document resume ed 326 711 ce 056 555 author ...document resume ed 326 711 ce 056 555 author...

DOCUMENT RESUME

ED 326 711 CE 056 555

AUTHOR Seitchik, Adam; And Others

TITLE Employer Strategies for a Changing Labor Force: APrimer on Innovative Programs and Policies. ResearchReport 90-01.

INSTITUTION National Commission for Employment Policy (DOL),Washington, D.C.

PUB DATE Jul 90

NOTE 169p.

PUB TYPE Guides - Non-Classroom Use (055)

EDRS PRICE MF01/PC07 Plus Postage.

DESCRIPTORS Adult Basic Education; Adult Educatix1; *BasicSkills; Case Studies; *Demonstration erograms;Dependents; Employer Supported Day Care; *EmploymentPractices; Entry Workers; Fringe Benefits; JobPlacement; *Labor Force Development; OccupationalTests; *Personnel Policy; Program Design; ProgramImplementation; Recruitment

ABSTRACTThis guide is for employers to use in planning future

human resources strategies. Part 1 focuses on three practicalstrategies germane to most labor and skill shortage problems. Thefirst chapter reviews challenges employers face. Chapter 2 presentstwo basic strategies for strengthening entry-level recruitment andstaffing: strengthenir-s the basics and broadening the recruitmentnet. An appendix presents issues involved in developing workplacetesting programs. Chapter 3 reviews major issues in the design andimplementatisn of basic skills programs. The fourth chapter discussesthe importance of dependent care benefits, employers' responses,planning a dependent care benefit, and alternative program models.Part 2 contains case studies of five organizations that developedsuccessful programs and policies in response to labor force changes:the Alliance for Employee Growth and Development, a joint humanresources development venture; Highland Park Day Care Center, aconsortium-based model for providing on-site child care services;Superior Technical Ceramics, which implemented an in-house basicskills program; .,ancaster Labs, Inc., which built its own on-site daycare facility; and Motorola Inc., which implemented basic skillsprograms. The case studies present a detailed account of theexperience of each organization and outline key lessons and issuesthat emerged in program implementation. (YLE)

Reproductions supplied by EDRS are the best that can be maclefrom the original document.

EMPLOYER STRATEGIESFOR A CHANGING

LABOR FORCE:

A Primer on Innovative Programs and Policies

Research Report 90-01

Prepared by:

Adam Seitchik

Jeffrey Zornitsky,Project Director

wIth the assistance ofChristopher Edmonds

July 1990

U DEPARTMENT OF EDUCATIONOffice ot Educational Research and Impayventent

EDU TIONAI. RESOURCES INFORMATIONCENTER

na document has been reproduced asteceived from the person or capanizationoricenabbp ot

Minot changes have been tnade tO improvereproduction qualtty

Points ot vtew Of opinions stated in tha docu-ment do not necessarily represent permitOE RI position or policy

National Commission for Empioyment Policy

BEST COPY AVAILABLE

2

ACKNOWLEDGEMENTS

The successful completion of this monograph would not have been possible withoutthe support of many organizations and individuals. We are indebted to the

National Commission for Employment Policy for providing financial support. We arealso grateful to Ms. Kay Albright, Ms. Elaine Brady, and Ms. Barbara Oakley of theCommission for supporting the project and for provi ling valuable guidance throughoutits duration.

Very helpful guidance and advice were also forthcoming from the many organizationsthat gave their time to the project. The American Bankers Association, the AmericanSociety for Training and Development, the Committee for Economic Development, theNational Affiance of Business, the National Association of Manufacturers, the NationalFoundation for Independent Businesses, the National Governors Association, the SmallBusiness Administration, and the U.S. Chamber of Commerce each helped to frame theissues and potential strategies that firms could reasonably be expected to pursue.

In addition, we would like to thank the five businesses and labor-managementorganizations that allowed us to visit their workplace programs and communicate ourfindings to the public. The Alliance for Employee Growth and Development, LancasterLabs, Motorola, Superior Technical Ceramics, and the Woonsocket IndustrialDevelopment Corporation were gracious and very forthcoming in helping us tounderstand their programs.

Finally, we want to thank Mr. Steven Marcus of Abt Associates who provided valuablecomments on early drdts of the monograph.

4,2

LIST OF CONTRIBUTORS

ORGANIZATION

The Alliance for Employee Growthand Development

American Institute of Banking

American Society for Trainingand Development

Committee for Economic Development

Congress of the USStaff, House Committee on Laborand Education

Consumer Value Stores

Delaware Chamber of Commerce

Devry Institute of Technology

Eastland Savings Bank

tinployment Resources Inc.

Lancaster Laboratories Inc.

Magic Years Childcareand Learning Centers, Inc.

Motorola Inc.

National Alliance of Business

t:t)

NAME OF CONTRIBUTOR

Marshall GoldbergRoy HoveyFrank LeoneKaren Richards

William BrowningPeter Carlivati

Tony CarnevaleEdward Schroer

Nathaniel Semple

Steve BartlettBeth Beulman

Janice Stanovich

Ruth Mankin

Donald Ingram

Cheryl Poholek

Rosemary Bickerton

Earl HessCarol MillerAnn OsborneMargaret Stoltzfus

Michelle Harwick

Mary FordJim FrasierBob HoldernessSusan HookerSylvia OhanesianNancy RusJeanne Stoner

Fred FrederickVirginia Rebata

National Association of Manufacturers Christian BraunlichDiane Generous, Esq.Randy Hale

National Foundation for William DennisIndependent Businesses David Jones

John Sloan

National Governors Association Evelyn Ganzglass

Saville & Holdsworth Ltd., USA, Inc. Walter JacksonRobert Sharron

70,001 Ltd. Lisa Hawkins

State of Georgia Robert MaburyDepartment of Technicaland Adult Education

State of Iowa Al ClausenDepartment of Economic Development

State of Mississippi Karl HaigkrOffice of the Governor

Superior Technical Ceramics

US Chamber of Commerce

Earlyn ChurchTheodore ChurchRichard FeeserBrian GoldRobert Harris

Fred KrebsRobert Martin

US Small Business Administration Jules Lichtenstein

Wellesley College Mickey Seligson

William Rainey Harper College Patricia Mu !crone

Woonsocket Head Start and Day Care Karen BouchardSusan Washburn

Woonsocket Industrial Scott GibbsDevelopment Corporation

Workplace Solutions Lic. Susan O'ConnorMarie Sweeney

6

t.'7

PREFACE

The world of work is changing dramatically. Increased domestic and iv- Tnationalcompetition, new technologies, and lagging productivity growth are just a few of

the major challenges facing American business. As companies adapt their goals andstrategies to these developments, the very nature of work will also be affected. In thisenvironment, strategic plans must include provisions for the efficient and effective useof human resources.

Over the next ten years, millions of jobs in the goods-producing and service sectorswill be restructured and, as a result, will require different and often new skills. Largenumbers of jobs will also be replaced by new occupations, many of which will demandhigher skill levels than those eliminated. Because workers who do not have the rightskills cannot perform their jobs, American businesses face the challenge of developingspecific strategies to ensure that their workers have the capabilities needed to adapt tothese changes.

First, with fewer workers from which to choose, employers have to make greater useof incumbents. While training existing workers is not new, a labor shortage environmentmakes the training payoff even more important. It also requires dipping further intointernal labor queues to meet new skill needs. As employers have attempted this, asurprisingly large number of experienced workers have been found with basic skillsdeficiencies sufficient to prevent them from participating in retraining and upgradingprograms successfully. Inthese instances, existing training programs alone have notbeen enough to facilitate the-development of new skills and kn, wledge. It has becomeapparent that retraining and upgrading incumbents will require integrating skillstraining with a more planned process of development that includes basic skillsremediation.

Since future output requirements cannot be met solely by increasin6 the productivityof existing workers, employers also have to recruit new workers. However, newworkers are in short supply and many of those available for hire are disproportionatelyfrom groups that bring to the workplace a different set of needs and desired benefits,ranging from basic skills training to dependent care and flexible work policies. Unlessefforts are made to recruit these new types of workers and address their training andemployment needs, employers will have difficulty meeting their hiring requirementsand remaining competitive.

This monograph promotes awareness of these issues by reviewing steps employers cantake to respond to changes in the size and composition of the labor force. It is designedas a primer for small and large businesses who are getting started on these issues andwho can benefit from an introduction to them. The monograph focuses on three basic

strategies germane to most labor and skill shortage problems, including: 1) improvingthe entry-level recruitment and staffing function; 2) planning and implementing basicskills and related training programs; and 3) introducing dependent care and workrelated policies. For each of these strategies, the monograph reviews key planning andimplementation issues as well as the experience that many employers have had inaddressing them.

To prepare the monograph, the authors relied on the experience and advice of manyindividuals, organizations, and businesses. In-person and telephone interviews wereconducted with representatives from business groups, government agencies, andprogram providers who are concerned with labor and skill shortage problems. Theyalso conducted an extensive review of the literature and visited a number of businesseswhich were identified as having implemented successful workplace programs andpolicies. The information that was collected was synthesized and used as the basis forpreparing what is hoped to be a useful and practical guide that employers can use as aroad map for planning future human resources strategies.

Organization of the Monograph

The monograph is organized into two major parts. Part I focuses on practicalstrategies that firms can take to address challenges posed by changes in the labor force.The first chapter is an overview and briefly reviews the nature of the challenges faced byemployers. The remaining three chapters focus on innovative practices and progiamsthat can be implemented to: 1) strengthen entry-level recruitment and staffing; 2)establish workplace basic skills programs; and 3) develop dependent care and relatedpolicies

Part II of the monograph includes the results of visits to five organizations that havedeveloped successful programs and policies in response to labor force changes. Theseorganizations include: 1) The Alliance for Employee Growth and Development, a jointhuman resources development venture of AT&T, the Communications Workers ofAmerica, and the International Brotherhood of Electrical Workers; 2) The Highland ParkDay Care Center, a consortium-based model for providing on-site child care services tosmall and large businesses; 3) Superior Technical Ceramics, a small manufacturer inVermont that implemented an in-house bask skills program; 4) Lancaster Labs, Inc., asmall testing business that built its own on-site day care facility; and 5) Motorola Inc., alarge electronics manufacturer that implemented a variety of basic skills programs for itsworkforce.

These case studies present a detailed account of the experience of each organizationand will provide the reader with the benefits of key lessons and issues that emerged inthe implementation of labor shortage policies and programs.

TABLE OF CONTENTS

PART ONE - An Introduction to Innovative Programsand Policies

CHAPTER 1 : The Challenge Of A Changing Labor Force 1

The Challenges Ahead 3

Surviving as a Small Business 6

CHAPTER 2 : Strengthening Entry-level Recruihnent andPlacement 11

Is There a Need for Change? 11

Strengthening the Basics 14

Broadening The Recruitment Net 25

CHAPTER 2 - APPENDIX : Issues In Developing A WorkplaceTesting Program 39

The Uses and Benefits of Workplace Testing 39

Alternative 'Types of Tests 40

Implementing Testing in the Workplace 42

CHAPTER 3 : Establishing Workplace Basic Skills TrainingPrograms 49

The Basics of Basic Skills 52

Identifying and Documenting Basic Skills Problems 57

Key Design Issues In Basic Skills Training Programs 58

Implementing the Basic Skills Program: OperationalConsiderations 69

CHAPTER 4 : Developing A Dependent Care Benefit 75

Why Are Dependent Care Benefits Important? 75

Recent Employer Experiences With Dependent Care 77

Planning For Dependent Care Needs 80

Creating a Dependent Care Benefit: Alternative ProgramModels 86

b

PART TWO - Case Studies

Introduction 107

Basic Skills and Upgrading Programs of the Alliance ForEmployee Growth and Development 109

The Technician for Tomorrow Training Program 112

English as a Second Language naining 114

Qualifying Exam Preparation Programs 116

The Highland Park Day Care Center 119

Introduction 119

An Innovative Consortium: The Highland Park Day CareCenter 121

Center Management and Financing 123

Issues in Project Development and Implementation 126

Assessment of the Woonsocket Day Care Consortium 127

Dependent Care Benefits at Lancaster Labs Inc. 131

Introduction 131

Dependent Care Benefits at Lancaster Labs '132

Development, Implementation, and Expansion 135

Assessment of the Child Care Experiment at Lancaster Labs 137

Basic Skills Training at Motorola Inc 139

Introduction 139

Corporate-wide Policies at Motorola 139

How Motorola Got Into the Basic Skills Business 140

Dasic Skills naining: Motorola Communications Sector,Fixed Products Division Plant In Shaumburg, Illinois 142

Development and Refinement of the Basic Skills Programin Schaumburg 144

Lessons from Motorola 146

Training Programs at Superior Technical Ceramics 149

Introduction 149

Structure of the naining Programs 151

Program Development, Refinement, and Expansion 154

Assessment of 'fraining Programs at Superior TechnicalCeramics 155

1 0

Part I

An Introduction toInnovative Programs and

Policies

;1

CHAPTER 1

THE CHALLENGE OF A CHANGING LABORFORCE

The challenge of meeting workplace needsappears in many respects to have never beengreater. At the same time that employers areincreasingly seeking well trained andeducated workers, fewer individuals will beavailable for work. Between now and theyear 2000, the nation's aggregate labor forceis projected to grow more slowly than at anytime since the 1930s.1 The number of 18 to24year olds, for example, will decrease toroughly 23 million in 1995, down from 28.9millior in 1980. By 1995, there will be 2.2million fewer labor force participants in thisage group in comparison to 1986. The slowgrowth of the labor force and thediminishing numbers of new, youngworkers present the nation's employerswith potentially unprecedented laborshortages, placing substantial pressures ontheir wage structures, recruitmentfunctions, and efforts to retain and developexisting employees.

The reduced rate of labor force growth willbe exacerbated by important changes in the7omposition of the labor force.2 Incomparison to the workforce of the 1970sand early 1980s, future workers will be olderand more likely to be women, minorities,immigrants, and those from educationallyand economically deprived backgrounds.By the year 2000, 80 percent of all new labormarket entrants will be composed of the firstthree of these groups. Moreover,immigrants are projected to account for 22percent of all new workers between 1985

and 2000, in comparison to their 7 percentshare of the labor force in 1985. A major partof the solution to the potential labor shortageproblem will likely require grea ter a nd moreefficient use of these new sources of labor.

Changes in the size and character of thenation's labor force have been welldocumented. In fact, the issue is hardlynews to most companies and public policyofficials. Trade and business tabloids, thenewsprint, the broadcast media, as well asscholarly journals have devoted substantialattention to these current and forthcomingchanges in the magnitude and nature of thelabor force. Yet for all the reswrch andpublic discussion, most employers havelimited experience with addressing thehuman resource implications of thesechanges. While there are several suchimplications, six have been highlightedconsistently:

1. The growing shortage of availableworkers will require companies todevelop new policies andprocedures that increase employeeproductivity and retention, andfacilitate career and skilldevIlopment among existingworkers. Increased on-the-jobtraining and offsite educationaldevelopment as well as changes incompensation and benefits willlikely be among the options that willrequire new, creative attention.

Employer Strategies for a Changing Labor Force

2. The shift in the characteristics ofavailable workers will require newrecruitment strategies. The use ofhelp-wanted advertisements an4professional search firms will likelyprove ineffective for many segmentsof the available workforce.Employers will increasingly have toreach out to prospective employeesthrough non-traditional recruitmentagents such as local governmentagencies and community-basedorganizations.

3. The increasing share of workerswith limited skills and educationwill expand the need for literacy andbasic skills training, both on- andoff-the-job. It may also requiremodifications in hiringrequirements, job restructuring, andnew career ladders and associatedtraining. While public educationand training institutions have animportant role to play here,companies will also be faced with aneed to promote literacydevelopment and make maximumuse of available workers.

4. The projected growth of theimmigrant labor force will add to theneed for literacy training. It will alsointroduce new issues fororganizational cultures to address.English-as-a-second language aswell as cultural sensitivity Miningwill become more important as theimmigrant population expands itsshare of the labor force.

5. The aging of the labor force willtranslate into an increased demandfor part-time and flextimeemployment and greater demandfor elder-care. As a result,companies may need to reconsider

2

their retirement and pension policiesas well as their ability to address theneeds many employees will have forelder-care.

6. The ccntinued growth of dualworking families and sing'ie motherworkers will add to the alreadystrong demand for child-careservices and flexible workplacepolicies. More attention will have tobe placed on developing creat've,cost-effective solutions to thegrowing need for day-care and othersupportive policies. Eextime, jobsharing, employer sponsoredchild-care, referral services, andflexible leave policies are among thetypes of alternatives that will likelyreceive increased attention.

To date, the bulk of attention to these issueshas focused on supply-side public policies,particularly as they relate to new andemerging sources of labor. There has been agrowth of sponsored research studies aimedat examining the importance of basic skillsin the workplace as well as the specialtraining and employment problems facedby rapidly expanding segments of the laborforce. Demonstration programs and effortsto create public-private training aryleducation partnerships have also beeninitiated.

This public policy orientation has made animportant contribution to ourunderstanding of labor shortage problems.It has underscored the need forimprovements in the quality of educationand training in the U.S., and provided abetter understanding of the training,remedia tion, a nd related employment needsof new emerging segments of the labor force.At the same time, limited attention has beendevoted to steps that firms can take to adjustto labor and skill shortages.

The evidence that does exist on employerresponses to labor shortages suggests ashort-term streegy with little emphasis onchanging recruitment practices, internaltraining, or the structure of jobs within theworkplace. According to a recent nationalsurvey, only 28 percent of all respondingfirms targeted the economicallydisadvantaged as a new source of labor andjust lb percent targeted immigrants, one ofthe fastest growing segments of the laborforce. In addition, the findinga from thissurvey and other similar surveys haveindicated tha t, in addition to wage increases,most firms have responded to laborshortages by intensifying traditionalrecruitment, hiring, and developmentstrategies (e.g., greater use of help-wantedadvertisements and recruitment bonuses).The introduction of upgrading, retraining,and basic skills programs, changes inoccupational staffing patterns, jobrestructuring, and even dependent care arestill offered by only a small proportion of allemployers.3

Given these results, it would seem thatemployers may need to do more. Continuedchanges in skill and education requirementsalone suggest the need for greater levels ofupgrading and retraining. When combinedwith a slow growing and aging labor forcethat is also undergoing demographic shifts,it is clear that a new era in human resourcesmanagement is emerging.

The Challenges Ahead

As we approach the next century,employers will face several critical humanresources challenges. Three, in particular,will likely affect a broad spectrum ofemployers across both industry lines andsize categories. These include:

1. The Basic Skills Challenge

Chapter One

2. Changing Worker Expectations

3. Human Resources as a Long-Term Investment

The Basic Skills Challenge

Basic skills have emerged as an importantissue for three reasons. The first is that risingeducation and skill requirements haveincreased the demand for workers who areable to learn new, Liore ad va nced skills.4 Asemployers have had to rely increasingly ontheir existing workforce to acquire theseskills, they have found a surprisingly largeshare without the basic skills needed toparticipate in upgrading and retrainingprograms successfully.

Problems with basic skills have alsosurfaced as a result of organizationalchanges that demand more independentinitiative and problem-solving, and placegreater reliance on teamwork. In theseinstances, employers have looked for theirworkers to display strong communication,leadership, and conflict management skills.Since the majority of American workershave not gone beyond high school, andbecause a rising share have already settledinto their careers, many have not had theopportunity to learn or practice these newtypes of skills that are beco-ning moreimportant in the workplace.s As a result,difficulties have often emerged asemployers attempt to introduce new, moreproductive forms of organizationalmanagement.

Another part of the basic skills issue i elatesto the characteristics of many new workers.Ii tle U.S. toda y, la rge proportions o f youngadults are functioning at relatively lowlevels of basic skills. As shown below, just".1.5 percent of all individuals 21 to 25 yearsof age can read at the eleventh grade level.Among those with a high school diploma

Employe Strategies for a Changing Labor Force

and some post-secondary education, as fewas 55.9 percent read at this level. Althoughsubstantial progress has been made ineducational achievemAnt overall, theevidence would seem to suggest that it hasnot kept pace with rising workplacedemands. In fact, recent test score resultspublished by the Educational TestingService reveal that most of the gains ineducation have been made at the bottom ofthe achievement ladder. While moreindividuals can function at minimum levelsof literacy, there have been few, if any, gains

at higher levels of literacy that are oftenrequired for todays jobs.6

Additionally, educatk. al gains have notbeen uniform across all demographicgroups. While minorities have made

)stantial gains in education, they lagsignificantly behind whites! Sinceminorities will account for adisproportionately large share of total laborforce growth over the next ten years, theirbasic skills deficiencies are both moreevident and problematic for employers andsociety in general.

Percent of Young Adults (21 to 25) at or Above the AverageReading Proficiency of 4th, 8th, and llth Graders

LEVEL OF EDUCATION RACE/ETHNICITY

H.S.Diploma

andPost-

SecondaryGrade Total 0-8 9-12 More Degree White Black Hispanic

11. 61.5 15.1 214 55.9 83.3 61.6 334 52.3

8 79.8 37.0 $3.6 77.9 95.6 85.0 S3.0 70.9

4 94.0 73.3 761 94.7 99.6 I 96.2 82.2 92.4

,

Source: Irwin S. Kirsch and Ann Jungeblut, Literacy: Profiles of America's Young Adults,Educational Testing Service), Report No. 16-PL-02, Princeton, NJ.

Facing up to these basic skills challenges iscritical. They have a clear bearing on theeffectiveness of existing upgrading andretraining programs and the ability of firmsto recruit new workers and employ themsuccessfully. The seriousness of thechallenge is also evident from the fact thatthe vast majority of employers do not

currently offer basic skills training and havenot yet begun to recruit from many of thegrowing segments of the labor force.8 Theexperience of those employers who haveintroduced basic skills programs for existingworkers or new recruits indicates thatengaging adults in a structured workplacelearning environment can be difficult.

4 15

Unless steps are taken to address thischallenge, many firms will be hard pressedto meet their hiring and skill requirementssuccessfully.

Changing Worker Expectationsand Needs

Not so long ago, the average Americanworker could be characterized as a manearning enough to care for his family,including his wife, who more often than notstayed at home to care for the children. Thisman would typically experience a"settling-in" process early in his career, andeventually find a job and aLt employer withwhom he would be lucky enough to staywith for a long period of time if not his entirecareer. Over the last twenty years, severaldevelopments changed this picture sharply,and modified thelmsir relationship betweenworkers and their jobs.

One was the rapid growth of woikingsingle mothers and another was the sharpincrease in dual-working families. TheAmerican labor force is no longerdominated by the male wage earner. Today,women are employed in a variety ofoccupations and industries, and because oftheir large numbers and rising educationlevels, are coming occupy a largerproportion of the highest paid and mostresponsible jobs in the U.S.9

Another development has been thecontinued effort by American firms todownsize and otherwise adjust the1i6workforces to be more competitive.Beginning in the early 1980s, large numbersof workers were displaced from their jobs asa result of plant closings and permanentreductions in force. It is estimated thatbetween 1981 and 1986, for example, nearly8.8 million full-titne workers lost their jobsfor these reasons. While the back to backrecessions beginning in 1980 were a major

Chapter One

cause of these reductions, firms havecontinued to downsize their workforceseven (1.-:ing times of strong economicgrov.-11.. A recent survey by the AmericanManagement Association indicated thatbetween 1988 and 1989, 39 percent of U.S.employers had reduced their workforces toaddress competitive pressures. For manyworkers, these developments have shakenthe basic expectation of long-term jobsecurity and introduced the strongpossibility that employment over one'slifetime will likely involve working forseveral different employers.

As these changes have taken hold, theyhave modified the basic relationshipbetween workers and their jobs andparticularly, what employees expect fromtheir empioyers. As a result of the rise indual-working families and single motherworkers, the demand for child careassistance has also incieased. It has becomeevident that employees look to theireinbloyers for assistance with securing carefor MAr children, whether it be throughon-site centers or through informationreferral service. With more workingparents, employers have also been facedwith a rising demand for greater workplaceflex;:iiiity that allows employees to betterbalance their responsibilities andcommitments to their careers and theirfamilies. Employers who do not addressthese issues have, and will continue to befaced with recruitment difficulties, higherturnover, and more frequent workinterruptions.

