants to provide assistance in all of the areas encompassed in this broad definition, or whether it should focus on some subset of these areas that is key to improving the competitiveness of small and mid-sized businesses. Recent estimates suggest that employers spend from $30 to $48 billion per year on training activities, excluding the considerable amount of training provided informally on the job. Analysis of training expenditures show that training occurs predominately in large companies (over 1,000 employees), with only insignificant training investments being made by small and mid-sized businesses. Just 15,000 employers (0.5 percent of the total) account for 90 percent of the $30 billion spent on training annually, according to the American Society for Training and Development (ASTD). MARKET STRATEGY Historically, the customer for technical training has been the employee, not the company itself, and technical training has been largely employee-driven. Among small businesses, the market demand for technical training is driven first and foremost by changes in technology, and secondarily by customer requirements placed by large companies on their small and mid-sized suppliers. The impact of technology on training in small and mid-sized businesses is mitigated by the fact that, as a nation, we under- invest in technology and equipment compared with other countries, and train insufficiently for the equipment we do purchase. Our investment in technology and equipment is half that of the Japanese, and only two-thirds that of the commitments among the G-7. Where numerically-controlled machine tools are installed in the U.S., only 25 percent of workers are trained in their use, as compared with virtually 100 percent in Japan. To maximize the competitiveness of American businesses, we must stimulate increases in both technology investments and the training investments needed to assure that the technology is optimally used. The gap is massive between the level of technology-related training provided currently and what would be needed if we invested in technology at the levels of our international competitors. Few employees outside companies with over 10,000 employees get training. Only 16 percent of American employees have ever had any training from their employers. The good news is that this percentage is on the rise: in 1983 the Bureau of Labor Statistics reported that only 11 percent of employees received formal training from their employers. ASTD estimates that, by the year 2000, 23 million people will be employed in professional and technical jobs that will require ongoing training. An additional 50 million workers, it says, need additional training just to perform their current jobs effectively. Typically, workers at firms with fewer than 100 employees have greater training needs than those at larger firms, because they tend to be less well educated and have a less stable employment history than do workers at the larger firms. However, small firms are less likely than larger firms to provide structured training because they have higher labor turnover and less access to capital to finance training. They are also less likely to participate in subsidized training programs because they frequently lack awareness about such programs, and lack the capacity to handle the administrative requirements associated with such programs PRODUCTS AND SERVICES The technical training needs of small and mid-sized businesses are currently being met through technology vendors, community colleges, training consultants, industry trade associations such as National Tooling and Machining Association, and training consortia such as the Consortium for Supplier Training. The training needs of individual employees may be met through proprietary schools or adult basic education programs as well. Although the largest provider of incumbent worker training is the community college system, anecdotal evidence suggests that equipment vendors are the predominant training providers for small businesses. In addition, some large companies provide training to their small company suppliers. Communications among service providers generally are segmented by the type of provider. That is, in-house trainers communicate with each other, community college personnel communicate with each other, etc., but rarely do the communication lines cross provider lines. In the typical, small, family-owned business, training is generally provided to the owner and the other family members who are a part of the business. The family then in turn trains the rest of the employees, so that the core knowledge is kept in the family. The training needs of employees at other types of small companies are usually met by supervisors or co-workers informally teaching new hires (Office of Technology Assessment). Traditionally, federal programs in employment and training have provided skills training to those outside of the workforce: the unemployed, the dislocated worker, and the future worker. Only recently have federal industrial modernization policies created explicit, though largely unfunded, links to training investments, through Manufacturing Technology Centers and the Technology Reinvestment Program in particular. The federal government has also funded incumbent worker training through adult basic education, a very fragmented system. In 1991, the federal government sponsored 78 separate adult basic education programs through 12 different federal agencies (Jobs for the Future). The states have been more active in this arena, though the level of their investments is still very small. Seventy state- financed workplace training programs are run in 46 states, according to the National Commission on Employment Policy. States spent a total of $375 million on workplace-based training programs in 1989. The highest funding levels reported were in California ($55 million), Illinois ($37 million), Ohio (32 million), and Michigan ($25 million). The "typical" (median) state devoted less than $2.5 million to these programs and served fewer than 4,000 employees. A 1990 study by Northern Illinois University found that most state programs were serving small and mid-sized businesses. Only one state program (out of 45) reported spending 70 percent or more of its funds on companies with 500 or more employees. In contrast, seven spent all of their money on small to mid-sized companies (those with fewer than 500 employees), 11 spent 90 to 99 percent of their money on small to mid-sized companies, 16 spent 65 to 89 percent on small to mid-sized companies, and 6 spent 31 to 64 percent on small to mid-sized companies. Nevertheless, the administrative burden of applying for state funds might be excessive for many small and mid-sized companies. According to Northern Illinois University, many large states work through umbrella organizations such as community colleges and trade associations to address the common training needs of small businesses. RESEARCH AND DEVELOPMENT Research resources in the training field include the American Society for Training and Development, The Modernization Forum, the Committee on Postsecondary Education and Training for the Workplace, the Center for Science and Technology Policy, the AFL-CIO, and the American Association of Community Colleges. National research is housed in the U.S. Department of Labor, the Department of Education's Office of Vocational and Adult Education, and in the military. State and local governments generally have information on state or local labor market requirements for training and area training providers. Little cross-cutting research exists on the training needs of small employers. Most of the existing information is anecdotal at best. There is a great need for quality research that goes beyond case study examples of training in small and mid-sized businesses. Perhaps the best information can be obtained through state customized training programs such as Illinois' Prairie State 2000 and California's Employment Training Panel, state economic development offices, and trade associations. Further attention also should