Changes have also occurred in howemployees view their careers and theircommitment to an employer. As a result ofmore frequent layoffs, organizationalchanges, and job restructuring, the promiseof long-term security with one employer hasbeen all but eliminated. This is as true forwhite-collar professional workers as it is for

Employer Strategies for a Cr?nging Labor Force

the blue-collar production workers.Throughout the U.S., greater numbers ofworkers are having to think in terms of"career security," and often look to theiremployers to play a greater role in skillupgrading and retraining and in providingcareer counseling and other related supportservices.

Human Rasources As a Long-TermInvestment

All signals indicate that a new frameworkis needed to manage several key elements ofthe human resources function. Continuedeconomic restructuring, a slow-growingard aging labor force, and increasingdemand for a skilled, educated, and flexibleworkforce will make it important foremployors to invest in their employees andestablish policies to support their continueddevelopment. Making these investments issensible only if employers view theirworkers as long-term investments.

As things now stand, employers have aninterest in their workers acquiring the skillsand capabilities related directly to their jobs.This enhances productivity and limits theextent to which workers can take their newskills to other employers. Indeed, theeconomics of retraining suggest thatemployers can benefit directly horn makingthe increased investments that may bewarranted to ensure that their workers canperform productively on their jobs.

While workers can also benefit from thistype of specific training, more broadly basedcareer development, including theacquisition of basic skills, is potentially morerisky for employers since it is marketable toa wide range of other firms. At the sametime, helping workers acquire these basicskills and prepare for change is what is oftennecessary for upgrading and retrainingprograms to be successful. Despite the

potential costs of these services, continueddownsizing, and changes in skillrequirements and the labor force may wellmake them unavoidable. By adopting along-term perspective, employers will bebetter able to realize the benefits of theseinvestments since, even in the short-term, itwill help to promote productivity and lowerhiring and other related transaction costs.

Taking a long-term perspective is also whatis needed to support dependent care andrelated policies. While it is surely possibleto manage without such policies, over timeemployers will likely face continued hiringand retention problems as well as morefrequent interruptions to work. Humanresources are the wealth of nations, andmaking the necessary investments in themwill benefit all employers, directly andindirectly.

Surviving as a SmallBusiness

The challenges posed by a changing laborforce will affect all businesses. However,small businesses face special needs. Whilethe issues that small business must confrontare not materially different from those oflarger firms, what is often different is themanner by which small business mustaddress its needs. Relatively limitedresources, time, and expertise suggestsmall business will have to place greaterreliance on multi-firm consortia, publiceducation and training programs, andother cost-sharing arrangements to addresstheir human resources needs.

The special problems faced by smallbusiness are not inconsequential either.Small business accounts for roughly 50percent of total U.S. employment and isresponsible for contributing nearly half of all

6 1 7

jobs that grew throughout the 1980s.12 Atthe same time, small business is morevulnerable to the effects of labor and skillshortages.

Relative to larger firms, small businesseshave higher levels of turnover (even aftercontrolling for demographic, wage, andother important differences), and employgreater shares of fyuth as well as lesseducated workers. As shown below,small businesses are also less likely thantheir larger counterparts to offer a variety of

Chapter One

important types of training. Remedialeducation, for example, is offered by lessthan 20 percent of all small businesses, incomparison to roughly one-third of largerbusinesses. Similar differences exist withrespect to communications skills, computerliteracy training, customer relations, and lifeskills. These differences, combined withlimited resources, will present many smallbusinesses with formidable challenges toattracting, retaining, and developingqualified employees.

SELECTED TYPES OF TRAINING PROVIDED BY FIRM SIZE,1987(Percent of Employees)

Type

of Training Total

FIRM SIZE

Lessthan100

100to

1,500

500to

1,500

1,500to

5,000

5,000to

10,000

10,000and

above

Conununkatiou Skills 68 57 63 65 80 91 91

Computer Literacy 67 57 65 73 72 62 68e

Customer Relations 52 48 43 47 72 76 73

Personal Growth/Life 22 12 15 26 31 38 27

Wilt

Sid ils Training 59 59 57 60 62 62 68

Remedial Training 26 19 18 29 35 48 32

Source: 1989 Training/Retraining Survey. (Society for Human Resources Management),

Alexandria, VA, 1989.

Business survival in the next century willdepend partly on how well employers areable to attract and maintain well educated

7

and skilled workers. For the E,mall business,survival will also depend on establishingcreative ways to share the costs of such


functions as basic skills training, dependentcare, and retraining. As the experiences ofseveral small businesses have alreadyshown, establishing such linkages is bothfeasible and a very productive use ofresources.

Creating Local Partnerships

Establishing partnerships with localcommunity and business organizations isone way that small business can leverage theresources required to meet many of its hiringand training needs. Local organizations,such as the Chamber of Commerce,community-based organizations (CB0s),and Private Industry Councils (PICs) can,for example, serve many roles to helpleverage resources and improve access tonew sources of labor. By contacting localbusiness or community organizations, smallbusiness can establish effective linkages thatwill improve its ability to address futurerecruitment, training, and education reeds.

For many small businesses, the publicemployment and training system hasproven to be an effective vehicle for meetingfuture human resources requirements. Thissystem's flexibility, strong private sectorinvolvement, and local orientation has madeit a viable vehicle for leveraging resourcesand establishing relationships with keytraining and education institutions.

The centerpiece of the employment andtraining system is ' ' Job TrainingPartnership Act (JTP1 This program,created by the federal government in 1982,is administered at the local Service DeliveryArea (SDA) level and designed to provide a

wide variety of employment, training,education, and related programs. To ensurestrong private sector involvement, eachSDA has a Private Industry Council, themajority of whose members must come fromprivate business. These PICs areresponsible for program planning andoversight, and for 2stablishing relationshipsbetween and among local businesses,training providers, and other institutionsproviding iducation and related services.

Funds made available under JTPA aretargetted on "economically disadvantaged"individuals and workers displaced fromtheir jobs. Eligibility is defined broadly andPICs have substantial discretion indetermining the types of programs to offer,including, but not limited to skills training,remedial education, English-as-a-SecondLanguage, on-the-job training, and supportservices, such as child care.

Because of JTPA's flexibility and focus,PICs can serve as the focal point for businesspartnerships to acquire and trainexperienced as well as entry-level workers.They can, for example, assist in developingspecific relationships with an individualfirm or can be the catalyst for a consortiumof employers who wish to work together toaddress a particular need. For smallbusiness, establishing a relationship withthe local PIC can be an effective vehicle forleveraging training and education resourcesand recruiting new and experiencedworkers. A call to the Mayor's Office, TownHall, or the Chamber of Commerce canidentify how to best contact the local area'sPIC.

8 1 9

Chapter One

Chapter Endnotes

1Johnston, William B., Packer, Arnold E., Workforce 2000: Work and Workers for theTwenty-first Century. Hudson Institute, Indianapolis, IN, 1987.

2Ibid.

3See: 1988 ASPA Labor Shortage Survey Report", (American Society for PersonnelAdministration, Alexandria, VA); Basic Skills: An American Management Association Re-search Report on Testing and Training (AMA), New York, NY, 1989.

4For a review of changing job requirements see: Johnston, William, et. al.; and Seitchik,Adam, Zornitsky, Jeffrey, From One Job To The Next: Worker Adjustment in a Chan&gLabor Market, (Kalamazoo, MI: W.E. Upjohn Institute for Employment Research), 1989.

5In 1985, for example, 61.3 percent of non-agricultural wage and salary workers had ahigh school diploma or less. See: Seitchik, Adam, Zornitsky, Jeffrey, op. cit.

6This* is reported in: Applebee, Arthur N., Langer, Judith A., and Mullis, Ira, U.S.,Crossroads in American Education: A Summary of Findings, (Educational Testing Service),

Princeton, NJ, 1989

7Ibid.

8See: 1988 ASPA Labor Shortage Survey, (American Society for Personnel Administra-tion), Alexandria, VA, 1988; and 1989 Training/Retraining Survey, (Society for HumanResources Management), Alexandria, VA, 1989.

9In 1979, for example, 6.2 percent of women between the ages of 25 and 54 wereemployed in the highest quartile of the wage and salary distribution; by 1985 this share hadrisen to 13.1 percent. In some sectors, such as financial services, womenaccounted for as much

as 33.8 percent of all executive and management positions in 1985, up from 10.7 percent in1970. Similarly, women held 23 percent of the highest paying financial service jobs in 1985,

an increase of 18 percentage points over 1970. These data are taken from: McDougal, EdwardF., and Zornitsky, Jeff, Labor Force Quality Issues in New York's Financial Services Sector,Prepared for: Urban Research Center, New York University, New York, NY, 1988.

105ee: Greensberg, Eric R., "Downsizing: Results of a Survey by the American Manage-ment Association", in: Personnel, AMA, New York, NY, October, 1989.

11 See: Seitchik, Adam, Zornitsky, Jeff, op. cit.

12See: U.S. Small Business Administration, Handbook of Small Business Data, Govern-ment Printing Office, Washington, DC, 1988.

135ee: Berkeley Planning Associates, Labor Turnover and Worker Mobility in Small and

Large Firms: Evidence From the SIPP, Berkeley, CA, December, 1988.

at 2

CHAPTER 2

STRENGTHENING ENTRY-LEVELRECRUITMENT AND PLACEMENT

Changing labor force dynamics haveintensified pressure on the most basichuman resources staffing functions--recruitment, screening, selection, andplacement. Mon companies haveresponded to this pressure by expanding theuse of traditional practices such as raisingwages, hiring more temporary workers, andintensifying newspaper ads. Overall, thesepopular strategies have not been veryeffective in increasing the number ofqualified applicants or improving the matchbetween workers and jobs. There are,however, a number of ways that businessescan strengthen these human resourcesfunctions and avoid the adverse effects oflabor and skill shortages.

This chapter is devoted to helpingcompanies improve the effectiveness ofentry-level recruitment and selection in achanging labor force environment. Thechapter begins by reviewing why it isimportant to consider making changes tothese basic human resources functions. Thisis followed by a presentation of two basicstrategies for improving the effectiveness ofrecruitment and selection:

Strengthening the Basics focuses onsteps companies can take to improve theeffectiveness of existing practices andprograms to recruit and placeemployees. This includes developinghelpful information systems to trackhiring costs, applicants, and jobvacancies; broadening traditional

11

recruitment strategies; providing newrecruitment incenti ves a nd benefits; andcreating more efficient testing andselection systems.

Broadening the Recruitment Netincludes strategies for recruiting newsources of workers and employing themsuccessfully. Expanding therecruitment base begins withrealistically assessing the available laborpool. Subsequent steps includeunderstanding the needs of each groupof potential workers; tailoringrecruitment tactics to reach out to adiverse work force; exploringcost-saving public/private partner-ships; increasing the objectivity ofscreening practices such as testing endinterviewing; and integrating the newhires into the company with innovativeorientation, "managing diversity," andrelated training programs.

Is There a Need forChange?

Over the past several years, there havebeen a number of indications that currentpractices to recruit and place newemployees have become less effective. Themost telling and broad indicator of thisdifficulty is reflected in what economists callthe Beveridge Curve. This curve depicts therela,ionship between the number of jobvacancies and the unemployment rate. It isused to determine whether employers are


having more or less difficulty fillingvacancies for a given rate of joblessness.Since the unemployment rate at the end ofthe 1980s was comparable to the rate at thebeginning and end of the 1970s (i.e., 5.5percent), the Beveridge Curve can be veryinstructive in identifying whether afundammtal change has occurred in theeffectiveness of the job ir itching process.

Using data obtained from the ConferenceBoard on the volume of help-wantedadvertisements placed with newspapersaround the country (as a proxy for jobvacancies), a Beveridge Curve ca n be plottedfor the years 1970 to 1989. This is shown inExhibit 1 and indicates that the curve hasshifted outward to the right, suggesting thatduring the 1980s, there were more vacanciesavailable for a given rate of unemploymentthan in past years. This indicates thatemployers throughout the United Stateshave indeed experienced more difficultyfilling their jobs than in the past.

Supporting this result is the sharp increasein recruitment costs during the last part ofthe 1980s. According to estimates obtainedfrom the Saratoga Institute, the average costper new hire between 1987 and 1988increased by ever $1,000 for exempt(salaried) employees and by ovet $200 fornon-exempt (hourly) employees. In fact,the 1988 average cost of recruitment was upto $7,495 per exempt hire, a 16 percentincrease over 1987, and $654 per non-exempthire. a 46 percent increase over the same

,-.mperiod. 1 oce these increases were well inexcess of inflation, it is safe to say that theeffort and resources required to attract andretain employees did indeed go up.

Taken together, these indicators suiggestthat it is fundamentally more difficult to fillvacancies than in the past. Understandingwhy this has occurred, however, isimportant to improving the effectiveness of

the staffing function. Certainly, mismatchesbetween emerging skill requirements andthe capabilities and interests of existingworkers have played an important role.'But so has a slow growing labor force, ashave changes in the characteristics of newlabor market entrants. It is now a Trailer offact that there are fewer new recruits than inthe past, and those avaibble for hire aredisproportionately comprised of groupswith whom employers have had littleexperience. Single mothers, the lesseducated, recent immigrants, and minoritiespresent the workplace with a new set ofmore complex challenges. Based on theresults to date, it would appear that just asthe public education and training system isundergoing quality-based changes,improvements will also have to be made inthe recruitment and placement functionscarried out by employers.

For one thing, employers will have to lookto get more from their existing investmentsin staffing. Most studies of hiring practiceshave revealed that the selection process,particularly among smaller employers, isnot conducted as effectively as it could be.A surprising number of employers do notrely on formal job related selection criteriaor tests, and do not systematically checkreferences or educational achievement.Recruitment, particularly in many smallfirms, is also constrained by limited budgetsand resources, including staff time. In thecurrent labor shortage environment,ensuring that the basics of recruitment andstaffing are working well is necessary toattract qualified applicants and select theright person for tne job.

The staffing function itself may also hoveto undergo some basic changes. One keyreason is that doing more of the same willnot always work. A 1988 national sui veyconducted by the Society for HumanResources Management (formerly the

12 2 2

Exhibit 1The Help-Wanted index vs. The Unemployment Rate,

1970-1989

160

150

140

130

120

110

100

90

80

70

60

89

073

11

11

0701

=1

88

0 79

0 74

072

CI

71

78

87

86

80

77

076

75

1970-1981

1982-1989

82

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.0

Unemployment Rate

Sources: Help-Wanted Index from the Conference Board, "Statistical Bulletin" (Monthly), New York.Unemployment Rate fromtabor Force Statistics Derived from the CurrentPopulation Survey, 1948-8r and from the Monthly Labor Review, January 1990,1989 Data for January-June Only, Seasonally Adjust xi

4 ti13


American Society for PersonnelAdministration), revealed that mostemployers have chosen to address labor, shortages by intensifying traditionalrecr-itment tactics.' Increased use ofhelp-wanted ads, greater utilization oftemporary workers, and increased wageswere among the most frequently cited tacticsused by employers. At the same time, themajority of these employers also reportedthat these s tra tegies were not very successfulin attracting additional qualified employees.Some of the more important limitations ofexisting staffing practices are illustrated inExhibit 2.

In the current labor market environment, itis clear that running a tight ship is important.But it is also certain that employing newtypes of workers can often mean changes inrecruitment, selection, training, and/ orinitial placement. Community-basedrecruitment, functional zssessment, basicskills training, and initial on-the-job supportprograms are among key changes that arebeginning to emerge in entry-level staffing.More and more, employers are starting toadapt various aspects of their staffingfunction to accommodate a labor force inwhich greater proportions of new workers,.._e not as easily employed as their earliercounterparts. Exhibit 3 presents anillustration of what may well emerge asentry-level staffing strategies for the 1990s.

Presently, there are a number ofinnovative, practical options that can helpaddress present and future staffingproblems. Some of these involve improvingexisting practices, while others are centeredaround expanding the recruitment base tonew sources of workers. The remainder ofthis chapter provides a review of howemployers can pursue these two strategies:1) strengthening basic functions; and 2)broadening the recruitment net.

14

Strengthening the Basics

Strengthening the basic hiring and staffingfunction is one strategy employers canadopt to address labor and skill shortages.As with any business function, it isimportant to ensure that maximum value isobtained for a given investment. Thissection focuses on steps employers can taketo improve the value of their basic staffingfunctions. Four areas are addressed briefly,including:

1. Managing recruitment effectively.

2. Broadening recruitment tactics.

3. Use of recruitment incentives.

4. Testing and selection.

Managing Recruitment Effectively

One of the first tasks in addressing thestaffing issue is evaluating existingrecruitment practices. Employers shouldbegin by examining how efficiently theirrecruitment function is operating and wherethere are opportunities for improvement.Essential to this task is a managementinformation system to track and evaluate theefficiency of the function. If such a systemdoes not exist, employers would do well toconsider implementing one.

A useful management system need not beelaborate, or even automated, but shouldinclude three fundamentals: 1. trackinghiring costs; 2. monitoring job vacancies andjob applicants; and 3. evaluating employeeperformartce. The easiest costs to monitorare the explicit ones such as advertising,outside search firm fees, employee referralbonuses, applicant and staff travel time, andthe salaries and benefits paid to recruiters.

2 4

Exhibit 3Entry-Level Staffing Strategies for the 1990s

ConsiderAlternatives to

TraditionalEntry-levelLabor Pool

BroadenRecruitmentStrategies

EvaluateApplicant Skills,

Trainability,and Preferred

Behaviors

CarefullyEvaluate

Job Descriptionsand Qualifications

Redesign Jobsto Better Fit

ApplicantCapabilities

ModifyQuahfication

Standards forNew Hires

ModifyCompensation,Benefits, and

PersonnelPolicies

NIIIII

Enroll "Trainable"Applicants inJob-RelatedBasic SkillsPrograms

rTeach staff to Recruit, Orient,Train, and Manage Diversity in

the New Environment

e

Exhibit 2Traps in Using Traditional Entry-Level Recruitment and Selection Practices

PersistentUnfilled

Entry-LevelOpenings

IIIIIIINIIMI

DifficultyHinng

QualifiedApplicants

UnderqualifiedApplicant

Pool

PursueExpensiveAlternatives

to Recruitment

DifficultyIdentifyingAcceptableApphcants

with StandardSelection

P dures

YES

NO

UnfilledOpenings

Difficultiesfor Incumbentsand New Hires

IncreaseOvertime

Subcontract/Use

TemporaryAgencies

RaiseWages

Invest inLabor-SavingEquipment

Reductionin

Productwity

Reductionin

WorkQuality

High Levelof

Turnover

Idezny, vacancies should also be tracked intotal and by type of job. Important statisticsto calculate about vacancies are the cost perhire and the time it takes to fill an opening.Productivity statistics, usually in the form ofworker evaluations, can then be used incombination with the other relevant data toanswer the following questions regardingrecruitment and selection:

What type of openings are mobtcommon?

Which openings take most time tofill?

Which positions generate most of thehiring costs and what is the cost perhire among different positions?

Which positions have the highestturnover rates?

Which positions have the lowest jobperformance ratings?

What staffing functions areresponsible for the bulk ofrecruitment costs?

On the basis of answers to these questions,explicit recruitment budgets can beestablished, targeted, and monitored on aroutine basis, providing helpful feedback onprogress toward hiring goals.

Anothr critical area to examine is the roleof recruiters. Recruiting responsibility isoften given to the personnel or humanresource department, while line managersare in charge of making final hiringdecisions. The overall staffing function isthus shared, and accountability can becomea problem. Identifying staffing goals andestablishing clear areas of responsibility formanagers, recruiters, and the personneldepartment is essential to developing anefficient recruitment and hiring effort.

Chapter Two

Broadening Entry-LevelRecruitment Tactics

Because standard recruitment tactics willnot always generate enough applicants,companies will have to turn to new tacticsand improvements in existing ones. Whilethere are several options from which tochoose, they should all be geared at makingthe recruitment function more aggressive,targeted, and efficient. Exhibit 4 presents anumber of innovative recruitment tacticsthat employers can use to build upon thosealready in place. These are discussed brieflybelow.

Expand Internal Recruiting

The usual method of internal recruiting isto display job openings in a companynewsletter or on a bulletin board and waitfor employees to apply. A more dynamicand effective approach is to actively seek outqualified or highly promising employeesthat may not be quite ready for the job, butare deemed trainable over time. Theseinternal recruits can then be directed towardappropriate in-house or outside trainingprograms, and then to their new jobs.Encouraging a broad-based applicationprocess and providing mobility assistancehelps both the employee and the firm.

A good practical example of internalmobility assistance is the Qualifying ExamPreparation Programs established by theAlliance for Employee Growth andDevelopment, a joint human resourcesventure between the CommunicationWorkers of America, the InternationalBrotherhood of Electrical Workers, andAT&T. These programs are designed tofacilitate internal mobility by offeringincumbents test preparation courses for thecompany's Qualifying Examinations. Theseexams are required in order to be admittedto certain training programs or job

172 j

Exhibit 4Innovative Recruitment Methods

Expand Internal Recruiting

Recruit from Customer Base

Participate in Open-Housesand Job Fairs

Work with Public/Non-profit Agencies

Use Alternative Print andElectronic Media

Establish EmployeeReferral Programs

Work with Schools/Training Institutions

Simphfy the Hiring Process

18 30

classifications. The program runs for 30 to36 hours at an average per-worker cost ofapproximately $450.

To date, Qualifying Exam PreparationPrograms have been implemented in about150 company locations, enrolling close to2,000 workers. As expected, partidpatingworkers fare better on their QualifyingExaminations than non-participants.Overall, about three-quarters of those whotake the courses passed the company'sQualifying Exams compared to a 20 percef.:pass rate for those who do not. There is nodoubt that the Alliance expects this result tofacilitate worker mobility and build on thehuman capital investments already made inthese individuals.

Use Alternative Print andElectronic Media

Innovative recruiting means reaching outto those who do not respond to traditionalrecruitment approaches regularly. Ads inalternative community newspapers andlocal neighborhood weeklies can broadenthe applicant base substantially. Adsoutside the help wanted section of the papercan also catch the attention of the casual jobseeker.

Simplifying the application process as wellas job qualifications can also help to attractmore applicants. Ads should encourage awide range of applicants and list onlyqualifications deemed absolutely essentialfor the job. Giving the company phonenumber instead of an address can alsospeed-up the hiring process, as canencouraging recruits to apply in person,without developing formal resumes. Thiscan save valuable time, as the prescreeninginterview and application process can all beconducted at once, often on the day that theapplicant sees the ad.

19

Chapter Two

Some companies are making innovativeuse of aliernative media such as direct mail,cable TV, radio, and electronic bulletinboards. Direct mail typically targets a groupof skilled workers identified throughprofessional associations or schools, but canbe broad-based (as part of a largercooperative business mailing). Cable TVand radio advertising is usually lessexpensive than other forms of electronicmedia, and helps target specific groups ofworkers who tune into specialized localstations. On-line electronic bulletin boardsare also popular, mostly to post informationon technically oriented jobs.

Recruit from the CustomerBase

Point-of-purchase recruitment is effectivewhen clients roughly mirror thecharvteristics of entry-level personnel. Fastfood companies, for example, recruit fromtheir customer base by placing flyers in takeout bags. Managers should always be on thelookout for good employees, and rightacross the store counter is a good place tobegin the search. Courteous customersmake for courteous workers, and a tactfulmanager is in a good position to raise theissue of employment. Having a flyer orpamphlet available describing the companyand its benefits increases the effectiveness ofpoint-of-purchase recruiting.

Establish Employee ReferralPrograms

The high cost of recruitment agencies hasled a number of companies to establishemployee referral programs. Most rewardsfor a successful hire are cash, but somecompanies offer prizes, discounts, or giftcertificates. Positions identified as havinghigh costs per hire are sometimes targetedfor rewards, or reward levels are increasedfor these hard-to-fill positions. Somemanagers may resist paying employees forinformation that might have been provided


without a reward, but this can be ashort-sighted view. A formal programprofessionalizes the role of the recruitingemployee, and implicitly holds that workermore accountable for the referrals that he orshe makes.

Participate in Open Housesand Job Fairs

Open houses usually are held on companypremises, and cast a wide net to potentialemployees. Job fairs typically are organizedaround a number of employers, and targetparticular kinds of jobs, such as clericalworkers or computer specialists. Thesuccess of these events as a recruitment tooldepends critically on the quality ofmarketing, including the pamphlets anddisplays made available, and the ability ofthe recruiter who is making tha t first contact.Open houses are most effective whenrefreshments are ample, and a targetedgroup of applicants is identified andsolicited. Targeting potential applicants atan institution such as a school or smiorcenter, and then providing transportation,helps to create a successful open house.

Job fairs have become popular, especiallywith small businesses, because theyefficiently pool the recruiting resources of anumber of employers in the same area. Theorganizer, such as a Chamber of Commerceor Private Industry Council, should beencouraged to take out a large newspaperad, the cost of which is likely to exceed theentire monthly recruiting budget of aparticipating small firm. The fair allows forthe speedy collection and review ofapplications and resumes, and saves thetime of an initial pre-screening interview.Being prepared to market the company, andthen linking with a well-organiLed andrespected promoter, ensures that the cost ofcompany participation -- often severalthousand dollars is not wasted.

Work With Schools and PublicTraining Institutions

One of the most popular recruitinginnovations is establishing closer ties withlocal schools and training institutions. Thefirst step in this process is contacting theschools to find out what is available foremployers. Many schools and traininginstitutes maintain print and electronicbulletin boards, employment flyers, andinternship programs. Networking withthese programs helps establish employmentnetworks a t the entry level. The local or sta teDepartment of Education and the yellowpays can provide listings ofoften-overlooked local training institutions.

Many employers establish enduringrelationships with workers that begin in theearly school years. Providing summer jobsfor high school students is not onlyinexpensive, but builds relationships for thefuture. Some high schools, and especiallyvocational schools, have placementprograms for summer jobs. A part-timeinternship program for graduating seniorsis a wise recruitment investment, which islikely to pay off the following year inpermanent hires. The school newspaper isalso an effective recruitment source. Awell-timed ad in the la te spring can generatea number of applications, especially iftransportation is not an issue. Wheretransportation is problematic, ,-ar poolingarrangements among students facilitatesummer work.

Work with Public Employment andTraining Programs

The foundation of the public employmentand training system is the Job TrainingPartnership Act (JTPA), enacted in 1982 anddesigned to build private sectorinyclvement in both the oversight andplanning of programs. Under JTPA,program planning and service delivery are

20 32

centered around local Service DeliveryAreas (SDAs). Each SDA has a PrivateIndustry Council (PIC), the majority ofwhose members comes from the privatebusiness community.

The PIC is responsible for strategicplanning and oversight of local programs.As discussed earlier, the effectiveness ofthese community-based programs, and theinvolvement of the private sector in them,relies substantially on the creativity andleadership of the localbusiness participants.A call to the Mayor's Office, Town Hall,County Board of Supervisors, or Chamber ofCommerce will lead to information aboutPICs and local training programs.

JTPA provides federal funding for servingthe "economically disadvantaged" as well asall workers displaced from their jobs.Eligibility is defined quite broadly.4 Somefunds are reserved for older workers, youth,and summer youth programs; and a portionof the money canbe used to aid persons whoare not economically disadvantaged orjob-displaced, but who have experiencedbarriers to employment (such as difficultyspeaking English, lack of education, and thelike).

The focus of federal assistance under JTPAis on training, including, for example,school-to-work programs, classroomtraining, on-the-job training (OJT), and jobsearch assistance. Consistent with thebusiness orientation of the legislation, manyPICs offer employers latitude in selectingparticipants and in developing trainingprograms. Under OJT, the SDA will financecne-half of the trainee's wages for a periodof up to six months.

The program is flexible enough that it ispossible for employers to developrecruitment and training-based initiatives

Chapter Two

on their own or in coordinaticn with theSDA, and then seek cost-sharing assistancewhen training eligible individuals under theprogram. Such arrangements allow for theprogram to sorve the individual needs ofparticular businesses. The local PIC can alsoserve as the hub of small businesspartnership efforts in the area of child care,recruitment, transportation, and basic skillsupgrading.

New Recruitment incentives

In addition to expanding recruitmenttactics, many companies are also developingincentive programs and policies to attractnew employees. These include directeducational support, flexible schedulingand benefit policies, and dependent careprograms. Some employers have evenexperirrented with transportationassistance and housing support as well. Inthe chapters on basic skills training (ChapterThree) and dependent care programs(Chapter Four), these benefits are describedin detail. What follows are some examplesof innovative "carrots" to enhancerecruitment.

Direct Educational Support

WI le many companies provide tuitionreimbursement programs, until recentlyeducational support was rare for part-timeand service workers. In addition, tuitionreimbursement programs available forentry-level workers are often limited in thenumber of courses supported, and thefinancial burden of paying for the courccand then being reimbursed is often too greatfor many younger workers. As a result,modifying existing or introducing neweducational benefits can contribute to moreeffective recruitment, especi Illy in thoseindustries and occupations wi,ere benefitsare limited, restrictive, and /or non-existent.


Educational Assistance at the Detroit Burger King

There are ways of designing educational assistance programs which are in the direct serviceof human resource goals. An example is the innovative education benefit implemented by theBurger King in downtown Detroit. In 1986 the manager was facing a turnover rate which wasconsistent with the rest of the fast-food industry--179percent. With each position turning overalmost twice per year, and training and recruitment costs estimated at $1,500 per hire, he firstattempted to solve the problem by adjusting wages and working conditions, but wasunsuccessful. Many of the best workers were quitting jobs not simply because the pay wastoo low, but because they wanted to attend college.

The education plan that was implemented was intended to have a dramatic, immediate, andlasting impact on recruitment and turnover -- and it worked. According to an independentstudy, the annual turnover rate among users of the benefit in 1987-88 was only about 58percent, much lower than the 240 percent rate for nonparticipants. Inflaticn-adjustedproductivity, measured as sales per employee hour and customers per employee hour,increased about 3 percent. Adequate crew size was more easily maintained with improvedrecruitment and reduced turnover, and the district manager's quality rating of the storeimnroved by 7 to 10 percent.

The key to the Detroit Burger King's success was tailoring the educational benefit to meetthe particular needs of the employees -- mostly young, part-time workers from the city. Themanager rejected the Burger King chain's benefit, which wasa standard tuition-reimbursementprogram tied to job tenure, in favor of his own plan. After meeting with representatives of twoInca/ community colleges, he arranged to make payments directly to the colleges to cover bc thtuition and book charges for his workers. Benefits are available upon the day of hire, with thenumber of courses paid for dependent upon the number of hours worked per week. Basedon the success of the model, it has been adopted by other local employers of young, part-timeworkers.

Flexible Scheduling andBenefit Policies

ln.troducing flexibility into the workplaceis important to many new recruits, such asworking mothers and older workers.Flexibility can be built into work in manyways (and is discussed in detail withinChapter Four). For example, traditionally,workers in many industries are either notallowed to work part-time, or are grantedpart-time work reluctantly, after makingthemselves invaluable as full-timeemployees. These attitudes are changing

slowly, as employers realize that largesegments of the workforce desire flexibilityfrom the first day on the j.k.

Often, students, parents, and retireesprefer part-time work or flexible workhours. Employees with dependents areincreasingly working at home or sharing afull-time job with another part-time worker.Flexibility does tend to reduce managementcontrol, but should not be resisted based onthat criterion alone. The challenge ofmanaging a diverse, flexible workforce must

2234

be balanced against thebenefits of recruitingand retaining high-quality workers.

Pro-rated benefits for part-time workersare an effective recruitment tool as well.These include sick leave, health carebenefits, and vacation pay. Offering flexiblework hours and pro-rated benefits sends asignal to potential part-f.mers that they willnot only be accepted, but that they arewelcome to join the company on a long-termbasis.

Dependent Care Programs

These benefits include assistance forelderly dependents (elder care) as well aschild care. Dependent care programs are anexcellr .t recruitment device and need not becostly. The most common form of this typeof benefit is an information and referralservice, wherein employees work withknowledgable expert, to develop adependent care strategy. The companysubsidizes the cost of the referral network,either at an annual fixed rate or on aper-referral basis. The benefit is both usefulto the worker and inexpensive for thecompany.

Other relatively inexpensive dependentcare benefits include establishing a pre-taxsalary deduction Plan, and holding aninformation fair. In addition, there are moreelaborate options such as on-site day care.Even here, costs can be reducedsubstantially through involvement withpublic agencies and other businesses.

Improving Applicant Selection

Screening methods used by companiesrange from informal interviews to batteriesof objective tests; from calling a fewreferences to the use of outsidepreemployment screening services.Standard steps in the screening process can

23

Chapter Two

include but are by no means limited to: I)evaluating resumes and applications; 2)conducting preliminary screeninginterviews and quantitative testing; 3)in-depth job interviews; 4) reference hecksand background investigatio-ts; and 5)physical examinations. However screeningand selection are structured by a company,it is critical that they operate efficiently andfacilitate correct decisicns.

Several steps can be taken to improve thematch between workers and jobs. Standardfunctions such as reference and factchecking, for example, should becomeroutinized and conducted efficiently. Muchinformation on resumes and jobapplications can be exaggerated or false, butcan be verified easily. Colleges will notreport grade point averages, for example,but will verify attendance.

References provided by applicants areanother valuable source of information andshould also be checked routinely. A smallinvestment before the hire can save the time,headaches, and money associated with a baddecision. Calling references not only helpsidentify weak candidates, but can highlightthe strongest candidates from what waspreviously an undifferentiated group.

NJ matter what screening methods areused, the standard selection approach isusually the competency-based model.Competency-based selection proceduresprovide a sound basis for determiningwhich job applicants are most suited foremployment in a specific job or family ofjobs. The approach is based on the use ofspecific. criteria related to good performanceusually found in high-performingincumbents. The process itself can be veryformal and involve candidate testing, or itcan be informal. For example, the owner ofa small manufacturing company in NewEngland requires his line personnel to be


"industrially housebroken," in that theyhave been previously employed in ablue-collar setting, and are aware of thegeneral hazards and house-keepingpractices required in such jobs. He foundthat this was the single most importanta pplica:, t tra it associa ted with success on thejob in his plant.

The most effective way to utilizecompetency-based selection is to develop aset of minimum qualifications that arerelated directly to the key tasks performedon the job. This type of functional approachto selection provides several benefits. Itensures that prospective employees will beselected on the basis of criteria that arerelevant and accurate predictors of futurejob performance. It also directly links therecruitment and selection process to existingjobs in a meaningful way that is intuitivelyappealing to employees and theirsupervisors.

One objective way to use acompetency-based selection process isthrough applicant testing. Objective paperand pencil testing is making a comeback forseveral reasons:

A favorable legal and regulatoryenvironment that no longerdiscourages objective testing. In1988, the Supreme Court reaffirmedthat objective testing should not betreated differently frominterviewing and other selectiondevices within discrimination cases.The burden of proof ofdiscrimination is on the employee,not the employer.

Tests have been provennondiscriminatory. There is nowconsensus within the reseArchcommunity that a wide variety ofvalidated, job-related testing

instruments are fair and do notdiscriminate against minority groupmembers.

Reductions in the cost of testing.Testing companies have developedoff-the-shelf, valid tests which areoccupation-specific. Even smallcompanies, with the help of experts,can get into the testing business foras little as a few thousand dollars.

Testing is, however, a relatively complexfunction, and companies should consultwith experts in establishing a program. Thesine qua non of a valid, effective test is thatit is a good predictor of performance on thejob.

There are two basic kinds of employmenttestspersonality and skill tests.

Personality Tests

These tests seek to measure qualitativebehavioral worker traits that are importantin particular jobs. For example, certaintechnical jobs require preciseness whileothers require flexibility. Valid personalitytests assess applicants along these and otherjob-related dimensions. Testing expertsstart with jobs, identify those workercharacteristics that are correlated with goodjob performance, and then test for thesecharacteristics among the applicant pool.

Ability Tests

Ability, or skill tests, are in greater use thanpersonality tests, mostly because theymeasure skills directly, are relatively easy toimplement, and are inexpensive.Job-related ability tests mirror the skills andtasks needed on the job and also support afunctional approach to training. To bettertie the tests to jobs, some experts havedeveloped tests along occupational lines,such as clerical or managerial. Thus, theskills measured vary with the occupation.

2436

Exhibit 5The "Diverse" Work Force

Ethnic and Racial Minorities Economically DisadvantagedWorkers

Less Educated andTrained Workers

ImmigrantsOlder Workers and

Retirees

Displaced Workers Homemakers andWorking Mothers

Students

Testing is not a substitute for otherscreening devices, but developing a testingprogram can help reduce two kinds of errorsmade in the selection process. The first erroris selecting someone who is ineffective onthe job (a "false positive"). This is costly forthe reasons specified above--lowproductivity and increased turnover duringthe probationary period. The second error,as costly as the first, is rejecting an applicantwho in fact would have performed well onthe job. In a labor shortage environment,companies can ill afford to reject goodapplicants. Moving away from subjectivecriterion toward objective testing is one wayof reducing the number of "false negatives"in the selection process.

The Appendix to this chapter provides amore detailed discussion of establishing aworkplace testing program.

BroadeningThe Recruitment Net

While more efficient staffing can helpaddress labor and skill shortages, It will alsobe important to consider new sources oflabor. Since the overall availability ofworkers is declining, employers will have toturn increasingly to new population groupsto meet entry-level sta.fing needs, includingnew labor market entrants, older workers,and those who are not as easily employed asworkers were in previous years. Exhibit 5highlights specific sub-groups that comprisethe diverse workforce available for hire.While these groups represent a source ofrecruitment opportunity, they also pose newchallenges for employers.

Chapter Two

The first challenge is that new entrants area very diverse group with varyingrecruitment, retention, education, andtraining needs. As a result, no one singlesolution will be sufficient to address theneeds of the large numbers of women,minorities, and immigrants that areexpected to account for the majority of laborforce growth.

The second challenge is that many newrecruits will continue to come fromeconomically or educationallydisadvantaged backgrounds. While theneed for basic language, math, andreasoning skills has never been moreapparent, many of these workers are oftennot prepared to meet that need. Accordingto the President of BellSouth:

In 1987, fewer than 30 percent ofemployment candidates met our skilland ability requirements for sales,service and technical jobs. Only 15percent scored at the proficient level onour typing test, and almost 50 percent ofthose tested were not qualified for jobsrequiringeven light typing. Overall, weestimate that fewer than 1 in 10app:icants meets all our qualificationstandards.5

Companies faced with labor or skillshortages must make a decision about howthey will broaden their recruitment net andfind ways to employ new labor marketentrants. V pith creative planning, these newemployees cn be matched to emerging jobsin cost-effective ways. Based on results fromthe ASPA Label. Shortage Survey citedearlier, companies that are targeting"non-traditional" applicants are generallyfinding that their recruitment effort is asuccessful one:

Chapter Two

Firm Experience With Using New Sources Of Labor

Non-TraditionalApplicant

Pool

PercentWho

Target

Of Those Who Target:Percent Reporting at LeastSome Success Attracting

Applicants

%Weft 53% 87%

Retirees 43 65

Homemakers 36 71

Physically disabled 30 55

'Economically diSadvantaged 28 64

Military 20 67

lattnigrantS 18 62

Mentally disabled 16 36 ,

Source: 1988 ASPA Labor Shortage Survey, American Society for Personnel Administration, Alexandna, VA, 1988

While the recruitment effort from thesegroups is generally successful, only arelatively small fraction of companies aremaking use of this alternative labor pool.The remainder of this chapter reviews foursteps companies can take for recruitingnon-traditional workers, including:

1. Tailoring recruitment tactics;

2. Partnership programs to build basicand other related skills;

3. Modifying selection practices; and

4. Integrating new hires within theworkplace.

Tailoring Recruitment Tactics for aDiverse Work Force

To reach out to a diverse workforce,recruiters must be flexible and creative.They must recognize that reaching differentapplicant sub-groups will require specifirand targeted recruitment strategies.

i t) 27

The clearest signal that companies can sendabout their openness is a message at thebottom of want ads: "An Equal OpportunityEmployer." This simple message notifics abroad-based populace that the organizationwelcomes applications from every qualifiAmember of the labor pool. More specificmessages such as "handicapped accessible"accentuate the basic theme, as do visualadvertisements which include workersrepresenting several demographic or othersegments of the labor force. In developingsuch advertising, companies are bound bythe law not to favor particular groups. Themessage should be inclusive, and cannot beexclusive.

A second basic approach is to makeinternal commitments to diversifying theemployee base, not just the applicant pool.Since so many job referrals come throughincumbent workers, a heterogeneous staff isvirtually self-perpetuating. Companiesestablish reputations in communities inlarge part through thetr record of hiring, notthrough their promises about future staffingpatterns. Intense efforts to diversify now

Emnloyer Strategies for a Changing Labor Force

can ease recruitment pressures in the longrun.

When targeting specific groups of workers,the most effective approach is to workthrough the institutions which serve t'..eircommunities. These networks of public andprivate institutions include senior centers,local Private Industry Col.ncils (PICO, theJob Servire, church groups, charitableorganizations, advocacy groups,community centers, and neighborhoodbusiness associations. Each group will haveits own set of recruiting issues:

Economically disadvantagedworkers

Transportation to and from work isoften a stumbling block, and iftransportation assistance is available,this information should be included inrecruitment literature. In addition,disadvantaged workers are not likely tobe reached through generalized wantads or private employment agencies. Asa result, it will also be important to bringrecruiters to these prevectiveemployees. Since low-income workersusually qualify for a number of publicemployment and training programs,employers can contact local PrivateIndustry Councils (PICs) forrecruitment advice and information onavailable services and workers.Working with the PIC is an effective andinexpensive way of reaching thelow-income labor force.

Workers with limited skillsand/or education

Many less-educated workers search forjobs at state employment offices. Makesure that jobs are posted with theemployment office, and that vacancyinformation is updated on a regularbasis. Adult education centers areanother good source of supply for

motivated but less-educated and trainedworkers.

Immigrant workers

Recruiters who speak the nativelanguage and can develop contacts inthe community are most effective inreaching immigrants. Not-for-profitorganizations and local PICs have fundsavailable for developing recruitmentand training programs for immigrants.A bank in Rhode Island, for example,worked with local organizations todevelop a combined English as a SecondLanguage/Teller Training program.The not-for-profit organizations wereresponsible for recruitment, while thebank participat 1 in the screeningprocess.

Physically and mentallydisabled workers

Rehabilitation agencies and disabilityorganizations are a prime source ofdisabled job applicWs. Theseorganizations can also be a source offunds for training as can local PICs.Local and state agencies for the disabledcan provide information on availableprograms and services for thispopulation.

Older workers and retirees

Older workers can be reached throughagencies and organizations which servethem, as well as through thepublications and electronic media thatthey read and watch. Since many ofthese potential workers may not beactively looking for jobs, classified adsare not the most productive recruitmentdevice. As with other kinds of workers,hiring seniors into visible positions inthe company helps to attract otherapplicants in that age group. Seniorsalso recruit effectively from their cohort.

2841

Dislocated work 71,3

Since 1982, the federal government hasmade funds available to employ andretrain workers who have lost jobsthrough plant closings, businessfailures, and large-scale layoffs. Thesedislocated-worker programs arecoordinated through state employmentand training agencies. The stateagencies often fund programs operatedfor specific groups of laid-off workers(such as those from a particular localplant). Contacting these programsdirecily provides access to experiencedand available workers, many of whompossess valuable skills. Call the stateemployment and training office and askfor information on dislocated workerprograms.

Homemakers and workingmothers

There are two essential strategies forreaching individuals with dependentcare responsibilitier 1narket workplaceflexibility and dependent care benefits.The rigidity of the work day and thehig' cost/restricted availability ofdepet lent care are the main stumblingblocks for those who have homeresponsibilities, but want to establishlong-term employment relationships.Companies that advertise flexibility andinnovati ve benef its, and deliver on thesepromises, clearly are taking the lead inattracting this vast pool of workers.

Students

Many companies hire high school andcoilege students as part-time workers,but few recruit in ways that makeoptimal use of the academic yearschedule. Students are generally free towork full time about four months out ofevery twelve, and many can be flexibleabout combining work with school.

Chapter Two

Partnership Programs to BuildBasic and Other Skills

While broadening the recruitment net willlikely increase the number of job applicants,many new recruits will not be able to meetminimum entry-level qualifications. As hasbeen reported by an increasing number ofemployers, greater shares of new entry-levelhires are deficient in the most basic elementsof job skills, including reading, writing, andmath. These deficiencies lead tolower-than-expected job performance, aswell as an inability to participate inentry-level skills training successfully.

An increasingly popular solution to thisproblem is Jfering basic skills training injob-related readiq writing, and math.Often as a condition of permanent hire,employers are providing new employeeswith up-front basic skills training. Thesetypes of training programs are often aprerequisite for enrollment in on-going,regular training, and have been shown to bean effective tool for employingnon-traditional workers successfully.

The discussion below focuses onpublic-private partnership programs thatemployers can develop to upgrade the skillsof new entry-level workers. The nextchapter provides a det 'led discussion ofkey issues in establishing workplace basicskills programs.

Partnerships with the Public Employmentand Training System

The public employment and trainingsystem consists of a variety of state andlocally administered programs. Most ofthese programs, such as JTPA, areauthorized, regulated, and funded by thefederal government, although many stateshave added their own funds to theseprograms and started new ones themselves.


Some states, for example, have establishedworkplace literacy offices which coordinatefunding and assistance for workplace basicskills programs. These services range fromproviding information and teacher training,to sharing substantially in the financing ofthe training itself. In Mississippi, the stateliteracy office is developing a set of"turnkey" materials for employers who wishto create basic skills training programs. Theemployer-provided programs will qualifyfor state basic skills tax crediL. Theguidelines for developing programs whiehqualify for the tax credits are flexible, in aneffort to broaden the range of participatingemployers. The Literacy Office works withemployers to cut red tape, and to make it aseasy and inexpensive as possible to set up aworkplace basic skills program.

While the existing array of publicprograms vary in their specific objectives,targeting requirements, and allowableactivities, they share the common goal offacilitating the employment of most of thecountry's disadvantaged groups, such aspoor and low-income single mothers. Assuch, they represent a viable source foremployers faced with the need to hireindividuals with limited basic skills, workexperience, or training.

School-to-Work Programs

Partnerships with local schools at e anotheroption for improving the skills of entry-levelhires. In the past several years a range ofcompanies have pursued joint programswith local vocational and general academichigh schools to ensure an adequate pipelineof job-ready entry-level personnel. TheBoston Compact and the Detroit Compactare two well known examples ofpartnerships between the businesscommunity and local schools. In Detroit, theChamber of Commerce works with the city'sschools to administer a payoff program forall students who maintain at least a C

average and a 90 percent attendance rate.For these students, a job or a collegescholarship is guaranteed upon graduation.

The school-to-work model has theadvantage of both cost-sharing anddeveloping contacts with youth that can payoff in terms of future recruitment ofpermanent employees. The challenge is tomotivate students so that they see a concreterelationship between school programs andtheir future job prospects. Beyond"Compacts" connecting school performanceto local job offers, other less complexpartnerships include mentoring programs,cooperative education programs,internships, and setting up "academies" andcurricula in local schools based on th%requirements of jobs in area industries.Local PICs and Chambers of Commerce aregood starting points for obtaininginformation on such partnerships.

Tax Credits for Broadeningthe Base

Hiring from the economicallydisadvantaged or physically disabledcommunity can also have straightforwardbenefits on the bottom line throuzh theTargeted Jobs Tax Credit (MC)! Thisprogram is administered through localoffices of the U.S. Employment Service. Foreach employee certified as qualified for thecredit, the company can generally reduce itstaxes by an amount equal to 40 percent ofwages during the first 1 2 months ofemployment, up to a credit of $2,400 percertified employee.8

Employers cannot retroactively claim thecredit the worker must be certified eligibleupon the day of employment; if the workeris not pre-certified by the EmploymentService, the company must request inwriting a determination of certification bythe fifth day following the hire. Either thepotential hire receives a voucher from the

30 4 3

a

Employment Service and presents it to theemployer, or the employer requests that theEmployment Service review the applicantfor certification.