be paid to the development of collaborative networks that allow businesses to share costs. The Consortium for Supplier Training represents one model. The school- to-work demonstration programs offer other models of small business collaboration, as do the training programs offered by the National Tooling and Machining Association. Little attention has been paid to the use of loans to individuals or institutions to encourage work-based learning. This area of inquiry, including methods for linking such training to workplace needs, merits more attention. ORGANIZATION AND MANAGEMENT Anthony Carnevale characterized the organization and management of the technical training "system" as a "crazy quilt." The technical training field has no clear boundaries, potentially including such disparate disciplines as organizational training, technology-related training, skill training, customer interface training, strategic training, professional training, and regulatory compliance training. Training providers range from in-house trainers, equipment vendors, large customer companies, and consultants, to community colleges and universities, industry trade associations, and training consortia. The training needs of individual employees may be met through proprietary schools or adult basic education programs as well. These diverse training providers remain relatively segregated, with little cross communication across the provider categories. Much of the current training system is geared to providing services to individuals, and not companies. This focus needs to be shifted if technical training is to have a meaningful impact on the productivity of small and mid-sized companies. FINANCIAL INFRASTRUCTURE By and large, training services are provided to those who can pay, and those who can pay are primarily large businesses. However, there are a number of strategies small companies with small training budgets can use to reduce their costs for training. Small and mid-sized businesses can form collaborative networks with employers with similar training needs and share training costs. They can apply for grants from government training agencies and obtain assistance from the technology programs that are trying to integrate training into their technology assistance efforts. And, by accessing community colleges and participating in school-to-work programs, small and mid-sized businesses can have some of their training costs subsidized by the public sector. Much greater attention needs to be given to developing mechanisms to allow and encourage small and mid-sized businesses to share training costs by collaborating with the public sector. INTEGRATION There are stellar examples of technical training being productively integrated with workforce literacy, work restructuring, and labor-management relations programs. However, the vast majority of technical training service providers operate separately and distinctly from service providers in the other fields. The division between technical training and workforce literacy is blurred in functional context workforce literacy programs and in integrated literacy and skill training programs. In the large majority of cases, though, workforce literacy programs and technical training programs are developed and delivered by different service providers with little or no connection to each other. Technical training can also be integrated into comprehensive work restructuring programs involving the redesign of both work processes and employer-employee relationships. In such instances, technical training is used to provide employees with the skills needed to operate productively within the new systems. Because there is some overlap in the institutions that provide technical training services and workforce literacy, work restructuring, and labor-management relations services (e.g., community colleges and universities), there is great potential for breaking down the barriers between disciplines and providing comprehensive services to small and mid-sized businesses. EXTERNAL ENVIRONMENT The Clinton Administration has shown great interest in determining an effective means for increasing employers' investments in training. Initial discussions focused on the use of tax credits or tax levies (such as France's mandate that employers spend 1.7 percent of payroll on training). Currently, employers spend 1.02 percent of payroll on training, with companies considered training leaders spending 3 to 10 percent of payroll. The administration is now considering a strategy to encourage employers to voluntarily increase their training investments. Both the Clinton Administration and state policy makers have taken a keen interest in measuring the returns to training. The Department of Labor's Office of the American Workplace is funding several projects on performance measurement. Motorola, commonly acknowledged as one of the leaders in corporate training, reports that every $1 it spends on training yields $30 in productivity gains over a three year period. However, the research on the "pay-off" of training is meager at best; it dwindles to nearly nothing when the focus is exclusively on small and mid-sized businesses. Another area of interest is in establishing common definitions and measures for training and training outcomes. There is an inter- agency effort underway to create core data elements and common definitions for employment and training programs. A report should be forthcoming in a few months. The National Institute for Literacy has a project to develop national performance standards for literacy programs. There will also be an initiative to develop performance standards in conjunction with the new welfare reform legislation. The Goals 2000: Educate America Act calls for the development of both academic standards and industry/occupational skill standards. ASTD has created a Benchmarking Forum composed of training leaders attempting to benchmark their training practices and processes. A number of the federal initiatives, most notably the School- to-Work Opportunities Act and the Goals 2000 legislation, demonstrate the federal government's keen interest and commitment to work-based training strategies that involve collaboration between the public and private sectors. A number of demonstration programs were funded, and their experiences were used to inform the development of the national legislation. CRITICAL ISSUES 1. What categories of training should the Collaborative focus on in order to most effectively enhance the economic competitiveness of small and mid-sized businesses? 2. The paper makes the point that the current delivery systems for technical training are focused at the individual level, not the firm level. While the firm focus allows for a greater alignment with company-specific objectives, it may not be cost effective for small and mid-sized businesses. How can the Collaborative help service providers meet the company-specific training needs of small and mid-sized businesses in a cost effective manner? 3. How can the tie be strengthened between employee-initiated training and workplace demands? 4. How can the Collaborative build on the institutional overlap among technical training service providers and workforce literacy, work restructuring, and labor-management relations service providers, to promote the development and delivery of integrated services for small and mid-sized businesses? 5. Modern competitive performance standards require quality, efficiency, variety, customization, convenience, customer service, speed, and continuous innovation (Carnevale). These are standards that businesses apply when making a training investment. How can these standards be met given the limited training resources of small and mid-sized businesses? 5. The business community is not supportive of either training tax levies or tax credits as a means to encourage increased private sector investment in training. How can the Collaborative encourage private sector investment in training? Louise Bertsche National Alliance of Business Matthew Coffey National Tooling and Machining Association