Although only one in one-hundredcompanies currently claims the credit, thisnumber could increase as employers learnabout the tax advantages and make use ofthe cost-saving potential of TJTC. TropWorld Casino only learned about theprogram in 1989 and by November of thatyear had hired 400 targeted workers. Largefirms like Texas Instruments also use the taxcredit.9

Modifying Selection Practices

To reap the benefits of basic skillsinvestments and job-related training,companies must develop effective ways ofselecting workers from a changing,shrinking, and in many ways morechallenging applicant pool. Standardselection practices are coming underincreasing pressure, since they have beenestablished to replicate the existing set ofproductive workers in a company. Whennew recruits have different backgroundsand charactc!ristics than those ofhigh-performing incumbents, screeningsystems may need to be modified.

Problematic SelectionCriteria

Through experience, employmentinterviewers look for a set of competenciesthat they know are prevalent in their bestincumbents, traits which typically gobeyond education, work experience, and theother basic qualifications that show up onjob applications and resumes. These moresubtle and intuitive signals of futureperformance are centered around applicantappearance and behaviors, such as dress,grooming, speech, demeanor, manners, andattention span.

Chapter Two

When the applicant pool is broadened, thatdiversity will be reflected in new patterns ofappearance and behavior. Faced withunfamiliar kinds of jobseekers, interviewersmay find that their intuition concerning anapplicant's employment potential is oflimited use since it is based upon severalphysical and behavioral characteristics,such as dress and speech patterns, notcommon among many new recruits. As aresult, many of the less formal but stillimportant standards used by interviewerswill come under as much pressure as themore formal criteria of educationalqualifications and test scores. For thesereasons, a majoi challenge faced byemployers is to modify their inter*wingprocedures to better fit with thecharacteristics and abilides of new recruits.

Developing New ScreeningSystems

When faced with an apparent mismatchbetween jobs and job applicants, a companyhas two basic options, which are notmutually exclusive--modify the job ordevelop the capabilities of the worker.Inherent in these options is changing basicscreening criteria themselves. If job tasksare modified, there is a related adjustment inthe required minimum capabilities ofworkers. Whether jobs are altered or not,gaps may remain between the jobrEquirements and the skills of the worker.

In the face of skill gaps, screeningrequirements may need to be modified. Oneway is to redefine acceptable job candidatesas those that meet minimum standards ofemployability or trainability, as opposed tothose that have mastered all of the requiredjob skills at the point of hire. This can bedone by selecting applicants whose score ona screening test is at or above somerLducedminimum threshold, or by breakingavailable jobs down into their componentrequirements and selecting applicants


whose skills do not fall below a minimumrequirement level. In Wier case, screeningfor "trainability" often means beingprepared to either offer up-frontremediation, or to lengthen the traditionalthree- to six-month probationary period.

For reasons of efficiency andcompetitiveness, companies can ill afford tocompromise on productivity. As a result,many firms are taking innovative steps toensure that those hired can be integratedinto the workplace smoothly andproductively. Some are using screening as atwo-part process--the traditional task ofdeciding whom to hire, and the assessmentof gaps between the requirements of jobsand the competencies of new hires. For agiven set of jobs, workers are being selectedbased on being either job-ready or trainable.Other firms are introducing basic skillsprograms for new "trainable" recruits basedupon functional job requirements. Whileslow to emerge in the workplace, theseefforts hold the promise of increasing theavailability of qualified employees for jobsthat may have gone unfilled for protractedperiods of time.

Some companies are also experimentingwith testing for the first time, and are findingthat objective tests are a relatively precise setof instruments. Tests allow for moreaccurate selection than simple screens basedon educational level or work experience. Awell-thought-out test battery is beingviewed increasingly as a valuable aid in theselection of trainable entry-level staff withinterests and potential skills that match jobcontent.

Despite their attractiveness as objectivepredictors of performance, selection testshave their limitations. Tests do not alwaysmeasure motivational levels well, are moreaccurate at predicting failures thansuccesses, are more predictive for groups

than for individuals, and can create anxietyon the part of the test taker.10 Especially ina labor s horta ge environment, there a re costsassociated with false negatives incorrectlyscreening out individuals that could havebecome productive employees. By rigidlyapplying tests to screen out low performers,some potentially high performers will berejected. So it makes sense to use testingflexibly, both to define minimumcompetencies and to design trainingstrategies. (See the appendix to this chapterfor more information on implementing aworkplace testing program.)

Increasing the Effectiveness of thefob Interview

Relying on a more diverse applicant poolrequires changes throughout the screeningprocess, up to and including theemployment interview. Interviewing isboth the most common and potentially themost subjective approach to selectingworkers. As the focus of the interviewbroadens from work experience andeducational background to growth potentia 1and trainability, errors in judgement canincrease, since "potential" is difficult tomeasure. As a result, interviewers shouldbe made aware of the fact that individualsneed not be completely "job-ready" on thedate of hire.

In addition, personal characteristics ofinterviewees should not have adisproportionate impact on the judgementof the interviewer. These include dress anddemeanor. Interviewers must learn to avoidstereotyping and search for meaningfulinformation related to future jobperformance. For example, future customerservice representatives need not be neatlyattired at the interview, necessarily, but theinterviewer must determine whether or notthe applicant is receptive to the idea of beingfasticY ,us in dress on-the-job. This is,broadly defined, an example of screening for

32 4 5

trainability, as opposed to measuringobserved competencies at the time of hire.

Brief interview often lead to prematurejudgements, as when an actress shinesduring her audition but turns out to beinappropriate for the part, or when amathematically inclined applicant panicswhen asked a straightforwardmultiplication question during aninterview. The increasing cost of rejectingpotentially productive employees suggestsextending the probationary training periodfor new hires, to give them every chance tocome up to speed. Multiple observations ofa worker deemed marginal in an interviewhelp to sort out the trainable from theuntrainable. Good workers even thosewith some deficiencies -- are difficult toreplace.

Integrating the New Hire Into theCompany

Investments in recruiting and hiring newkinds of workers can be lost if the recruits donot blend well with incumbent employees.Along with diversification comes anincreased need for building flexibility andtolerance among existing employees, andfor developing programs to support the newhires.

Modifying Initial PlacementPractices

Once hired, most workers begin aprobationary period which includesemployee orientation as a first step.Orientation in many companies -- andespecially in smaller ones -- is a brief,sometimes informal process. A traditionalorientation will cover the basics of employeebenefits and company policies, often in aslittle as one hour.

,,t ,,4-." t

33

Chapter Two

Most orientations assume that the workeris job-ready, in the sense that he or she willbe able to read the orientation materials, hasthe basic skills to do the job, and is areasonably good fit with the company andits culture. However, given the reduction inthe number of new hires that are meetingtraditional qualification standards, theseassumptions must be re-evaluated.

Additionally, implicit in the standar6conception of orientation is the notion thatthe company has certain norms andexpectations which the applicant, onceinformed of these standards, will be able to

meet. If many of the new hires are notjob-ready, then the purpose and format oforientation may have to be changed as well.

One approach is to introduce moreelaborate orientation programs, such asthose that became popular in the 1970s and1980s, including a well-known experimentaldesign administered and publicized byTexas Instruments (TI). The innovative TI

approach included a seven-hoursocialization program on careermanagement and strategies foradvancement. Evaluation results from TIindicated a low rate of turnover amongthose new employees who had participatedin the program; subsequently there has been

a keen interest in orientation among humanresource professionals. Relativelywell-developed programs, designed to

increase productivity and reduce turnover,are now in place in larger companies such asCorning Glass Works and the DisneyCorporation.11 Although expensive, these

programs can serve as models for smallempli-vers that wish to develop morestructured orientation programs for newemployees.


Basic skills and related programs for entry-level workers is another example of howcompanies are adjusting the initial place-ment phase for new recruits. In this case, theprobationary period is expanded beyond itstraditional role of assessing employee com-petencies; the first year is increasingly seenas a time to develop needed job skills. Ob-served deficiencies, rather than beingviewed as failures, are remediated throughcompany assistance. In consequence, the as-sumptions underlying the initial placementprocess are changing. The challenges of theinitial hiring period are as much on theshoulders of thz company as on theemployee. Correcting mismatches betweenthe worker, the job, and the company are tobe expected, an-1 the goal is to alleviate thesemismatches and integrate the new hire intothe existing work group.

Finally, the new environment has createdan additional managerial taskmanagingdiversity. Managers must learn how tohandle the special concerns of workingparents with complicated daily schedules; ofimmigrants who may have troublecommunicatini, in English; of high schooldropouts wary of classroom-based training;and of other grotips who may not readily fitwith an organization's culture. Just as manynew employees will need to be enculturatedto the workplace, managers must also betrained to manage the diverse workforce.

Some Model Programs

At Ortho Pharmaceutical, a subsidiary ofJohnson & Johnson, high turnover rates andlow representation in upper management ofwomen and minorities led executives toundertake efforts to change the companyculture. The goal was greater assimilation ofless-represented groups into themanagement ranks. Executives began byhiring an outside consultant to conductthree days of rrviaging diversity training

for all members of the upper-levelmanagement team.12

The training at Ortho was made up ofawareness-raising exercises to helpparticipants understand their own attitudesabout race and sex, and to demonstrate howone's personal views influencedecision-making and other institutionalbehavior. Trainees also discussed whatmeasures could be undertaken to effectchange. Management personnel who tookpart in the training disseminated what waslearned throughout the company, andbegan promoting the idea of valuingdiversity. This turned out to have littleeffect, so the same training course wasextended to all employees--one level at atime. In addition, managers wanting specialhelp in their departments were givenassistance in developing customizeddiversity training programs, includingaccess to training films and literature.

The Procter and Gamble (P&G)corporation has a diversity program thatinvolves many distinct activities in theccmpany.13 The effort is decentralized,allowing individual facilities anddepartments to arrive at their own solutionsto managing diversity. Nonetheless,support from corporate managers has beeninvaluable in encouraging facilities topursue diversity programs. The responsesinclude multi-cultural teams to advise topmanagement, special relationships withblack colleges, and minority workingconferences. One division of the companyimplemented an "on-boarding" program fornew hires, in response to the extended timethat black women and other minoritiesneeded to become acclimated into their jobs.The on-boarding program provides specialtraining for women and minority employeesand for their managers.

34 ,-4 i

For the smaller firm, integrating the newhire into the company culture need not beexpensive. Several businesses have takenthe simple step of appointing individuals orcommittees to facilitate communicationbetween minority workers and companymanagement. Digital EquipmentCorporation adopted a policy of valuingdifferences which it wrote into its corporatecharter.14 The company established aManager of Valuing Differences to facilitateimplementation of company policy. Digitalis launching a training initiative that aims toprovide every employee with the resourcesand preparation needed to take fulladvantage of increasing workplacediversitythrough the 1990s. The company has a largenumber of trainers, many cf whu.n have

--

35

Chapter Two

gone through courses at its AffirmativeAction University.

High turnover, lack of career mobility, andproblems between employees from differentethnic or racial groups have created theimpetus for workplace diversity programs.Businesses are moving away from theattitude that hiring minorities and women isthe equitable thing to do, toward a belief thathiring, training, and retaining a broadworker constituency is the efficient thing todo. Through the establishment of supportgroups, buddy systems, and formalorientation programs, companies arelearning how to celebrate differences withinthe company culture, and in doing so raisingthe productivity of both incumbents andnew hires.


Chapter EndnotesL'1988

Human Resource Effectiveness Report" (The Saratoga Institute). The 1988 report wasbased on 319 company surveys.

2Adam Seitchik and Jeffrey Zornitsky, From One _Job to the Next: Worker Adlustment in a

Chan*ing Labor Market, (Kalamazoo, MI: W.E. Upjohn Institute for Employment Research),1989.

3These results are from "1988 ASPA Labor Shortage Survey Report" (American Society forPersonnel Administration, Alexandria, VA).

4The "economically disadvantaged" include welfare recipients and their families; thosewhose family income is below the poverty level for the 6-month period prior to application;publicly subsidized foster children; and adult haftdicapped individuals whose incomes meeteligibility criteria, but whose family incomes may not. Dislocated workers (or equivalently,displaced workers) are those who have been terminated or laid-off because of a plant closingor reduction in force, or are long-term unemployed and have limited opportunities foremployment or reemployment in the same or a similar occupation in the area in which suchindividuals reside. Individual states can restrict or extend the definition of displaced workers.For more information see "The Job Training Partnership Act," The U.S. National Commissionfor Employment Policy, September 1987 (Washington, D.C.: U.S. (overnment PrintingOffice).

5As quoted in The New York Times, September 25, 1989.

6,'CompaniesStep in Where the Schools Fail," The New York Times, September 26, 1989.

7The targeted groups are: vocational rehabilitation referrals (defined as those with a physical

or mental disability who have been referred to the employer while receiving or after complet-ing state-approved vocational rehabilitation services; the economically disadvantaged, in-cluding youths aged 18 through 22, co-op students aged 16-19, summer youth employees aged16-17, and Vietnam-era veterans; and recipients of various types of public assistance. SeePresent Law and Issues Relating to the Targeted Jobs Tax Credit," Joint Committee on

Taxation Staff, May 24, 1989 (Washington, D.C.: U.S. Government Printing Office).

8The credit can only be taken if the worker is employed for at least 90 days or a total of 120hours. That part of wages which is claimed as credit cannot be deducted as a business expensefor tax purposes. More liberal credits and minimt.m work guidelines apply for economicallydisadvantaged summer youth. Contact the local office of the U.S. Employment Service formore information on using the credit.

9,'LaborLetter", The Wall Street Journal, November 7, 1989.

10Caruth, Donald L., Robert M. Noe III, and R. Wayne Mondy, Sgin the Contemporary

Organization, (New York: Quorum Books), 1988, chapter 9.

36 4 9

Chapter Two

11See Ron Zemke, "Employee Orientation: A Process, Not a Program" raja_ j&,lin August,

1989), pp. 33-38.

12See Lennie Copeland, "Valuing Diversity, Part 2: Pioneers and Champions of Change"(Personnel, July 1988), pp. 44-49.

13Ibid.

14Ibid.

5 Jr

Chapter Two

CHAPTER 2 - APPENDIX

ISSUES IN DEVELOPING A WORKPLACETESTING PROGRAM

The information presented in thisappendix is designed to acquaint employerswith key issues surrounding the design andimplementation of workplace testing. Threespecific issues are addressed, including:

The Uses and Benefits of WorkplaceTesting

Alternative Types of Tests

Implementing a Testing Program

The Uses and Benefits ofWorkplace Testhig

Although long the province ofpsychometric experts, workplace testing hasbecome an increasingly useful managementtool for assessing job applicants, new hires,and incumbent personnel. When usedjudiciously and in consort with otherassessment devices, paper and pencil testsare a cost-effective way of screening for hireand promotion, and identifying deficiencieswhich can be remediated through training.While virtually all companies interviewapplicants as part of the screening process,an increasing number of businesses aresupplementing their interviews withobjective testing.

The resurgence of testing as a screeningdevice has been sparked by three factors:

5 1 39

1. a more favorable legal and regulatoryenvirenment that no longer discouragesobjective testing; 2. a growing consensuswithin the professional testing communitythat formal tests are not inherently biasedagainst minority group members; and 3. areduction in the cost of test administrationand evaluation. One testing expertestimates that:

Ten years ago, if an employer called usand wanted to put together a test batteryfor salespeople or copywriters orfill-in-the-blank, we told him it wouldtake $100,000 and six months. Nowwe're talking about $6,000 and a coupleof weeks.1

The conventional wisdom is that testing ismost efficient when the selection ratio ofhires to applicants is low, and companiesneed a cost-effective way to pare down theapplicant pool. However, the recent increasein formal testing programs has occurredduring a period when the growth of theentry-level workforce has slowedconsiderably. What managers are finding isthat making the wrong hiring decision iscostly, as is placing the right person in thewrong job. These risks can be reduced bycarefully evaluating both people and jobs.

Testing is becoming a more common partof human resource systems in an effort toimprove the match between employer andemployee. Testing can be thought of asfacilitating the development of a human


resource map within the company thatidentifies the requirements of jobs and theaptitudes and abilities of the workforce.

When the human resource system ismapped out with a systematic analysis ofjobs and people, it becomes clear that testingcan be taken beyond its traditional role a s aneffective screen for new hires. Testing canbe used to facilitate job mobility and designeffective training programs. Since thebenefits of training are maximized whentrainees' needs are documented clearly, thetraining function can be enhanced throughwell designed job-related testing. Testingcan also help assess when a worker is readyfor promotion. In this context, testing can beviewed as a tool for career enhancement.Despite the challenges involved withdeveloping an effective assessmentprogram, many companies are finding itwell worth the investment.

The benefits of testing are greatest whenworkers are viewed as long-terminvestments. When technology changesjobs or automates them away, employerscan choose to train or retrain existingworkers in new skills rather than replacethem with new workers. This is facilitatedwith accurate information about whereincumbents will best fit into the company'snew job structure. For most workers,careers develop like branches of a tree -- notlike rungs on a ladder. When many careerpaths are possible or new ones emerge,testing can help managers decide wherehuman resources within the compan y can bemost efficiently and effectively applied.Investing in workers also implies that theinitial hiring decision is a serious one withlong-term consequences, and that carefulscreening for job-related personality andability traits is cost-saving in the long run.

Alternative Types of Tests

The most positive recent development inthe field of testing has been the movementto establish assessment instruments that aretied closely to job requirements. Prior to thisinnovation, employers were rightlyskeptical about the utility of psychologicallyoriented personality profiles orclassroom-type basic skills tests. Workerssubject to such tests often wondered aboutthe relationship of the test to the job, andemployers have had difficulty using theresults to evaluate employees or to develophuman resource plans.

State-of-the-art job-related testing beginsnot with potential hires and trainees, butwith tile content of jobs and the highperformers within those jobs. Thedevelopment effort seeks to identify testitems which are positively correlated withjob performance. Those elements of a testbattery which are determined to have"predictive validity" (e.g., shownstatistically to be related to good workon-the-job) can then be used to assessindividuals and design traini', v., programs.

When selecting a testing program,employers should also look for "facevalidity", that is, an obvious or intuitiveconnection between test items and job tasks.The job-relatedness of testing instrumentsshould be obvious within each of the twobasic kinds of tests--personality and skill.By ensuring that workplace tests havface and predictive validity, employers canbe confident that test results will be accurateand relevant to their needs.

40 5 c)

In the area of personality, for example, thejob-related tests should not be designed toestablish 1 full personality profile, completewith the identification of traits which mayhave no concrete relevance to the job.Rather, the emphasis should be narrow andfocused on matching individual personalitytraits (e.g., empathy, assertiveness,decisiveness) to jobs, as validated bycomparing test scores and performancemeasures of workers who are in those veryjobs. Additionally, personality tests can bemore applicable when tailored aroundclusters of jobs, such as sales, customerservice, or management. Such tests shouldalso not make irrelevant references to race,religion, sexual preferences, etc.

Similarly, job-related skill tests shouldattempt to replicate the tasks of workers.For example, a clerical worker can be givena clerical skills test as an alternative to ageneric math test, with the items of theclerical test mirroring the kinds of tasksrequired for the job. Such a test mightinclude a series of questions wh:ch requiresprocessing information on a mock computerscreen. Tailoring tests to jobs will increasethe validity of the instruments and likelyenhance workers' motivation to completethem, since doing well on the tests is moreobviously tied to doing well on the job.

Personality Tests

Job-related personality tests should seek tomeasure those aspects of a worker's natureor style that affect performance in particularjobs. The job-relatedness of the tests arecritical, in that different personality typesare required not only across occupations,but also across company cultures and withinthe particular setting of each job. Forexample, some management positionsrequire fitting into the existing companyculture, while others need leaders who arehappiest when applying new ideas and

IL: 414-1 k j

Chapter Two

changing the environment ot the workgroup. Some sales jobs requirepersuasiveness, others require creativityand flexibility. The bank manager may needto be very achievement-oriented, while anachievement-oriented bank teller will feelstifled by the lack of promotionalopportunities inherent in his or her position.In sum, different jobs require differentpersonalities.

In some cases, personality traits which areassociated with high job performance can becounter-intuitive. For example, in one set ofsales positions it could be that good salespeople do not have an affiliative need to bewith other people in fact, spending lots oftime associating with unprofitable clientsmay well not be productive. Thus, the keyto effective personality testing is validation

identifying which test items are bestcorrelated with high job performance. Quiteoften, job-related personality tests aredeveloped around certain categories of jobs,such as management or sales positions.Personality tests may be best suited to thosejobs that require qualitatively oriented skillsand where contact with customers or clientsis emphasized, or in key managerialpositions.

The personality test batteries developed bythe most innovativ e testing firms haveevolved away from academic typeinstruments which are difficult to associatewith jobs. For example, Saville andHoldsworth's Occupational PersonalityQuestionnaires attempt to profile up tothirty personality dimensions in threejob-related categories: 1) interpersonalrelations (e.g. assertive, gregarious,empathetic); 2) thinking style (e.g. practical,artistic, innovative, detail-conscious); and 3)

feelings/emotions (e.g. relaxed,tough-minded, competitive, decisive). Theassessment results are then used inselection,


training diagnostics, managementdevelopment, and career counseling.

Related to personality tests are interestinventories, which a re most commonly usedas a tool in career guidance and counseling.Unlike the personality test, the interestinventory directly asks employees to rate thedesirability of various families ofoccupations and areas of interest.Inventories are often tailored to workers atvarious stages in their careers, such as highschool graduates, college graduates. orentry- and mid-level managers. Foremployers, the test can be thought of asmeasuring a third dimension of theirworkers not"can do" orwill do," but wantto do. Interest inventories are rarely used asa candidate selection device.

Ability Tests

The most common tests given to workersmeasure skills, and are variously calledaptitude, ability, or skill tests. Traditionalforms of these tests were developed inacademic settings, and include such wellknown instruments as the MinnesotaMechanical Ability Tests and the BennettDifferential Aptitude Test (which includes atest of abstract reasoning) Literallyhundreds of abilities tests are commerciallyavailable, and cataiogued (along withpersonality tests) within the series of MentalMeasurements Yearbooks, edited by OscarBurros. The most common types of skilltests are verbal, numerical, clerical, spatial,diagrammatic, mechanical, and tests ofdexterity.

The trend in workplace skill or ability testsis toward developing instruments that arederived from tasks that workers faceon-the-job. Instead of a generic math orreading assessment, workers increasinglyare given tests centered on categories ofoccupations, such as clerical, technical,

42

production, sales, and management jobs.These tests will of course assess reading andmath ability, but do so within the context ofjob tasks. Clerical tests, for example,measure verbal usage, numericalcomputation, checking, classification,verbal meaning, numerical reasoning, andaudio checking. Tests can also be designedaround job families with particularapplications, such as an automated officebattery.

There are a number of potential adva ntagesof such "content-based tests" (meaning testswhich are structured around job tasks, ormeasures of performance). First andforemost, they have "face validity," in thatmost of those who administer and take thettsts can see the connection between theinstruments and job performance.Especially if test takers are wary ofclassroom-type, school-based assessment,the job-rela ted look of the testing instrumentmay reduce anxiety and alienationsurrounding the entire area of testing andassessment. Also, content-based tests mayhave greater predictive validity imitatingjob tasks within the tests can increase thecorrelation between test performance andjob performance. Correlations can also beaffected by restrictions in the range ofresponses, in sample size, and in supervisorratings.

Implementing Testing inthe Workplace

The basic steps in establishing a workplacetesting program are as follows. The first taskis job analysisassessing the requiredcompetencies for the work that needs to bedone in the company. Step two isdeveloping a valid test battery one that isa good predictor of future performance injobs. Step three is administering the tests,

5 --.

and deciding what will be done with theresults. Underlying each of these steps areconsiderations of cost, legal exposure, andthe use of outside consultants.

Job Analysis

Job analysis identifies the key tasksassociated with a job or set of k-,1-4.- Thisprocess is recommended witl.lin federalguidelines on employee selet.tion, because aclear understanding of job tasks is likely tomake assessment systems more job-related.By breaking available jobs down into theircomponent parts (the task of job analysis) itis possible to test for gaps between workersand jobs. This ais in both screening and indesigning training programs to fill thosegaps. Formal job analysis systems includethe Position Analysis Questionnaire (PAQ)developed at Purdue University and theDepartment of Labor's Job AnalysisSchedule (JAS). The JAS, for example,collects data on the functions, setting,equipment, content, and worker traitsrequired for a variety of occupations. Jobanalysis systems vary widely in theiravailability, quality, and cost.

Job analysis often begins with managersand workers completing objectivequestionnaires about the jobs which theysupervise and do. Off-the-shelf job analysissurveys covering broad occupationalcategories can usually be filled out in lessthan one hour. The accuracy of job analysisis enhanced by having outside consultantsor in-house subject matter experts (such ashuman resource professionals) observeworkers in their jobs, and completequestionnaires or conduct interviews. Sometesting specialists offer structuredcomputerized analyses for only a fewhundred dollars and the cost of participants'time in completing the questionnaires.

r ...-it; t)

43

Chapter Two

As with most things, the quality andaccuracy of job analysis can be a function ofcost, but even smaller companies will findthat a little formal job analysis is better thannone. The highest quality systems will bestandardized, strive for multiple types ofinputs (surveys, interviews), and collectdata from a variety of job incumbents,supervisors, and subject-rnatter experts.The point of the exercise is to make explicitthe "what" and "how" of the company's jobs,so that these can be compared to theincumbent employees (and potentialworkers) who are available to fill thepositions.

Following a job analysis, the next step is tolink joi.) tasks to individual skill andpersonality attributes. Some testingcompanies have developed expert systemswhich match a set of job tasks isolatedthrough job analysis to the likely neededindividual attributes for those tasks, aspreviously identified by industrialpsychologists. These attributes then formthe basis for selecting . test battery for jobcandidates.

Realistically Assessing theRisks of Testing

From the employer's perspective, theleading factor reducing the deslre to test isthe legal risk. Many employers, especiallysmaller ones, are unaware of recentdevelopments in research, court cases, andtest development that have reduced thisrisk. But legal exposure is still an issuewhenever testing is seen as a potentialscreen, whether for hire, promotion, oraccess to a training program that will lead topromotion.


The key legislation with regard to testing isTitle VII of the Civil Rights Act of 1964, asamended by the Equal Employment Act of1972. Title VII makes it illegal for employersto discriminate in hiring, firing, promoting,compensating, or in the terms, conditions, orprivileges of employment on the basis ofrace, color, sex, religion, or national origin.Coverage includ es most firms with fifteen ormore employees for each working day ineach of twenty calendar weeks in the currentor preceding calendar years. Subsequentfederal legislation prohibits discriminationby age and against pregnant women.2Several states and localities have extendedprotection to employees in smallerbusinesses, and two states have barreddiscrimination based on sexual preference.Further requirements are placed uponfederal contrntors.3

In 1978, the various 'ederal agenciescharged with enforcing antidiscriminationlaw published a set of Uniform Guidelineson Employee Selection Procedures, whichdo not carry the weight of law, but have beengiven much deference by the courts. TheUniform Guidelines articulate the elementsof a valid testing program. When theguidelines are followed closely, then the useof validated, job-related selectionprocedures is virtually unassailable.

A rule of thumb in employee selection isthe so-called four-fifths rule: there is"adverse impact" on a protected group if itsmembers are not hired at the rate of at least80 percent of the rate of the best achievinggroup. If there is no adverse impact, thenthere is less legal pressure on the companyto validate that its selection procedures arejob-related. However, there are soundbusiness reasons for making sure selectionis job-related no matter the demographicprofile of applicants and employees,because irrelevant screening criteria willlead to a less productive set of hire

When there is adverse impact, the UniformGuidelines strongly suggest that companiesconduct a job analysis, and then validatetheir selection procedures. The use ofvalidated, job-related hiring practices isfully protected under the law, even ifadverse impact occurs. For sound ethicaland moral reasons, however, manycompanies seek to diversify theirworkforces in the presence of adverseimpact, by broadening recruitment practicesand introducing other innovativeaffirmative action techniques.

Some employers have the misperceptionthat the federal guidelines encourage hiringcertain groups of workers. In fact, the goalof the legislation and guidelines is simply tobase selection criteria on job-related factorsrather than race, sex, etc.. Senator HubertHumphrey, arguing for the passage of TitleVII legislation in 1964, said that it "does notlimit the employer's freedom to hire, fire,promote, or demote for any reasons or noreasons so long as his action is not basedon race." In Watson vs. Fort Worth Bank andTrust (1988), the Supreme Court reaffirmedthis nondiscriminatory approach to Title VIIby ruling that interviewing and otherselection devices should not be treateddifferently from objective tests withindiscrimination cases. This action reducesthe bias that had developed within case lawthat held objective screening criteria (such astesting) to higher standards th toresubjective methods.4

The legal climate with resp .o hiring andpromotion practices is currently in flux. Inresponse to a number of 1989 SupremeCourt rulings, a bipartisan group of U.S.congressmen has introduced legislationknown as the Civil Rights Act of 1990. TheAct would codify that employers have theburden of proving tha t adverse impact is theresult of nondiscriminatory hiring practices,and is thus justified as a business necessity.

44

5 d

The Justice Department is crafting anarrower bill, since President Bush hasthreatened to veto the proposed Civil RightsAct of 1990 in its current form.

Research has shown that, on average,minority candidates may score lower onvalid and reliable ability tests than whiteapplicants. Thus, using these tests may leadto adverse impact in selection. However,various studies have shown that a numberof tests are indeed job-related, and do nottreat minorities unfairly. Therefore, it is notillegal to test, as long as the test is clearlyvalidated and related to job performance.Summarizing this research, testing expertFrank L. Schmidt of the University of Iowastates that:

Cumulative research findings havedisconfirmed ... theories that postulatedthat average score differences betweengroups were due to deficiencies in the[ability] tests ... At the same time,research has shown that such tests arevalid for virtually 4111 jobs and thatfailure to employ them in selection canlead to substantial economic losses.These findings have increased thepercentage of jobs for which such testswill probably be used.5

Developing a Valid Test Battery

The Uniform Guidelines specify seve7almethods for validating a testing program,but by far the most common iscriterion-related validity.6 "Criterion-related" means that the test is correlated witha measure (or criterion) of job performance.By far, the most common criterion used issupervisor evaluations. When thevalidation is done by conducting the test andcollecting the criter!on scores at the sametime it is called concurrent validity. Whenthe testing is done first and thecriterion-related job performance assessedlater it is called predictive validity.

ty7ti45

Chapter Two

Although the jargon surrounding testing iscumbersome, the process is fairlystraightforward. Imagine setting up atesting program for a bank teller position.The first step in the process is job analysis --figuring out the content and context of theteller position. The second step is selectingan appropriate test battery. At this stage, anumber of tests and selection procedures arechosen, in order to see which dimensions arecorrelated with job performance. Theadvantage of concurrent validity is that thetest can be validated rapidly. In this case,concurrent validity would meanadministering the test to a sample ofincumbent tellers, and then comparing testresults to some measure(s) of jobperformance, such as the tellers' error ratesor supervisor assessments. Test scaleswhich are good predictors of jobperforma nce become pa rt of the battery, andthose that are not good predictors arediscarded.

While concurrent validity has theadvantage of providing a rapid turnaround,it has its disadvantages. Incumbentpersonnel may not take the tests as seriouslyas a group of potential hires, especially ifthey are told there will be no directconsequences from the assessment. Also,companies tend to sort out their good fromtheir bad performers over time, and keep thegood ones, so that tIs.:. incumbents'performance scores may not show enoughof a range to distinguish between the goodand the not-so-good workers. Clearly, acriterion-related validation is only valid tothe extent that the performance criterion(supervisor evaluation, error rate) is anaccurate measure of on-the-jobproductivitv.

An example of predictive validity wouldbe administering the tests to a group of tellerapplicants, without using the scores to makehiring decisions. Once criterion measures


are collected on the job (such as thesix-month supervisor evaluation), the testswould be scored and compared toperformance. The advantage here is that thetest would be validated on the same groupfor which it is designed (applicants). Thedisadvantage is the time that it takes tovalidate the test battery before it can be putin place.

The Uniform Guidelines do not requiretha t a ll tests be revali da ted in a 11 workplaces,but it is prudent to conduct a validationstudy if technically feasible. Under theguidelines, a company may use tests whichare validated elsewhere when (1) the test'svalidity has been clearly demonstrated inother settings; (2) the validity of the test wasestablished on workers performing taskssimilar to those within the company, asdetermined by job analysis in both settings;and (3) the test has been determined not tohave adverse impact elsewhere for the localminority groups. If there is adverse impact,then it is advisable to do a validity study inthe new setting, unless it is not technicallyfeasible to do so.

In sum, for reasons of efficiency andprotection from legal risk, it mi. kes sense tovalidate testing instruments in theworkplace. Unless a company hassubstantial in-house expertise in this area,the field is complex enuugh to warrant theuse of outside consultants. The cost of avalidation study varies widely, dependingon how elaborate the test battery and howlarge the company. A 1975Prentice-Hall/American Society forPersonnel Administration survey reportedcosts of und er $5,000 in most cases.7 Despiteinflation, dollar costs have been reducedsince then by computerization andstandardization of validation procedures.One testing specialist at Saville andHoldsworth Inc., a Boston-based firm,reports that without validation, the up-front

46

cost of job analysis and buying somematerials can be less than $1,000; however,larg, companies often spend over $100,000designing and validating a testing program.A validated testing battery can bedevelopedfor as little as $6,000.

For smaller companies, an effectiveapproach to test development andvalidation is working through a localemployer group. In collaboration with atesting specialist, consortiums of businessesin a single industry or related industries canpool resources in job analysis andvalidation. Group efforts also help toestablish norms which make sense for thelocal population of workers, avoidingreliance upon national standards which maynot fit the region's workforce.

Conducting the Tests andInterpreting the Results

Currently, an employer can initiate atesting program at an operating cost ofapproximately $5-20 per subject tested.Off-the-shelf job-related tests of bothpersonality and skill have lowered the costsand increased the validity of theinstruments, and are available for use byhuman resource professionals. Reputabletesting companies follow AmericanPsychological Association guidelines as tothe minimum training required toadminister psychological tests. Testingspecialists often provide training courseswhich certify in-house personnel to use theirmaterials. Developing testing competenciesin-house can significantly lower assessmentcosts in the long-run.

By rigidly applying tests to screen out lowperformers, companies will inevitably endup rejecting some potentially highperformers. On the other hand, awell-thought-out test battery can aid in theselection of trainable entry-level staff with

5s

interests that match job content. When soviewed, many companies are using testingflexibly, to both define minimumcompetencies and design training strategies.

47

Chapter Two

In essence, testing is not and end unto itself,but is rather a management tool to aid inassessing workers and mapping outavailable human resources.


Appendix Endnotes

1Val Arnold, vice-president of individual assessment at Personnel Decisions Inc., as quotedin Training Jecember, 1988, p. 50.

2These are the Age Discrimination in Employment Act of 1967, as amended in 1986, and thePregnancy Discrimination Act of 1978.

3These include the Rehabilitation Act of 1973, the Vietnam Veterans Readjustment AssistanceAct of 1974, and Executive Orders 11246 and 11375. Federal :ontractors with contracts abovea minimum cutoff point are required to develop affirmative action programs.

4See Clint Bolick, "Legal and Policy Aspects of Testing" (Journal of Vocational Behavior 33,1988), pp. 320-330.

5Frank L. Schmidt, "The Problem of Group Dilferences in Ability Test Scores in EmploymentSelection" (Journal of Vocational Behavior 33, 1988), pp. 272-292.

6The other methods are content validity and construct validity. Content validity refers totesting individuals as they perform the actual tasks of a job; the classic example is a typingtest for clerical personnel. Construct validity is determining the extent to which a testmeasures some theoretical trait such as intelligence or verbal ability, as an end unto itself. Theemployer is on safer ground if these constructs are objectively validated as connected to jobperformance that is, included as part of a criterion-related test.

7Wilfredo R. Manese, Fair and Effective Employment Testing; (New York: Quorum Books),1986, p. 26.

48 6 C)

CHAPTER 3

ESTABLISHING WORKPLACE BASIC SKILLSTRAINING PROGRAMS

When the Tektronix company, a high-techfirm in Oregon, tried to shift its traditionalassembly line workforce to a moreautomated manufacturing system, 20percent of its production workers werefound lacking the basic skills needed for thetransition.1 in response to this, the companycontracted with a nearby community collegeto operate an on-site program in basic mathand English instruction for many of itsnon-English speaking assemblers. InOntario, Canada, Sherborne ManufacturingLimited, a machine parts producer,discovered that it was necessary to invest inadult remedial education to improveworker literacy skills before changes in itsassembly and manufacturing technologycould be implemented.2

These are just two examples of how manycompanies have begun to respond to basicskills deficiencies among new andincumbent workers. Although a smallproportion of all employers currentlyprovide basic skills training (18 to 26percent), most of the evidence--bothanecdotal and research-basedsuggests thata growing share plan to increase theprovision of such training.' According to arecent national survey of M3 firms by theSociety for Human Resources Management,77 percent had plans to increase theprovision of basic skills training over thenext three to five years. Writing, math, andbasic communications skills are expected toreceive the greatest attention.4 In an

environment where there is a growing gapbetween the basic skills needed in theworkplace and the abilities of workers,workplace-based education and traininghas become an increasingly necessaryhuman resources investment (see Exhibit 1).

The need for basic skills training is madeclear by the large numbers of workers whoare not hired or promoted because ofdeficiencies in one or a combination of basicskills areas. In the U.S. today, it is reportedthat 84 percent of all firms that test jobapplicants for basic skills deny hiring ifdeficiencies are found.5 A similarly highpercentage of firms (72 percent) denypromotion if work. ire tested as deficientin basic skills. While the majority of firmsdo not currently test job applicants for basicskills, the large share that do (40 percent) areturning away otherwise good workerswhose productive capacity could beenhanced by upgrading their basic skills.This type of selection strategy may havebeen appropriate in a baby-boomenvironment, but it is not very efficientwhen qualified workers cannot be foundeasily.

Understandably, many firms are reluctantto engage in basic skills training. Some arefearful of the costs and potential loss ofnewly trained %,orkers, and others lack theexpertise and/or access to information onavailable resources. While establishing abasic skills program can indeed be a

6..49

C .:2

Exhibit 1The Role of Workplace Basic Skills Training

Pool ofPotential

EmployeesRecruit

Test & I OrientPlace New

Select Hires in Jobs

(Y Job SpecificTraining

Develop &Retain

Employees

I

('Job Specific

Training

Basic Skills Training

challenging task, it is also a feasible one.Several firms, both large and small, havedemonstrated the viability of establishingeffective workplace basic skills programs.The experience of one small Vermontmanufacturer, as described below,illustrates the point. Acfaitionally, publicemployment and training programs, localadult literacy centers, and area colleges areavailable to assist with various aspects ofdesigning and implementing basic skillsprograms. In some cases, these (public)institutions can also share the costs ofdesigning and operating the program. Formany employers, the key challenge today isnot so much whether or not to offer basicskills training, but how to best design andoperate a program that responds to the

Chapter Three

needs of workers and the firm withinexisting budgetary and other guidelines.

This chapter reviews some of the majorissues involved with the design andimplementation of basic skills programs fornew and incumbent workers. The chapter isorganized around the following four issues:

1. The Basics of Basic SkillsPrograms

2. Identifying Basic Skills Problemsin the Workplace

3. Designing a Basic Skills Program

4. Implementing a Basic SkillsProgram

Upgrading Job-Related Basic Skills at Superior Technical Ceramics

Since 1984, Superior Technical Ceramics (STC) nas been operating a job-related basic skillstraining program taught by staff engineers and delivered on an in-house basis. The firstclasses offered were basic math and blueprint reading. Subsequent courses have beendeveloped in job-related specialties such as kiln procedures and threading.

STC is a small manufactur er located in rural Vermont that produces machined ceramics forspecialty business uses. The company has a workforce of less than 100, most of whom areunskilled and semi-skilled production workers. The only entry-level skills required are theability to attend tc detail, some manual dexterity, and a willingness to work in a manufacturingenvironment. Machine set-up and shop supervisory jobs, however, necessitate a set ofcompetencies that few of the entry-level workers have. These include reading and interpretingblueprints, making shrinkage calculations, and calibrating machines to the exact requirementsof small-scale production runs. The higher level set-up and shop supervisory jobs at STC arestaffed almost completely through internal promotion. Because of the sequential nature ofceramic manufacturing, mistakes can be quite costly as pieces move through the variousproduction stages.

Initially, the company's job-related math and blueprint training was offered to all interestedworkers, half on company time and half on the worker's nwn time. However, managementcame to believe that such broad-based training was not an efficient use of scarce smallbusiness resources. Slow learners held back those with more ability and academicbackground, and not all those who took the classes could realistically move into positions thatrequired more sophisticated analytical skills. To improve the benefits of their training

6


programs, STC's courses are now targeted on the most motivated and able production workerswho show promise for advancement.

By encouraging a select group of workers to enter into job-related courses, SIC sends asignal that training is the first step toward promotion. It is not necessary that workers doextremely well in the courses to advance. While training has become central to upgrading thebasic skills necessary for promotion, it also identifies wcrkers who have the drive anddetermination to complete something that is challenging for them--no matter how well theyactually do in the class. This is a key indicator that STC uses to assess the longer-termpotential of its workers.

Two important issues in the development of basic skills upgrading at STC were efficiencyand cost minimization. To address these, STC's courses are organized in such a way thatthere are no explicit expenditures. Staff engineers develop the courses based on theirexperiences on the shop floor, and teaching is treated as a job assignment covered by theirbase salaries. In addition, workers enrolled in training come off of the line 15 minutes early toattend classes in the company lunchroom. Classes last from 30 to 45 minutes, but workersreceive only their regular paychecks. So the major cost is 15 minutes of lost production time,and the time spent by the engineers in designing and teaching the courses.

The critical math and blueprint reading courses run for up to 22 weeks, depending on theabilities of those enrolled. Classes tend to have no more than 10 to 12 workers, and meetonce per week. Sessions are held in the fall and in the spring. Neither workers nor engineersare interested in taking or teaching courses during the short Vermont summer.

STC's President is convinced that without the basic math and blueprint training, it would bevery difficult to fill higher-level shop positions from within. Without training, shop workers wouldneed much more supervision from engineers, and this of course is expensive. The companyhas shown that it is possible to upgrade workers' skills in job-related ways with limited explicitcosts, and with effective results.

The Basics of Basic Skills

At the outset of designing basic skillsprograms, it is important to establish aconceptual framework that defines basicskills and the approach that will be taken toengaging adult workers in a structuredlearning experience. While the specifics ofprogram planning and implementation areimportant, addressing these early designissues can make an important contributionto setting a clear course of action thatresponds to specific worker and company

52

goals. There are four such design issues thatwarrant careful attention, including:

1. Defining basic skills;

2. Classifying basic skills problems;

3. Establishing functional links; and

4. Planning for the adult learner.

Defining Basic Skills

There are several key considerations inestablishing a workplace basic skillsprogram. First and foremost is definingbasic skills. Those interested inimplementing workplace basic skillsprograms must begin with a workingdefinition that reflects workplace needs,permits measurement of workercompetencies, and allows for themeaningful classification of problems thatmay be found to exist. This is an absoluteessential for ensuring that basic skillsprograms have specific objectives andprovide training in areas that reflectworkplace needs and deficiencies amongemployees.

Traditionally, basic skills have beendefined in acade:tic terms to includereading, writing, and math. Most publiclysponsored literacy programs, adulteducation courses, and evenemployer-provided training initiatives havefocused on providing remediation in one ora combination of '.hese areas. Recently,however, the term has taken on a broaderdefinition to include the 3-Rs as well as aspectrum of more qualitative skills neededto perform effectively on the job.

The broadest definition of basic skills toemerge recently was developed by theAmerican Society for Training andDevelopment (ASTD).6 According toASTD, employers want well-roundedworkers who have acquired a range ofcritical skills and who also have thecapability to adapt to change and acquirenew and more sophisticated skills whennecessary. On the basis of case studies anddiscussions with a large number ofAmerican firms, ASTD developed adefinition of basic skills that includes 17discrete competencies organized into sevenmajor areas. These include:

Chapter Three

1. Ability to Learn

2. Reading, Writing, andComputation

3. Communication: Listening andOral Communication

4. Adaptability: Creative Thinkinganc Problem Solving

5. Personal Management:Self-Esteem, Goal Setting,Motivation, and Personal/CareerDevelopment

6. Group Effectiveness: Inter-personal Skills, Negotiation,and Teamwork

7. Influence: OrganizationalEffectiveness and Leadership

At a time when new forms of production,service delivery, and management aredemanding new and higher levels of skills,this range of competencies will be valuedhighly by employers and employees alike.In manufacturing, for example, theemergence of multi-skilled teams to planand oversee product design and productionhas highlighted the need for a wide range ofnew attitudes and skills among employees.As workers in this collaborativeenvironment take on added responsibilityfor problem solving and dedsion making,they must certainly be competent in suchbasic skills such as reading, writing, andmath. However, collaborative workenvironments also require basic skills ingroup problem solving, conflictmanagement, leadership, andcommunication. To be competitive intoday's global economy, employers needworkers who have a wide-range of basicskills so they can perform productively in a

i: o


changing environment and assume a varietyof responsibilities.

While this broad definition may define thestructure of ideal worker competencies, theneed for them varies. Not all firms will placeequal value on each of these skills, andneither will they be able to afford thetraining needed to impart all basic skills inworxers. Basic skills requirements may alsodiffer by major job category and byorganizational area (e.g., assemblyoperations, custome, service, etc.). From apractical viewpoint, the definition of basicskills needs to be based on the most criticalrequirements of each individual firm.

Recently, the majority of employerattention has been on the academic elementsof basic skills. This is partly because a largeshare of employers already provide trainingthat addresses several of the other elementsof basic skills.7 At the same time, the focuson academics also reflects an unexpectedlarge share of new and incumbent workersfunctioning at literacy levels below what isrequired to do a good job and participate inadditional training successfully. Faced withcompeting priorities, most employersusually begin by defining basic skills interms of a functionally literate workforceable to perform productively and learn newskills.

Classifying Basic SkillsProblems

The process of defining basic skillssuggests a related consideration--decidinghow to classify workplace needs andemployee deficiencies. 2or a given set ofbasic skills, there is likely to be a high degreeof diversity in actual levels of employeecompetencies. In addition, the absence ofsome skills may pose different workplaceproblems than limitations in other skillareas. By developing an approach to

54

classifying the types of basic skillsdeficiencies found in workers, programbenefits can be more readily identified, andeffective programs can be more assuredlydesigned.

For example, the CommunicationsWorkers of America and AT&T recentlyimplemented a series of brief TestPreparation Programs designed to helpworkers pass company tests that serve asprerequisites for entry into certainoccupational groups and advanced trainingprograms. In this case, the problem wasfocused on a large number of employeeswhose moderate levels of basic skills werenot sufficient to pass these tests. This standsin sharp contrast to a situation where theemployees may have had extremely lowlevels of literacy. By identifying theproblem in terms of mobility blockagesamong workers with moderate levels ofbasic skills, the company and the union wereable to design a program with clear goalsand expected benefits.

There are several ways that basic skillsproblems (or deficiencies) can be classified.One useful way is to group them in terms of"multi-strands", with each strandcorresponding to a slightly different type ofsolution.8 For any given set of basic skills,problem areas or deficiencies can begrouped into primary categories that serveas the foundation for developing a programresponse. In the case of literacy related basicskills, these categories could include thefollowing:

1. Extremely low level literate wcrkerswho cannot function independently witheven simple print. New or incumbentworkers at this low level will requireextensive educational remediation tohelp them function in basic entry-leveljobs.

2. New and experienced wodiers whoexhibit moderate levels of basic skills,but cannot benefit from advancedtraining, assume new responsibilitiesreadily, or adapt to the increasingdemand for higher level problem-solvingand group decision-making skills. Thistype of problem can often go unnoticed,but can affect a large proportion ofwodiers.

3. Employees at nearly all ability lovelswho make job related basic skillsmistakes that influence safety,productivity, and promotability.

Creating a framework for defining andgrouping basic skills problems sets the stagefor the next critical designissueestablishing functional links betweenbasic skills and job requirements.

Establishing Functional Links

To be meaningful to both workers andmanagement, the definition of basic skillsmust bear some specific relation to the tasksand issues confronted on the job. Very earlyin the program design phase, attention hasto be given to drawing specific linksbetween the basic skills identified asimportant and how they are actuallyreflected in specific job categories.Adopting trus functional approach to basicskills training ensures that programs arefocused on practical job related tasks, andthat curricula are based on materials thatreplicate work situations and teach basicskills in the context of workers' jobs.

The primary value of taking afunctionally-based approach is that itgrounds the program in employees'functional areas of expertise and usesinstructional materials drawn from regularjob-related activities. In contrast to thegeneric approach used in secondaryeducation. a functionally-based approach

55

Chapter Three

would base its curriculum on theemployee's work tasks. Für example, toteach basic arithmetic, a functionalcurriculum would center instruction onproduction coding forms the worker uses onthe job, or the use of a blueprint operatingmanual.

There are a number of specific factors thatmake functionally-based training moreappropriate for workplace learning. First,by drawing on the (adult) learner's currentknowledge, functionally-based teachingtends to reduce anxiety adults frequentlyhave concerning training and education. Itcan also build trainee self-confidence byhighlighting what trainees know rather thanthe competencies they lack.

Functional training is also easilydistinguished from the type of traditionalclassroom training many adult workersexperienced as youths, thereby limiting anynegative associations that may exist withprior educational experiences. Finally,because functional basic skills trainingemphasizes the application o"-ills ineveryday worklife, employees t. morelikely to practio, and apply what they havelearned in training, and less likely to dropout of training due to dissatisfaction withtheir progress or the program's relevance.

Ultimately, oking a functional approachpromotes the transfer, application, andretention of basic skills. It also ensures thatthe definition and teaching of required basicskills are relevant to the organization andthe employee's ability to do his or her job. Indesigning a basic skills program, employerswould do well to begin by identifying thosebasic skills that are critical to theorganization and then expressing them infunctional terms that relate specifically tothe jobs, competencies, and tasks underconsideration.


Planning For the Adult Learner

in designing a basic skills program, it isimportant to remember that the student is anadult who ir tany cases has been out ofschool for a numbr! of years. Theexperience of most firms that have providedworkplace basic skills training indicates thatadult workers cannot be expected toperform well in instructicaal settings on oroff the job that are designed for thetraditional youthful student. As a result,special attention has to be given during theearly design phase to ensure that trainingand education programs are structured toreflect the learniAg behaviors andpreferences of adult workers.

There has been a great deal of researchaimed at identifying learning differencesbetween adults and youth, including theirimplications for basic skills training. Fivecommonly accepted differences that have animportant bearing on the design of basicskills programs include:

1. Adults are more afraid of beingembarrassed if they do .iot knowsomething, and are therefore morereluctant to try new things.

2. Adults often have extensiveknowledge and experience to contributeto their understanding of the topic andbecome frustrated when training isstructured in abstract, generic terms.

3. Adults want to know in advance whatis going to happen in training, what willbe expected of them, and how they willbenefit from participation.

4. Adults are usually more inrterested insubjects that have practical applicationsin their lives and/or jobs than they are intheoretical or abstract concepts.

5. The educational backgrounds andcompetency levels of adult workersshows great diversity and requires aflexible approach to curri,;ulumdevelopment.

These differences can be applied in anumber of different ways tu design basicskills programs for adult workers.However, together they suggest thateducation and training for adult workerswill be most successful when the training is:

Functionally based.

Participatory in nature and based onmethods that necessitate the activeparticipation of workers.

Adjusted to the trainee's skills leveland modular to acconimodatedifferences in skill and competencylevels.

Structured to ensure that traineesreceive constructive feedback ontheir performance while learningnew tasks.

Designed to i odel the thoughtprocess, thus facilitating traineeintrospection and the enhancementof learning skills.

Integrated with the worker'sprimary life activities to facilitatepractice, assimilation, and eventualintegration of newly a pire e. skillsa nd knowledge.

Conducted in a way that protectsconfidentiality, and fosters trust andrapport by showing respect for theadult learner.

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Identifying andDocumenting Basic SkillsProblems

In the workplace, employees utilize avariety of skills to accomplish specific tasks,develop solutions to problems, and makejudgments about different situations.Reading, writing, and communication, forexample, are relied upon routinely toperform one's job, whether it be in anindividual or group setting. Whileemployees' basic skills may be adequate foracceptable performance, basic skillsdeficiencies are ofter well hidden until achange in the work or external environmenttakes place.

As the symptoms of basic skills problemsappear, employers should attempt toidentify and dxument the problem in asmuch detail as possible. This type of earlydocumentation should include the type ofworkplace problem that has emerged and itsrelation to basic skins, the areas of theorganization and the oc:upations that seemto be most affected, and the specific groupsof workers which appear to have the greatestproblems. On the basis of this infrirmation,companies and workers can establish thefoulidation for a targeted and responsivebasic skills program.

There are several types of indicators orevents that employers should routinelyassess to determine whether a basic skillsproblem exists. Although not definitive,these indicators represent the starting pointfor flagging potential problems anddeveloping solutions to them. At least threemajor indicators or situations have provenuseful in spotting ba3ic skinb problems.

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Employee and Customer Feedback CanReveal Skill Deficiencies Among

Workers.

A supervisor's report may relay thatimplementation of new technology is takinglonger than anticipated, customers maycomplain that cashiers are unable tocalculate change without using a cashregister, or employees may complain thatthey need training to perform up to managerexpectations. To take advantage of thesecues, a company personnel manager orsupervisor should be on the lookout for suchproblems, and be ready to investigate themto see if basic Skill deficiencies are the cause.

Changes In Technology and theOrganization Of Work Can CreateWorkplace Basic Skill Problems.

This is particularly true for companies witha long tenured, ok : vorkforce that washired to perform low and 3emi-skill jobs.Such workers are likely to face difficulty ifchanges in the workplace suddenly call fornew technology training or a teamorientation to decision making. A change incircumstances is a force that can often bringskill deficiencies to light. Companiesanticipating change should be alert topossible basic skill problems.

Persistent Shortages In FillingVacancies, and High Turnover Can

Indicate a Need For Workplace BasicSkill Training.

Company efforts to hire new workers withstrong basic skills may yield few qualifiedpersons as skilled entry level workers growscarcer. Similarly, incumbent workers maylack the basic skills needed for advancementand may seek alternative opportunities. Ineach case, the workplace cou ' benefit from


a basic skill training program. Greaternumbers of lower skilled individuals couldbe hired, and workers that might have quitor been fired because of poor basic skillscould be trained by the company so they canperform on the job.

These types of indicators and situations canprovide important information aboutpotential basic skills problems. Theyprovide clues that need to be followed-up todetermine whether a more extensiveexamination and development effort iswarranted. Employers can benefitsubstantially by routinely checking for theseand other similar indicators and attemptingto document their relation to basic skillsdeficiencies.

Key Design Issues In BasicSkills Training Programs

Once an employer determines that it maybe necessary to implement a workplacebasic skills program, several specific issuesmust be addressed. These issues can beviewed as design steps, and include:

Assessment of workplace basic skillsneeds;

Establishing conditions in theworkplace that encourageenrollment in training;

Design of a training curriculum; and

Obtaining management approval,and financial commitment to thetraining program.

Assessing Basic Skills Needs

Conducting an assessment of basic skillsneeds is an essential step in the design of aworkplace training program. It provides

the information necessary to determine thespecific nature of basic skills problems, howprevalent they are throughout theworkplace, and the extent to which they areconcentrated among different employeegroups, job categories, and areas of theorganization. An investigation into the sizeand nature of basic skills problems is criticalto determining an appropriate programresponse.

The cornerstone of the assessment processis a comparison of the basic skills requiredfor a set of jobs and the abilities of workers.By identifying the gaps that exist betweenworker competencies and skillrequirements, employers can plan aprogram that responds effectively to bothemployee and company needs.On the basis of the information obtained

from the initial dorumenta tion of basic skillsproblems, employers should begin theassessment process by determining thetypes of specific skills needed to performproductively on the job. Once these basicskills requirements are identified, it will beimportant to establish minimumcompetency levels that can serve as the basisfor determining the extent to which basicskills deficiencies exist among workers.

Determining actual worker skills andcompetencies is the next step in theassessment process. To be useful,information on skill requirements must beexamined in the context of actual workerabilities. Ideally, the range of worker skilllevels would be categorized in relation tominimum acceptable levels of competencyso that judgments can be made regarding theseverity of the problem and the traininginvestment that will likely be required.

Regardless of the assessment method used,the process of assessing basic skills needsshould be organized to answer four majorquestions, including.

5871

1. To what extent are employeesfunctioning at acceptable levels of basicskills, and what number and percentmight be targeted for training?

2. Which groups of employees and jobcategories are most vulnerable to basicskills problems, and how are theydistributed within and across differentorganizational and/or business units?

3. How much interest do employeesexhibit in basic skills training, and whatare the characteristics of those likely toparticipate in a program?

4. What is the likely size and specificfocus of basic skills training programsthat will be needed in the workplace?

There is a wide range of alternative waysto implement a basic skills assessmentprocess. They vary from talking withemployees and supervisors to testingemployees on a customized task specificcompetency test. The choice of a needsassessment technique should be based onthe size and complexity of the particularbusiness, the 'ived extensiveness andimportance of . problem, and criticalconstraints imposed by both time andresource availability. Presented below arebrief summaries of alternative techniquesfor conducting a needs assessment.

Talking to Employees andSupervisors

Much can be learned from talking to theindividuals a training program would serve.Informal or structured conversations withemployees and supervisors about basicskills requirements and deficiencies canyield information about the perceived needfor training and likely employee response tosuch training. Interview guides can also beused to conduct structured individualinterviews and focus groups composed of

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managers and/or employees. Each of thesetechniques can provide a good impressionof workplace needs, although they will notyield quantitative measures of need.

Conducting Needs-Based Surveys

A more formal approach to needsassessment is to survey employees and/orsupervisors regarding their perceptions ofexisting worker skills and job requirements.This method has been used widely inindustry and can provide accurate anduseful planning information, especially bysurveying both supervisors and theirsubordinates. Adopiing a survey approachcasts a wide net that will f.T.7ilitate a detailedand accurate determination of basic skillsneeds.

Testing Employees forBasic Skills

Formal tests of employee basic skills isanother, more precise, alternative forconducting a needs assessment. While thetest results will still have to be combinedwith information on basic skillsrequirements, the testing approach canprovide the most accurate portrayal ofworker abilities.

There are several general tests thatemployers can use to obtain reliableinformation about basic skills deficiencies intheir workforce. Testing packages varywidely in cost and in terms of howspecifically results are reported and the timerequired to complete them. Testing does,however, offer a proven method forgathering accurate information aboutworker competencies that can be useddirectly in planning basic skills programs.

Workplace basic skills testing requirescareful planning. Employees may resist


taking such tests and they may experiencesubstantial anxiety about the results.Moreover, to be useful, tests should bestructured to assess functional work-relatedskills rather than general educationalcompetencies. In planning a workplacetesting program, careful attention should begiven ensuring that the testing processaccounts for workers' needs and potentialfears, and that the test itself measures thoseskills and competencies critical to jobperformance.

Conducting a Basic Skills Audit

A basic skills audit is the mostcomprehensive and thorough approach to

conducting a needs assessment. The basicsteps needed to conduct the audit includethe formal collection and analysis ofinformation on skills requirements andworker competencies. Basic skills audits areusually targeted on specific groups of jobsand may involve a combination of employeesurveys and testing, as well as formal jobanalysis. While the specific tools needed toperform the audit may vary, whatdistinguishes it from other techniques is itsthorough, comprehensive, and detailednature.

The disadvantage of a basic skills audit isthat it can be relatively costly, timeconsuming, and complex.

Needs Assessment at Texas Instruments

When Human Resource staff at Texas Instruments (TI) needed to conduct an assessmentof their training needs, and do so quickly, they began by establishing an assessment teamwith members drawn from each of the five functional areas of the Human ResourceDepartment. Outside training and development specialists were then hired by TI to help directthe needs assessment.

With the aid of the outside specialists, the assessment team developed a five step trainingneeds assessment model. Step One involved creating a list of tasks typically performed onthe jobs analyzed. This list was then reviewed and modified by the assessment team afterround-table discussions. Finally, the list was divided across five functional areas. In thesecond step, the assessment team developed and carried out a survey of TI's HumanResources staff. The survey asked respondents to rate the importance of each task on thelist in relation to their jobs. Data from the surveys were then analyzed and a cumulative rankingof tasks was develved.

The third step in TI's needs assessment was to observe Department instructors as theyconducted company training. Observation focused on instructional delivery, and monitorswere guided by a short list of points to check off. Two measures were taken to alleviate anxietyamong the personnel that were observed. Monitors met with each employee underobservation to explain the purpose of the inquiry and to assure him or her of the confidentialityof any findings. Second, after the training session was complete, monitors met with theinstructor to provide feedback.

The assessment team staff then conducted structured interviews with a sample of employeesfrom each of the five functional areas in the Human Resource Development Department. The

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purpose of the interview was to clarify the strengths and weaknesses of the product delivered

by each area with the aim of highlighting areas where staff training would be helpful. Finally,

the assessment team comprred results from the different sources of information and p; epared

a final report on training needs of the Human Resource Development Department.

Source: This discussion is drawn from Wircenski, Sullivan, and Moore, "Assessing Training

Needs at Texas Instruments", Training and Development Journal, April, 1989, p.61.

Establishing Conditions and aProcess for Program Participation

Early in the design process, it will beimportant to determine how theparticipation process will work. This is acritical planning step since the benefits ofproposed training investments depend onthe participation of workers. Based on theexperience of many firms, employers shouldnot expect that all workers targeted for basicskills training will ultimately becomeparticipants. On average, employers shouldexpect a (voluntary) participation rate ofroughly 25 to 30 percent.

A worker's decision to participate in a basicskills program depends on a variety offactors related to personal goals andambitions, the location and scheduling oftraining, the perceived relevance of theprogram, connections between programparticipation and salary as well as careergrowth, and whether the overall designaddresses anxiety and fears that adultworkers may have regarding continuingeducation. Those responsible for planningand implementing basic skills programsneed to take these factors into considerationcarefully when preparing the program'sdesign.

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While most employer-sponsored basicskills programs are voluntary, some firmsare moving toward mandatory participa-tion. Aiding this approach is federal legis-lation that allows up to 10 hours ofremedial education to be offered withoutrequired overtime pay, as long as theworker has not graduated high school, isfuactioning below ale eighth grade 7-vel,and the training does not include job-spe-cific training (The Fair Labor StandardsAmendment of 1989, Section 7).

Mandatory participation in training is notwithout potential problems, however.Workers may resist participation forpersonal reasons or because the location andtraining schedule is inconvenient.Mandatory participation also suggests anabil0, to identify those specific workerswho will be expected to enroll in a program.Unless a company mandates participationfor all workers in a given area oroccupational group, it will have to rely upona combination of testing and supervisorassessments. The latter screeningmechanism may be viewed as especiallysuspect by prospective trainees.

( t

Employer Strategies f a Changing Labor Force

Developing Basic Skills at Motorola

In the second half of the 1980s, Motorola developed an international reputation for qualityand innovation, and has the Business Week cover stories and the Department of Commercequality award to prove it. The electronics giant's innovative provision of basic skills upgradingfor its workforce is a case in point.

Motorola is a highly decentralized company, although some policies cut across productionsectors and lines of business. One of these policies is the "service club," which includes allworkers who have given at least 10 years of service to the company. While the service clubis not a guarantee of lifetime employment, it is close to such a guarantee. Members of theclub can be let go only if their managers have done everything possible to keep them, andeven then, a layoff requires the signature of the Chairman of the Board.

In counterpoint to the service club at Motorola is the increasing realization that there are basicskills deficiencies among incumbent workers which are affecting quality and efficiency. Thecompany has responded to this in several ways. As a long-run solution to a higher level ofminimum skills proficiency, a job-related corprate Basic Abilities Testing Battery (BATB) wasdeveloped, and is now given to all new applicants for production jobs. The test covers both

ading and math, as well as visual acuity, forms completion, and simulated work situations.oilce virtually all new hires are scoring at job-grade levels on the BATB, the basic skillschallenge at Motorola relates primarily to the incumbent workforce.

The initial basic skills training efforts at Motorola were voluntary, and most were on one-halfpaid company time and one-half on the workers own time. The courses have been developedmostly through contracts with the adult education departments of local community colleges.For both the company and the community colleges, in-plant basic skills training is relativelynew, and there is still much to be learned about how to upgrade basic skills in the workplaceeffectively.

In som- cases, Motorola and the local community college have created an educational liaisonposition that serves a number of plants in a single geographic area. This adult educationprofessional is responsible for coordinating programs and developing job-related curricula.The liaison is employed by the college, but works in the plants side-by-side with Motorola staff.This allows the company to have an adult education expert on staff, without having to createa new career path within Motorola itself.

The challenge of skill upgrading is immense, and Motorola understands that the commitmentto basic skills training is a long-term commitment. The BATB, which was developed based onreal needs within Motorola production jobs, is designed to test for reading at the 7 to 9.5 gradelevel, and math which includes decimals, fractions, and percentiles. Since it takesapproximately 100 hours of training in each subject to raise a worker one grade level, movingworkers up to the level of the BATB can take a number of years.

As an incentive to participate in tr dining, many plants provide access to higher-level jobs, paygrades, and advanced skills training only to those who have demonstrated needed skill

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proficiency on the the BATB. This helps to focus the basic training around a common goalthat workers understand. Workers are given a clear economic incentive to enroll in coursesand take the test.

Over time, more and more Motorola plants that provided basic skills training on a voluntary50 percent company time basis have moved toward mandatory training (for those who needto develop job-grade competencies) on 100 percent company time. Aiding this decision wasnew federal legislation which allows up to 10 hours of basic training to be offered withoutmandated overtime (as long as the worker has not graduated from high school or is functioningbelow the 8th grade level). Beginning with voluntary participation before moving to mandatorytraining has helped the company reach the more motivated (and possibly higher skilled)workers first. Mandatory training may require more resources and take longer to be successful,but the company believes that it is the only way to upgrade the basic skills of each and everyMotorolan.

The Motorola basic skills program includes 40 distinct delivery systems across a multitudeof plants. The company projects that by 1995 about $35 million will have been spent on basicliteracy. But Motorola has not attempted to justify this expenditure through exactingcost/benefit analysis. Rattmor, top management views the need for basic skills upgrading asintuitive and obvious, as part of a much broader effort to be the highest quality manufacturerof electronics goods in the world.

When the decision is made to providetraining on a voluntary basis, there areseveral steps that can be taken to encourageworker participation. These include thefollowing.

Pay employees for time engaged incompany training, or conduct training

during working hours.

Payment for some or all of the time spentin training will reinforce the company'scommitment to training, and lower theemployee's costs of leisure time lost becauseof training. The major drawback of suchencouragement is the high cost.

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Provide informal support for trainees.

Persona I support and encouragement fromsupervisors and management in thecompany is valuable in getting employeesthat need basic skills training to overcomefear and to participate. Communication toemployees about the program can facilitatesuch support.

Clearly communicate the objectivesand expectations regardingparticipation in training.

Reassure employees against fearsconcerning jot, security, and explain whatwill be expected of participants, particularlywith respect to grading and attendance.

t.


Schedule training so employees canbegin training at any time, and can

attend immediately before or after workhours.

The easier it is for employees to attendtraining, the more likely they are to attend.Waiting periods between the time anemployee expresses an interest in trainingand training enrollment can cause manyemployees to lose interest. If training can beaccommodated easily in an employee'spersonal schedule, workers will be far morelikely to take part in training.

Hold training on company premises.

This encourages participation by making iteasier for employees to attend and byemphasizing the importance the companyassigns the training. In addition, because aworkplace training site is likely to be quitedifferent from a public school, employeereaction against a traditional classroomsetting is likely to be mitigated.

Establish programs which ease thepersonal costs of atteuding training.

Facilitating car pooling and child carearrangements, as well as other similaractions reduce the chance that familycommitments will force trainees to declineenrollment or to drop out of training.

Protect the confidentiality of trainingparticipants.

Adults with basic skill deficienciesfrequently go to great lengths to hide theirlimitations, and fear that other people will

learn about them and view themunfavorably. If employees believe that it ispossible for co-workers to learn they areseeking remediation, they may refuse to takepart in training. Assurances ofconfidentiality of training participants is oneway to address such fears. Anotherimportant way stigma is avoided is bypackaging the basic skill training programas part of an overall employee training anddevelopment program; and avoidingreference to the program as remedial orbasic skills.

Link training to career advancement.

Creating clear and explicit links betweenparticipation in training and careeradvancement can provide employees withimportant incentives to participate intraining. By connecting successful programparticipation with opportunities forpromotion, employers can motivateworkers and also help to fill existing andfuture vacancies.

Designing the Basic SkillsCurriculum

The design of the basic skills curriculum isthe point at which information on workers'abilities and job requirements are translatedinto a specific plan and set of materials thatare used to engage workers in the learningprocess. Key elements of curriculum designinclude the development of an instructionalapproach, and the preparation of a programoutline, individual lesson plans, andinstructional materials.

While there are several alternative formatsthat can be used to design the basic skillscurriculum, four key issues should beaddressed. These basic curriculum designissues are as follows.

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Base the Curriculum on a Functional- Match the Curriculum to the Worker'sCompetency Based Approach

An effective basic skills curriculum shouldbe grounded in the specific tasks thatemployees are expected to perform on thejob. To the extent feasible, training shouldreplicate work situations and teachemployees basic skills in the context of theirjobs. This functional approach stands incontrast to the traditional academiccurriculum used in the school system, wheregeneric examples and abstractions are thebasis for teaching new skills.

Within a functional approach, theprogram's curriculum should also becompetency-based. Competency-basedtraining is related to functional training inthat instruction is aimed at increasingemployees' ability to perform specific tasks.Unlike general basic skills training whichmight focus on objectives such as improvingspelling, vocabulary, or readingcomprehension, competency-based trainingfocuses on skills-specific objectives, such asusing an operations manual or readingblueprints. What distinguishes thecompetency approach from more basicfunctional training is its reliance onbenchmarking worker skill levels andtracking performance over time.

A key step in creating a functionally-basedcurriculum is conducting a job and taskanalysis. For those job categories identifiedas experiencing basic skills problems, a taskanalysis will identify the specificcompetencies that are needed to performproductively. This information can then beused to develop course objectives andoutlines, as well as a framework forinstructional materials.

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Skill Level

Once the functional basis of the curriculumis established, instructional plans andmaterials have to be developed. Because theskill level of workers will vary, theinstructional plan must be flexible and set ina competency range appropriate for thetrainees. While programs can be developedwith fixed instructional plans, these tend tobe more restrictive and prone to higherlevels of attrition.

Modular instruction is a cost-effective wayof tailoring training and eduLationalmaterials to the unique needs of individualworkers. A modular curriculum consists ofseveral stand alone units on different topicsor competency levels which can becombined to comprise an individualizedinstructional plan. The completion of agiven module usually indicates theachievement of a specific competency andsignals Progression to the next one.

In addition to its appeal to a wide range ofworkers, a modular curriculum offers otherbenefits as well. One is that it facilitates theplacement of individual workers at levelsappropriate to their skills. A modularcurriculum can also accommodateunexpected demands on a worker's timeespecially if training is offered after or beforework hours. Because of its flexible structure,workers may be able to miss certain classesbut still progress toward the achievement ofspecific competencies.

Open entry and exit is the most flexible wayto use a modular curriculum. It allowsworkers to enter a program at any given timeand to exit as easily. The key foundation ofopen entry and exit programs isindividualized instructional plans andcompetency objectives. In this case, much of


the responsibility for participating intraining and achieving critical basic skills isplaced in the hands of the individualemployee. As a result, while this flexibilitymay encourage employee participation, italso increases the risk against achievingstandard organizational competencies.

Offer Participatory Training

Training that is passive and emphasizeslectures and note taking will likely be lesseffective than participatory instructional

processes. Active instruction promotescompetency building by engaging theemployee and requiring participation. Itelso provides an opportunity to practicenew skills and receive direct and relevantfeedback that can be used to improveperformance.

There are several instructional methodsthat can be used to foster active participationin training. Many of these are describedbelow and include tutorial instruction,interactive computer exercises, jobsimulations, role playing, and case studies.

Basic Skills Curricula at the Ford Motor Co. and the United Auto Workers

A Company/Union team developed an interactive videodisc-supported course in industrialmathematics. The Skills Enhancement Program (SEP) focuses on improving themathematical skills of employees. SEP includes learning and counseling opportunities in 6areas: adult basic education, general educational development, high school completion,English as a second language, a basic skills course aimed at refreshing reading and mathskills needed to take part in technical training, and an acqdemic advising service to assistemployees in identifying and pursuing basic educational goals. SEP course-; are developedby a joint local committee composed of union and management represent gives and localeducation providers that include local school district adult and community educationdepartment, community colleges, and 4-year colleges and universities. The training coursesare designed to be flexible, permitting self paced instruction and open entry end exit.Participation in SEP is voluntary.

In another instance, the UAW-Ford Eastern Michigan Academy teaches basic skills to roughly300 Ford employees annually. Classes in reading, writing, speaking and listening let studentsstudy through topics of interest to them. Training focuses on the underlying concepts ratherthan the mechanics of reading, and tries to teach participants how to learn rather than

to learn specific facts. The program seeks to show participants the process of learning soworkers can be more flexible and adaptable in the future, and gain the confidence needed toadjust to technological changes in the company.

Participant interest in the training is high, only 18 percent fail to return for additional trainingonce they begin. The training facility is open long hours to enable workers from all shifts toattend training either before or after work. Workers are free to pick and choose what coursesthey want to attend. The training center hired its own instructors rather than draw from highschool or vocational school resources which were faulted for not allowing the company andunion adequate control over the curriculum and teaching.

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The center recruits workers during management and union representative meetings that areconducted during working hours. When the training center first opened, assembly lines wereshut down to permit all workers to attend training.

Sources: Bernardon, Nancy, "Let's Erase Illiteracy From The Workplace," Personnel,January, 1989, p.29, the Departments of Education and Labor. The Bottom Line: Basic Skillsin the Workplace, Washington, D.C.: Government Printing Office, 1988. Petrini, Cathy (Ed.),"How Businesses Can Fight Workplace Illiteracy," Training and Development Jou rnal, January1989, p.18. McGee, Lynne, "Teaching Basic Skills to Workers," Personnel Administrator,August, 1989, p.42.

SELINST

ECT AN APPROPRIATERUCTIONAL MODEL

There are a variety of ways in which basicskills programs can be delivered. Presentedbelow is a summary of five instructionalmethods.

Classroom Training

Classroom training 's a low-cost way oftraining groups of workers. This method isusually most successful when thecurriculum is conctruct d carefully andwork-relevant material is used. Althoughthe traditional classroom setting has theadvantage of enabhng one instructor toteach several workers, it can also promote apassive learning experience. Computerassisted instruction, tutoring, and otherinstructional techniques can be used toincrease the participatory nature ofclassroom training.

Tutors

One of the most common instructionalmethods used in workplace basic skillstraining programs is one-on-one teaching,usually called tutoring. There are manyadvantages of tutoring:

It permits an informal assessment oflearner skills and individual

67

targeting of training to the learner'sability level.

The ',ace can be adjusted to eachindividual learner.

Positive a nd supportiverelationships can develop betweenthe tutor and learner, which helpsfoster learner participation andinvolvement.

Tutoring is particularly suited toworking adult learners experiencingsevere time constraints, as thetraining can usually be scheduled toaccommodate the learner's personalschedule.

At the same time, tutoring is a relative)/expensive instructional method and cannotbe used alone to train large numbers ofworkers.

Work Groups

Work group instruction (small classes ofabout 3 to 10 people) represents a middleground between classroom instruction andtutoring. Accordingly, it has some of theadvantages and disadvantages of the twoinstructional approaches. Some of thedvantages of this mode of instruction areat:

ath

Employer Stritegies for a Changing Labor Force

It simulates work processes, whichoften involve working together;

Students can learn from one another;

Support groups can developbetween learners; and

It is less costly than tutoring.

In addition, scheduling work groups isgenerally easier than classes. Similarly, it iseasier to adjust the level of training to beappropriate to a small group of learners,than for a large class.

Ore of the principal drawbacks of workgroups is that they are highly dependent onthe skill of the instructors or facilitators.Other disadvantages are that.

Adults may be reluctant toparticipate in work groups becauseof concerns about confidentiality;

Work groups are more expensivethan classroom instruction;

Unless all members of the group areat about the same competency level,it may be difficult to adjust thctraining to the learners' levels; and

Scheduling may be oi,

Computer-Assisted Instruction (CAD

Computer-assisted instruction is beingapplied increasingly in basic skills trainingprograms. Computer tutorials are mostoften used to supplement classroom basicskills or technical instruction, and arecompleted at the convenience of the worker,and at a skill level adjusted to eachemployee.

Several studies have documented thebenefits adult workers derive from

computer learning, such as privacy,feedback, scheduling flexibility, and controlover the pace of instruction.Computer -based training is not withoutdifficulties, however. Most important is theissue of designing a literacy tutorial that isfunctionally-based, yet appropriate to theadult learner's skills and interests. Thisissue, added to the high fixed costs ofestablishing a computer training facility, hasled several large industrial programs toabandon their use of computers.

Interactive Videodiscs

The newest and most sophisticatedinstructional method is the interactivevideodisc. The interactive videodisc isplayed on a device similar to a videocassetteplayer. It allows workers to watch and listento a training video and then respond to aseries of prompts. Using pictures and audio,the interactive videodisc has many of theadvantages of computer tutorial programs,but elicits more active engagement of thelearner. The chief disadvantages of thismethod are its high costs and lack offlexibility.

Building Union and ManagementSupport and Obtaining Budgetary

Commitment

Once the basic elements of the training planhave been broadly defined, a writtentraining plan, including estimated costs,should be presented to the company'smanagement and union. The presentationof the development plan can be more or lessformal, depending upon the number ofpeople that will be involved in the trainingprogram if it is adopted. Presenters shouldsummarize the findings of the needsassessment, and explain how the plan fitsinto overall business goals. Thepresentation should include an exposition ofthe recommended program and how it will

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81

address the company's training needs. Ifnecessary, options should be presented,along with alternative cost estimates.

In justifying a basic skills training program,the case for training must rest on the resultsfrom the needs assessment. These needsmust be clearly linked to companyperformance in terms of lost productivitycaused by the skill deficiencies, inability torespond quickly to new technology andother market changes, and product qualityand workplace safety concerns.

Successful adoption of a basic skillprogram also rests upon the amount ofsupport the proposal can gain within thecompany. A basic skills program willprobably be just one of many programs orchanges being advocated by differentpeople in a company at a given time. It isessential that those responsible for trainingcommunicate witn managers to build acoalition to support the basic skill: training.

Alternative means of financing theprogram should also be included in thepresentation to company management.Possible outside funding sources,department user fees, or allocations from acompany training fund are some of thealternative mechanisms available.Depending upon the precise nature of thetraining program envisioned, financingalternatives are likely to be more or lessappropriate. For example, a general adultliteracy program would be more likely toinclude a public funding component. Aprogram that targets worVers largely fromone department of the company would havegreater rationale for training user-feefinancing.

In building support for the basic skillstraining program, it is also important tofocus energy on "destiginatizing" basic workskills training The perception of such

Chapter Three

training as an integral part of an overallemployee development plan should beencouraged.

Implementing the B:isicSkills Program:OperationalConsiderations

Once the basic curriculum has beendesigned and management and unionrepresenta tives signal support for the effort,attention has to be turned to programimplementation. At this point, manyimportant operational issues must becarefully addressed. Regardless of thequality of the curriculum that may beplanned, selection of a delivery method, thedevelopment of an internal marketir g plan,and thedesign of monitoring and evaluationstrategies can have a significant impact onoverall program effectiveness.

Selecting a Program DeliveryModel

In the process of curriculum design, adecision will have to be made about the useof outside resources. Training andeducational institutions, as well asconsulting firms can be relied upon to assistwith a variety of key program tasks, rangingfrom the needs assessment to curriculumdesign and program delivery.

While a natural inclination may be todesign and operate the program internally,this can be a very demanding andpotentially risky approach. Most importantis that it will require specific expertise inprogram and curriculum design as well asthe dedication of existing staff time to planthe program and provide instruction toemployees. Moreover, an internally

Employer St...tegies for a Changing Labor Force

operated program will also require theidentification of company space, materials,and equipment to support training.

Because of the demands of a strictlyinternal approach to training, many firmshave looked to outside resources to assistwith some or all of the tasks involved withplanning and operating a basic skillsprogram. Outside experts and traininginstitutions can be used to. 1) conduct theneeds assessment; 2) develop thecurriculum; 3) provide instructors andtraining facilities; or 4) support all aspects ofthe program. The choice over the mostappropriate use of outside support shouldbe based on an assessment of a company'sexisting resources and expertise, as well asthe credibility and appropriateness oflocally available education and trainingresources.

Regardless of the mix of internal andexternal resources that are used to supportbasic skills training, there are certainfundamental questions that need to beaddressed. These questions should beconsidered during both the initialdevelopment of the program's curriculum,and negotiations with prospectiveproviders. They include:

1. What specifk tasks and functionswill outside resources support?

2. Will training be offered on-site orat the premises of a trainingprovider?

3. Will internal staff be used asinstructors or tutors and if so, towhat extent will they be trained?

4. To what extent will the trainingcurriculum be customized to meetfirm-specific skill and commtency

70

needs, or will an off-the-shelfprogram be used?

5. What types of reporting will berequired of outside providers onthe progress of workers and theoutcomes of the program?

When looking to the outside for assistancewith basic skills programs, there are twoprimary alternatives that employers canpursue. One involves leveraging externalresources while the other focuses onpurchasing services. Each is describedbriefly below.

Leveraging External Resources

There are several external resources thatcan be leveraged to meet basic skills needsin the workplace. One is other employerswith similar r -,Nis. Small businesses, inparticular, sl- .. the common constraint oflimited ma,. ,_es and have often formedtraining consortia. These consortia areusually among firms in the sair.:! industry;they focus on common training needs, andpool resources to develop and deliverprograms. In many cases, third partybusiness organiza tions, such as Chambers ofCommerce and Private Industry Councils,are relied upon to organize the consortiumand assist with the development andimplementation of a financing and trainingplan.

Another source of external resourcts arepublic adult education and trainingprograms. Federally and state sponsorededucation and training programs, as well ascommunity-based organizations andnot-for-profit literacy centers are availablein most local communities and can beaccessed directly by employers. Some ofthese programs have strict targeting criteriawhile others, such as literacy renters, areusually open to the public. All of these

programs, however, offer the advantage ofsharing the cost of the training.

There are several ways that publiclysponsored training and education programscan be utilized. The most simple approachis to arrange a referral and enrollmentprocess between the employer and theprogram for a given number of workers.

Chapter Three

Other options include customizedclassroom training and on-the-job training.As a starting point for leveraging theseresources, employers should contact theirlocal Chamber of Commerce or PrivateIndustry Council to identify availablesources of training and any enrollment andrelated restrictions they might have.

Mixed In-House/Outside Assistance for asic Skills Training at SpringIndustries, Fort Mills, S.C.

This South Carolina textile manufacturing company us,3d public funding and cooperativearrangements with local colleges to provide basic skills training to its employees. The companyprovides on-site facilities for classes in basic literacy and basic skills taught from a technicalviewpoint. The company pays employees only for the initial orientation which occurs duringworking hours.

The company also began a pilot project in their Lancaster, S.C. plant as part of the "Governor'sinitiative for Work Force Excellence." Specialists from a local technical college helped thecompany run the pilot program which teaches basic literacy (5th to 9th grade reading), GEDpreparation, and basic skills courses with a technical emphasis for certain occupations andtrades. To teach the courses, the program uses a variety of providers including local literacycouncils, adult education departments of area high schools, and technical schools.

Personnel managers at Spring Industries say that literacy training existed in the community,but that the on-site program made it easier for their employees to enroll in training andaccommodatetheirwork schedules. On-site provision of remedial training was also consideredimportant as it underscored the company's support of the program.

Early in program development, the company conducted -eadability studies of their manuals,selected math and physics concepts which were used repeatedly in company training, andadded pictures end labels to facilitate easier learning of their textle dictionary.

One problem the company experienced with its program was a high drop off between thenumber of people who were initially enthusiastic about training and the number who actuallyattended training once it was offered. Of the 1,800 people who showed initial interest in thecompany's program, about 1,400 followed through and enrolled, although early in the programthe attrition rate was much higher. Pc,isonnel managers at the company attribute the high fairoff encountered early in the program to a three month time lag between orientation and thestart of classes that existed when the program first started.

Training is confidential and completely voluntary since the training involves literacy arid basicskills, and participants may face stigma if their participation becomes known. Because

71


individual initiative is so central to success in the program, it must remain voluntary accordingto company spokespersons.

Source: McGee, Lynne, "Teaching Basic Skills to Workers," Personnel Administrator, August,1989, p.42.

Purchasing Outside Services

In many instances, employers may decidethat the need for flexibility andcustomization warrants the use of anoutside contractor to design and operate theprogram. When this is the case, theemployer face3 several important designissues, such as whether the training will beoffered on-site or at the training institution,the extent of tirm-specific customization,and the use of in-house staff as trainers ortutors. An additional issue is the selectionof a service provider.

The Request for Proposal (RFP) is thestandard format for procuring trainingservices. Specifically, the RFP is a writtenrequest by the employer asking prospectiveproviders to submit proposals that statehow and at what cost they will meet theemployer's specifications and needs. Inaddition to specifying objectives and needs,the RFP usually contains a set of evaluationcriteria that the employer will use to make aselection. These cr''eria and their use arevery important since they will have a directbearing on the quality of the program that isprovided. Key criteria that can be helpful inmaking a decis'on include:

Co::

Experience and Credentials

Instructional Method

Approach Toward Adult Education

72

Interaction With the Company

Expected Results

Financial Stability

Packaging the Program andEncouraging Employee Participation

One of ,l-ic mojor differences between basicskills training for incumbent and newlyhired employees concerns pi ogramrecruitment. Recruitment is an importantconcern for any program targeting currentemployees, while new employees can easilybe required to attend training as a conditionof employment.

Avoiding the perception of the program asremedial or for employees lackingelementary reading and math skills isessential. If employees fear that they will beidentified as lacking basic skills because theytake part in the program, the program mayfail for lack of particpationregardless ofthe need for such training. Accordingly, theprogram should be packaged as an additionto the general employee developmenttraining offered at the company, and a namefor the program should emphasize itsrelation to overall skill on the job rather thanwith its remedial content.

Decisions about the structure of training,its scheduling, a nd where it will be held canalso have an impact on employeerecruitment and selection. Recruitment ofcurrent employees must be addressed

carefully as new programs can beinterpreted with suspicion for fear that thechange may endanger job security or signala fundamental shift in company operations.Supervisors and other employee leadersshould be used as channels ofcommunication to reassure employees thatsuch fears are unfounded.

Coordination of staff involved in theprogram is crucial in assuringcommunication about the purpose, scope,and implications of the new program areconveyed in a consistent manner across thecompany. Copies of the program designmaterials, and arty publicizing materialsshould be provided to the managers andsupervisors.

Managers and supervisors should beencouraged to tell their staff about theprogram, and to invite questions employeeshave about it. Some companies have hadtheir training staff deliver presentationsabout the program at department or localunion meetings. Some cifnployers hold an"open house" at their training facility whenit opens to give employees an opportunityto go and find out about the training oncompany time.

Employee newsletters, bulletin boards,and other routine communicationmechanisms should be used to p_ omoteinterest in the program

Monitoring Program Results,and Maintaining Program Enrollment

Once employees begin to attend training,the program must be monitored on a regularbasis. On-going monitoring serves thepurpose of gauging the extent to which theprogram is achieving its operationalobjectives, including enrollment,participation and retention levels, and tinitcosts. Monito-ing is also used to identify

Chapter Three

problems with the curriculum andinstructional methods, and to initiatecorrective action plans.

There are several ways to implement amonitoring system. These range fromstandard program operations reports andperiodic visits i.o the training site, toinformal discussions with trainingparticipants, supervisors, and instructors.Regardless of the specific monitoring planthat is established, it should be designed toprovide periodic information on keyprogram performance indicators that can berelied on to make necessary changes andimprovements.

Evaluating the Program andMaking Adjustments

Evaluation of the training program isimportant in determining program worth tocompany management, and in providinginformation needec to improve the programin the future. Th:, training design planshould lay the ground work for theevaluation by setting program goals andperformance measures. Pre- andpost-training skill assessment tests,observation of training and participantperformance on the job, and/or interviewswith trainees, their managers, and other staffinvolved ir the training provide threedistinct sources of information about theprogram that can be used in the evaluation.

Evaluation should be on-going, beingcarried out annually or with each trainingcycle. The results of each evaluation shouldbe written up and submitted to companymanagement. The methodology forevaluating the program can vary from briefreports summarizing employee views of thepi-ogram; to reports displaying andexplaining figures on program participationand dropout rate; to more rigorous designsthat attempt to measure program impacts.

r r 1Cr k )


Chapter Endnotes

1From Employment and Training Reporter, "Employers See Fewer Qua. ified New Workers,Skills Dropping Study Says", July 13, 1989, p. 1067.

2From Zemke, Ron, "Workplace Illiteracy Shall We Overcome", Tjaig,lin June, 1989, p. 33.

3See: Miller, Kathleen, Retraining the American Workforce, Addison-Wesley Publishing

Co., Reading, MA, 1987; and 1989 SHRM Training/Retraining Survey, Society for HumanResources Management, Alexandria, VA.

4Basic Skills: Testing and Training Survey, American Management Association, New York,New York, 1989.

5Ibid.

6Workplace Basics. The Skills Employet s Want, American Society for Training and Devel-opment and U.S. Department of Labor, Washington, DC, 1988.

7SHRM, op. cit.

8Mikulecky, Larry, "Second Chance Basic Skills Education", Chapter 5 from Investing inPeople: A Strategy to Address America's Workforce Crisis. Background Papers, Commissionon Workforce Qual ity and Labor Market Efficiency, Government Printing Office, Washington,DC, 1989.

8774

CHAPTER 4

DEVELOPING A DEPENDENT CARE BENEFIT

Dependelit care is a basiness issue for theobvious reason that employees cannot cometo work unless their dependents are caredfor. Study after study has shown that mostworking parents have trouble arrangingchild care, and that those with the mostdifficulty also experience the most frequentwork interruptions. In recent years, moreand more working parents have also beenfaced with the need to care for their agingpa,.ents. Although often unexpected, theneed for elder-care can also cause frequentwork interruptions as employees search forsolutions that will satisfy th long-term careneeds of theti. parents.

In response to the growing need for childand elder-care, companies have begun tointroduce CI 2pendent care benefits into theirccmpensation programs as well as flexiblework-related policies. And they have doneso without the burden of expensivesubsidized on-site child and elder carecenters. Today, there are a number ofdependent care and related options fromwhich to choose, including low costinformation and referral services. Whencarefully selected, developed, and marketedto employees, these services can do much tomeet the needs of existing and prospectiveemployees.

The purpose of this chapter is to show howdependent care programs and relatedpolicies can be structured realistically forsmall and medium sized businesses as wellas large c.,es. The charler is organizedaround four major questions:

b '3

75

1. Why are dependent care benefitsimportant?

2. How have employers respondedto date?

3. How should a dependent carebenefit be planned?

4. What types of programs andpolicies are available to meetdependent care needs?

Why Are Dependent CareBenefits Important?

Dependent care is important because it isas much a business issue as it is an issue forfamilies and parents to address. For onething, changing labor force demographicsindicate the increasingly importantcontribution that women--the traditionalfamily caregivers--are making to theeconomy and the individual firms thatcomprise it. Unless the dependent careneeds of these women can be addressedsuccessfully, companies will andthemselves with even greater recruitmentand retention problems as well as morefrequent work interruptions.

In 1987, for example, there were about 64million households in the United States. Ofthese, one in five were married-couplefamilies in which the mother worked andhad children under 14 years of age. An


additional 5 percent of households wereheaded by single mothers with childrenunder 14. This represents a total of about 29million adults, mostly workers, who arelikely to require some sort of child careservices. While many of these families areable to secure services themselves, agrowing share need assistance and oftenlook to their employers for help. This isespecially so since so much of existingdependent care service is provided bysomeone other than a relative.'

Women have traditionally been thecaregivers to the elderly as well as theyoung, and as more women have enteredthe paid labor force and the population hasaged, the need for elder care has alsoemerged among employees. However, thepotential demand for elder care is not aseasily estimated as that for child care. We doknow that 12 percent of the population in1987 was over 65 years old, up from 9percent in 1960. Also, most of this growthhas been among those 75 years of age andolder. There are now more than 12 millionAmericans who have celebrated their 75thbirthday, and this group is expected to growalmost four times as fast as the populationas a whole during the 1990s. By the year2000 the Census Bureau estimates that thenation will contain 17 million individualsage 75 years or older. Clearly, this olderpopulation will strain the health caresystem, and place more pressure on workingparents to help address health and relatedlong-term care needs.

Working under the assumption that theaverage individual 65 years or older has twoworking children, we can anticipate apotential demand for elder care services at63 million workers in 1990, growing toalmost 70 million workers by the year 2000.Even if only 10 percent of the elderly areactually dependent on their children at anyone time, this still represents a demand for

elder care services of about 5 percent ofworkers in a given period. As their parentsage, a significant fraction of the workforcewill have a potential demand for elder-careservices. The demographics are such thatthere are even more workers with agingparents than with young children.

Taking account of dependent care needs isalso important because the growth ofworking women and dual working familieshas changed employee expectations of theircareers and the balance between theircommitment to work and their familyresponsibilities. Working women as well asmen in dual working families areincreasingly interested in finding ways toart responsibly to their family members andstill satisfy their career ambitions. Whilethey expect their employers to provideassistance with obtaining dependent careservices, they also expect some degree offlexibility in their work schedules so theycan care for an ill dependent, attendparent-student conferences, or vacationtogether. Firms that are unwilling or slow toaddress these growing needs for flexibilitymay also find themselves at a competitivedisadvantage in recruiting and retaining astable, productive workforce.

For companics that want to utilize thetalents of working parents, it is clear thatdependent care issues will be a major itemon the business agenda. Part of the issueincludes dependent care services whileanother part encompasses a range of policiesto more flexibly organize the balancebetween work and family responsibilities.Thus, the challenge is not so much whetherto address dependent care, but how tointroduce policies and programs thatrespond to employee needs and arereasonable investments, given existing workrequirements and financial constraints Bystarting with a modest benefit or policy,even the smallest of companies can almost

76 8 i)

immediately alleviate some of the pressureon workers with dependent careresponsibilities.

Recent EmployerExperiences WithDependent Care

Employers who have taken an interest independent care have discovered a numberof positive results. To take just one example,a May 1988 article in Personnel magazineextolling the virtues of employer-supportedchildcare benefits reported that:

Nyloncra ft, Incorporated ofMishawaka, Indiana has attributedmajor reductions in turnover ratesand a drop in absenteeism to lessthan 3% to its childcare programs.Lim.oln National Life InsuranceCompany in Fort Wayne, Indianasays its childcare program led toreduced absenteeism and improvedNroductivity. At Mercy Richards

IHospital ... 34% [of surveyedemployees] reported that the [childcare] center had been a factor in theiraccepting jobs at the hospital.

Although most employers do not measurethe benefits of their dependent careprograms and related policies, there havebeen attempts to quantify the value of a fewcompany-provided child care programs.The results from these efforts are quitepositive and provide a strong basis forviewing dependent care as a sound businessinvestment.

A comprehensive survey conducted by theNational Employer Support:A Child CareProject in 1982, for example, found a positiveexperience among most of the 415companies with "major programs" in effect

77

Chapter Four

at the time. These programs, such as on-sitechild care centers, were reported to have ledto beneficial results in the following areas(percentages represent fraction ofemployers reporting a positive effect):2

Percent of Employers Reporting aPositive Effect from Day Care Program

Movie 90%Recruitment 85%

Public Relations 85%

Turnover 65%

Absenteesim 53%

Scheduling flexibility 50%

Productivitv 49%

Employers were less likely to reportbeneficial effects in the area of quality of theworkforce (42%), equal employmentopportunity (40%), tardiness (39%), orquality of services (37%). However, in thebalance of cases there was either no effect oran unknown effect. Virtually none of theresponses was negative.

While these results are impressive, theyreflect what are essentially employers'impressions and views of whether theprograms were worthwhile or not. Theactual cost savings from reduced turnover,less arduous recruitment and the like werenot calculated systematically.

A few companies surveyed by the Projectdid make an effort to calculate the effect oftlieir childcare programs on the bottom line.Studies were conducted in the areas ofturnover, recruitment, and overall costs andbenefits. Seventeen of the 18 companieswhich collected such data found lowerturnover rates for parents using the programthan for their workforces as a whole Theaverage rate of turnover across allemployees in these firms was 44 pei cent. Incomparison, the turnover rate fof users ofthe child care programs was only 19 percent.


Ten companies, mostly health careproviders, estimated the yearly recruitmentvalue of their child care programs in the twotop job categories targeted forimprovements. Based on the number ofworkers recruited and the average cost ofrecruiting, the savings from the programswere estimated as S16,400 per companyannually. In responding to the NationalEmployer-Supported Child Care Survey,147 companies were able to measurebenefits from reduced turnover, lowerabsenteeism, etc., and compare them tocosts. Ninety-five percent of the companiesreported that overall measurable benefitsfrom the program outweighed total costs.

With results like these, one would expect alarge number of employers to develop directservice day care benefits, and in fact anumber have done so. According toestimates from a 1987 government survey ofbusiness establishments with 10 or moreemployees, about 25,000 provide direct daycare services on-site or nearby theworkplace. However, this represents onlyabout 2 percent of all businessestablishments of that size in the UnitedStates.

Employer hesitancy in developing on-sitechild care centers is warranted, in part, bythe expense and risk involved. On-sitecenters are not for everyone and make mostsense when there is an obvious staffingproblem that can be tied directly to childcare concerns, and when the creation of acenter is estimated to alleviate some of thepressure in an efficient, affordable manner.Otherwise, on-site centers may be too riskyfor many companies to justify, especiallysmaller employers.

More companies have developed othertypes of benefit packages and policies thatare effective but do not include on-site care.These benefits have expanded dramatically

of late, and by 1987 well over 100,000business establishments were providingsome sort of child care benefit or serviceg-ared toward improving morale,aosenteeism, and turnover caused byfamily-related concerns. In addition, manyemployers also offer low cost work schedule,policies to relieve work-family pressures.'These include:

Providing access to dependent careinformation and referral services;

Introducing flexible spendingaccounts, which allow employees todeduct child care expenses fromtheir paychecks using pre-tax dollars(the employer contributes nothingexcept minimal administrativeservices);

Adding dependent care benefits toan existing cafeteria plan (this can bedone without increasing themaximum cost of fringe benefits);and

Developing flexible work-schedulepolicies (such as part-timeemployment and flexible workhours) which benefit employeeswith dependents.

The growing importance of these a nd otherdependent care programs is reflected in arecent survey conducted by the ConferenceBoard. The Conference Board reported afour-fold increase in the number ofsurveyed employers providing child careassistance between 1986 and 1989.4 Whilefew employe. s had paid formal attention tothe aging parents issue as recently as twoyears ago, the survey reported that eldercare is rapidly becoming "the new"employee benefit in larger companies.

78 (LL

For example, AT&T recently agreed toprovide unpaid leave for employees to carefor their ailing relatives, and is establishinga resource and referral service for elder carewhich began operation in early 1990.Moreover, the American Association ofRetired People (AARP) estimates that eklercare services were provided by only 10companies in 1987, but that in 1989 about 20percent of corporations with 1,000 or moreemployees had some sort of benefit.5 Aswith child care, the typical benefit is modest,along the lines of resource and referralservices or flexible scheduling policies.

Although the trend is for more dependentcare benefits, many companies, andespecially smaller businesses, have still notdeveloped even low-cost programs. In thesame 1987 government survey mentionedearlier, only 3 percent of establishmentswere estimated to have either set up flexiblespending accounts or provided assistancefor child care through a cafeteria plan.Arnroximately five percent give theirworkers access to childcare information andreferral services. The fraction of employersproviding elder-care referral services is alsosomewhat small (but growing rapidly)according to a Bureau of National Affairssurvey. Flexibility n work schedules aAclleave policies is more common, but is sfillonly provided by three out of every riveestablishments.

The reluctance of many employers toaddress dependent care needs stems partlyfrom perceived cost and risk. Health careinsurance costs in the 1980s love outpacedinflation by a long shot, increasing totalfringe benefit expenses substantiallv.Understandably, many companies havehesitated in developing new dependent carebenefits wIlpn the costs for existing benefitsare perceived as already too high. But as theexperience cf other employers has shown, itis possible to develop a low-cost dependent

Chapter Four

care benefit. If cost is the only concern, thenthere ii little leason not to establish a flexiblespending account or a flexible workschedule, for example. Some employersmay simply not realize the range of options,which vary from very inexpensive to veryexpensive.

An additional concern often cited is thatemployees are accustomed to benefits thathelp everyone in the company. Therefore,some employers may hesitate to develop adependent care benefit of no use tosignificant portions of their workforce.While employees do not blink whencompensa tion varies according to one'sposition in the occupational ladder, payingbenetits according to family status may beanother matter.

Staff concerns about equity can be met bydesigning equitable benefits. Flexiblespending accounts are financed by thegovernment (through a reduction in taxrevenues) not by employers. Within acafeteria plan, one worker's dependent carebenefit is another worker's extra vacationday. Additionally, information, counseling,and referral services can be established aspart of a generic employee assistance planserving all workers. In sum, services toworkers with dependents can be providedequitably as well as inexpensively.

A iependent care policy of some kindmakes good business sense in almost allsituations. The key question is what exactform the benefit should take. By firstimplementing inexpensive benefits andthen considering more elaborate ones,companies can begin to address thedependent care issue without unnecessaryrisk or expense. The recent experience ofLancaster Labs provides an encouragingexample for tne small as well as largebusiness.


The Child Care Center at Lancaster Labs, Inc.

For employers who have hesitated in developing dependent care programs, encouragementcomes from Lancaster Labs, Inc. (LLI), a small business in Lancaster County, Pennsylvania.An analytical testing company with a workforce of less than 400, LLI has shown that an on-siteday care center can be developed which meets the needs of workers while requiring limitedcompany subsidy.

The 112-child facility adjacent to the Labs is leased to a professional day care provider atnear-market rates, with the cvnpany's employees given priority service. Community memberscan also use the center if there is space available. In addition tc the reasonable rental of itsbuilding, LLI finances the maintenance, water, and sewer services for the center. In return forthese rental, maintenance, and utility subsidies, which total no more than :4, i 0,000 per year,the children of LLI employees receive diapers, meals, and high-quality, center-based servicesat 20 percent below the going rate in the community. Day care expenses can be paid for withpre-tax dollars by making deductions into a company-administered flexible spending account.

LLI has found the day care ,;enter to be helpful in recruitment, retention, and public relations.The professional vendor takes full responsibility for management and liability risk. Turnoverhas been reduced among female staff and recruitment in general has been enhanced by thepositive publicity generated by the center. The results are clear proof that even smallerbusinesses can develop on-site day care without extraordinary risk or expense.

Planning For DependentCare Needs

Developing a dependent care plan neednot be a complex or protracted task. It canbe accomplished expeditiously by internalhuma n resources staff, a company-wide taskforce, outside consultants, or somecombination of each of these. Still, becausethe planning task is so important todeveloping effective dependent carepolicies, i!- must be approached carefullyand based on a mix of information regardingmanagement priorities, employees' needs,business requirements, financialconsiderations, and existing communityresources.

80

As shown in Exhibit I, there are fcarcriticalsteps to follow when initiating an effort todevelop and implement a dependent careprogram. These steps are very intuitive andcan be accomplished with limited resources,time, and intrusion into the daily conduct ofwork responsibilities.

The first step is to determine how theplanning task will be managed andconducted. These two responsibilities areseparable in that a single employee orinternal team can orchestrate the planningprocess and still use an outside consultant toconduct the specific information gatheringand design tasks. Thus, a first key task is tochoose between individual and teamresponsibility as well as the use of outsideconsultants. The choice between anindividual and team has usually been made

f!,;

Exhibit 1The Assessment and Implementation Process

AssignResponsibilities

Develop a NeedsAssessmentInformation Base

Design the Program

Implementthe Program

HR Dept'nternal TasK ForceOutside Consultants

Employee focus croups. drop-bvbooths. & surveys

Adeqi acy of current dependentcare arrangements & costsProblems at home & on thejob as a result of dependent careresponsibilitiesExpected future needsInterest in various proposedcompany-provided benefits

Dependent Care Task Force

Company & worker goalsCurrent company policiesResource availability/constraintsBusiness requirementsResponsibility for planning &implementation processSystems capability

Community resources

Other companies that areproviding benefitsExpert consultantsInformation & referral servicesDirect service providersLocal & state public/nonprofitagencies

Estimate Program NeedSelect Program/PoliciesSecure ResourcesSelect VendorsDevelop li-iplementation and

Markenng Plan

Provids TrainingMarket ProgramAssess ResultsInitiate Improvements

Employer Strategies kit a Changing Labor Force

on the basis of company size andcomplexity.

The use of outside experts depends onresource availability and internal expertise.Companics that employ benefit specialistsmay, for example, be able to manageprimarily on their own, assuming that theincumbent is familiar with dependent careplanning and programs, and has the timenecessary to execute the tasks successfully.Eventually, however, most companies turnto outside consultants and firms to assistwith one or another aspect of programplanning.

There are several areas where outsideexperts can provide assistance. Someconsultants specialize in providing servicesbeginning with the planning process itself.These experts meet with in-house staff,present and discuss a wide range of options,and then assist in assessing needs,evaluating alternatives, and developingprograms. The advantage of using outsideexperts from the beginning is that they canhelp select the right program to meet theneeds of the work force and the goals of thecompany.

If a company already knows what se vicesare likely to be established, another option isto select a firm to provide those services.This can be done at the end of the planningprocess, or early in the process so that theexperts can help the company gatherinformation and plan the program. Forexample, if a preliminary decision has beenmade to establish an on-site day care centerthat will be leased to an outside vendor, thevendor can be selected well in advance andparticipate in planning the construction,financing and/or operation of the center.Selecting one vendor for both planningprograms and offering services is usuallycost-saving, but may lock the company intoa specific set of benefits before the

information-gathering process iscompleted.

Once responsibility for managing andexecuting the planning tasks has beenassigned, the second step is to develop aneeds assessment information base. Thistask is intended to guide and inform theplanning process so that a program or policycan be developed that meets employeeneeds and fits within the boundaiies of whatis acceptable and affordable to companymanagement. Three major blocks ofinformation are critical.

The first includes information on companypolicies, priorities, and resource andsystems constrai-Its. Whatever program orpolicy is planned, it must be consistent withwhat is practical and feasible to implementwithin the company. Flexible benefits andcafeteria plans, for example, have specificadministrative requirements that thecompany will have to meet if it implementssuch a program. Similarly, flexible workschedules must not impede the company'sservic :! delivery or production process. Forthese reasons, it is wise to initiate theplanning process by meeting with seniormanagement to identify critical constraintsthat are binding or may be overcome in thecourse of Fogram development.

The second source of information isfocused on available community resourcesTaking an inventory of the types ofdependent care resources that are availablein an area can help substantially whenplanning a specific type of service It canalso assist in dentifying service options notyet considered. In addition, networkingwith trade and business organizations, suchas Chambers of Commerce, as well as otherfirms, can provide valuable assistance inidentifying resources and learning from theexperience of others.

82:-. 6

Many states and localities, for example,have established public dependent careinformation and referral networks. Inaddition, local community-basedorganizations often provide on-site day careassistance as well as referral services.Similarly, for-profit organizations havemushroomed to provide companies withinformation and referral services as well ason-site day care. Some of these are nationalin scope while others are regionally based.

Finally, employee input is critical ifdependent care benefits are going to beeffective and popular. An assessment ofexisting employee needs is at the heart of theplanning process and its information base.Unfortunately, most companies do notobtain specific feedback from employeesabout their dependent care needs. A 1988survey of 1,500 businesses by the AmericanSociety of Personnel Administrators foundthat employers have little knowledge oftheir employees' actual child care needs.Companies knew much more about taxadvantages, impacts of family demands onwork, and the costs of child care benefits.6However, without identifying employees'needs, it is extremely difficult to designeffective progrims. An assessment ofdependent care needs among employees iscritical to sound successful planning.

Exhibit 2 presents the basic informationthat should be obtained from an employeeneeds assessment. This includesbackground data on the characteristics ofemployees and their families, informationon current dependent care needs andproblems, and feedback regarding the needfor and interest in alternative programs andpolicies. In essence, the employee needsassessment should be designed to addressfour basic questions:

1. What are the family characteristicsand responsibilitiRs of employees

83

Chapter Four

and what dependent care needsdo they have?

2. How are existing needs met, andin what areas do employees facedifficulties?

3. What unmet needs exist amongemployees?

4. To what extent are employeesinterested in new or alternativetypes of dependent care policiesand programs?

Typically, employee input is solicitedusing some combination of informal andformal data gathering. In largerorganizations, group discussions or focusgroups, combined with formal employeesurveys is the best way to develop anunderstanding of workers' dependent careneeds and how these can be best addressed.Focus groups help to clarify the nature ofworker needs, while surveys provide aclearer and more accurate indication of howmany workers are likely to desire particularservices. Smaller companies, of course, canlikely rely on group meetings to cover mostof their employees, or even less formalmechanisms.

A more informal way of collectingemployee information is through the use ofa drop-by booth. These booths are often setup in the cafeteria or some other visible,common location where workers can easilystop by, collect information, discuss theirneeds, and exchange ideas. One successfulmodel is to hold a child care or elder carein-house fair, where employees can meetvarious local service providers and gatherinformation. A drop-by booth at the fair canbe used to solicit advice and informationfrom workers. The fair thus becomes boththe first benefit offered and a logical steptoward designing future benefits.

9 7

Exhibit 2Typical Building Blocks of an Employee Survey

" Age

* Sex

* Family Income

Number/age of Family Members

Residence/CommuntingDistance

Job Title

Work Schedule

ININE=MINEIIMML._Current Dependent Care Arrangements

Who are Caregivers for Average Weekly CostDependents While You Work? of Care

Summer and After-School Work/Family Difficulties ofArrangements Current Arrangement

Sick-Child Arrangements

Interest in Dependent Care Programs

Good Idea to Establish Program?

Specific Current Needs

Estimated Future Needs

Type of Program Desired

4MIII

Interest in and Affordability ofProposed Programs

Estimated Benefits ofProposed Programs

Affordability Constraints

Employee data can also be a window intopotential program benefits (e.g., how muchthe program may reduce absenteeism,turnover, and so forth). The data must beseen as a rough estimate, however, since

Chapter Four

employees can only guess about expectedbenefits. The value of obtaining employeefeedback is illustrated by the experience ofthe Travelers Companies.

Elder Care Benefits at The Travelers Companies

The Travelers Companies in Hartford, Connecticut is an example of a large corporation which

has made extensive use of employee information in designing dependent care programs and

services (as reported by William H. Wagel in Personnel, October 1987). One of the first

companies to address the elder care issue, The Travelers surveyed a random 20 percent of

their home office staff who were at least 30 years old in June 1985. Over half of thosecontactedcompleted and returned the confidential survey. The results revealed that approximately onein five workers provide some care for an elderly friend or re!ative.

The Travelers asked a comprehensive set of questions concerning average hours of care

per week, receipt of outside assistance, presence of younger children (about 80 percent ofrespondents had both elder care and child care responsibilities), type of services provided,

and the events that precipitated workers' caregiving rc ,. Four out of five respondents desired

information about community resources.

The Travelers strategy was to respond to the workers stated need for more information, to

establish a flexible dependent-care spending account, and to promote the use of flextime and

personal leave as options for those in need. Within a year after the survey was implemented,

a caregiving fair was held for both employees and retirees. Representatives from communityagencies provided information to workers on their lunch breaks, information that otherwise

rnuld have taken hours to research and collect. Information on caregiving was also added to

, 1 company library and to the interactive video services for employees, and a support group

was established through the employee assistance plan.

It is instructive that The Travelers did not attempt to quantify the cost-savings of these

programs. The provision of a wide variety of relatively low-cost elder care benefits flowed from

a company philosophy that helping employees with family problems increases productivity and

reduces turnover not from a careful analysis of costs and benefits. According to James J.

Davis, Vice-President of Personnel Administration:

"We have found that all of these policies and programs help balance work andcaregivingwithout sacrificing productivity. In fact, our premise here is simple: we believe that

accommodating our employees' caregiving responsibilities actually increases productivity."

100

85


After compiling information oncommunity resources and frommanagement and employees, the next stepis to use the results to identify and planspecific programs and policies. This isgenerally not a complex task, although itwill vary depending on the nature of theprogram or policy to be pursued andcompany size. On the basis of the needsassessment information, the following fivequestions should be answered initially:

1. What needs do employees haveand to what extent are they metsatisfactorily by existing companypolicies and programs or throughother self-initiated means?

2. What are the unmet needs and howcan they be addressed by alternativeprograms and policies?

3. Which programs and policies aremost feasible to implement givencompany policies, priorities, andsystems, as well as financialconsiderations?

4. To what extent can the mostneeded and feasible programs orpolicies be met through existingcommunity and other availableresources, and at what cost?

5. What are the specific implemen-tation requirements of thoseprograms and policies selected asmost viable to pursue?

Once these questions are answered and aspecific approach is selected, it will benecessary to design the program or policyand implement it. Carefully plannedimplementation is important since it willinfluence success. In those instances whenan on-site dependent care center is selected,

it will be necessary to conduct a feasibilitystudy.

Feasibility studies are crucial to theimplementation of direct service options.Whoever conducts the study, whetheroutside consultants or internal staff, must befully familiar with state and local zoningandlicensing requirements, liability law,available state subsidies, and possiblesources of community support, such asfoundations, unions, and state and localgovernment. A professional feasibilitystudy will normally include both start-upbudgets and operating costs. The cost of thestudy itself, if conducted by an outsideconsultant, is usually under $10,000, withthe final expense varying with thecomplexity and size of the task.

Creating a DependentCare Benefit AlternativeProgram Models

When a company chooses adependent-care program it is making adecision about how much to spend, whichbenefits to offer, and whether or not to useoutside service providers. As discussedearlier, there are various program optionsfrom which to choose, depending on needand cost considerations. These options aresummarized in Exhibit 3 and include:

Information, counseling, andreferral programs

Flexible work and schedulingpolicies

Financial assistance

Community programs andprivate/public partnerships

Direct service provision

861 0 1


This section of the cha;ter provides a briefdescription of these five alternative types ofdependent care benefits. The models areintroduced sequentially to highlight first therange of possibilities that are least expensiveand complex, and then to introduce themore costly benefits such as financialassistance and direct service provision.Exhibit 4 presents a summary of the majorstrengths and weaknesses of each modeland can be used as a guide for the section.

Information and ReferralServices

Information, counseling, and referralservices are by far the dominant elder carebenefit offered by employers. They are alsothe most common types of service providedby employers for workers with child careneeds. The key advantage of this type ofservice is its low cost and ease ofaccessibility.

Information and referral services can beongoing or arranged around specific eventslike an information fair. Their popularityflows from their value to employees and therelative lack of expense involved. Neededinformation on community services can takehours to collect individually; the companycan save itself and its employees time andmoney by helping to identify the variety oflocal programs and service providersavailable already.

From the company's perspective, an initialinformation fair or information packetserves a number of useful purposes inaddition to informing employees aboutavailable services. Through thedevelopment process, in-house staff willbegin to grasp the scope of services availablein the community. This can save moneylater by avoiding unnecessary programdevelopment costs. In implementing the

fair, the company may also obtain a bettersense of the true interest in services amongemployees, and receive needed feedback asto what further services would be mostdesired.

Ongoing information and referral servicesare being offered by a growing number ofoutside professional pros .iers. Thesecompanies specialize in keeping track of thevarious dependent care options within acommunity. For a flat annual fee or on aper-employee-served basis, employees candirectly access these providers to identifyavailable services which will best meet theirspecific dependent care needs. In otherinstances, the outside firm will provide thecompany with a listing of available servicesthat can be obtained by employees asneeded.

Some information and referral providersmaintain national networks, which areespecially helpful for larger, multi-statecorporations. An advantage of contractingwith one of these providers is that theburden of updating information oncommunity services is lifted from in-housestaff. Especially in large communities, it ismuch more efficient for a contractor toprovide services to many companies thanfor each company to develop and maintainits own network.

One limitation of local providers is thatmany employees have elderly relativesliving in distant communities, which mayneed care on short notice. Also, nationalcompanies with many plants or interlockingbranch offices will require a nationwidereferral network. For both these reasons, anumber of larger firms have begun tocontr2.;:t with the national informatinn andreferral services, which then subcontractwith local providers.

Exhibit 3Various Types of Dependent Care Benefits

v4

Information, Counselling, and Referral Programs

' Vendor-Provided Referral' Information Fairs and Drop-By Booths' Counseling Services Through an EmployeeAssistance Plan (EAP)

' Videotapes and Publications' Vendor-Provided Telephone Counseling for

Latchkey Children

Flexible Work and Scheduling Policies

' Part-Day and Part-Week Work' Variation in Work Day (Flextime)' Flexible Use of Sick Leave, Personal Days,

and Parental Leave' Two Workers Share One Full-Time Job (Job-Sharing)

' Telephone Access to Dependents During theWoric Day

" Arrangements for Woricing at I iome' Supportive Company Management

Financial Assistance

' Pre-Tax Deductions for Dependent Care Through Flexible Spending Accounts (FSAs)' Financial Assistance Through a Nontaxable Dependent Care Assistance Program (DCAP)-- Can be Established forSubsidizing On-Site Services, Worker-Selected Services, or Employer-Selected Services

' Other Discount and Subsidy Programs

Direct Service Provision

' On-Site Child Care and Elder Care Centers Consortium Centers' Aftel-School, Sick Child, and Summer School Programs ' Family Day Care Networks

Community Programs and Public/Private Partnerships

' Cost-Sharing Arrangements with State and Local Agencies" Community Projects to Expand Dependent Care Options

102 103


A much smaller number of companies nowprovide professional counseling to workerswith dependent care needs. Those that docounsel workers generally do so within theconfines of generalized employee assistanceprograms (EAPs). Counselors can helpworkers with emotional issues surroundingwork and family, and provide informationon community resources. Educationalprograms and support groups arranged bythe staff supplement individual counseling.

Flexible Personnel Policies

Flexible personnel policies are a way ofmeeting work/family needs withoutdedicating additional resources to newemployee benefits. Flexibility allowsworkers to better balance their variousresponsibilities to both their families andemployers. Some options such as part-timework are ccmmon, while innovations suchas work sharing (two workers sharing onefull-time job) are still in the experimentalstage.

At the outset, each company must decidehow flexible it can be given its technologyand job tasks, but from the worker'sperspective, the more flexibility the betterthe chance of building a long-termrelationship with the company. Someoptions, such as allowing workers to calltheir dependents and caregivers withoutnotice, can be of little cost to the companyand reap great benefits in employeesatisfaction. Others, such as parental leave,require a greater commitment on the part ofthe company.

Many large corporations have taken thelead in experimenting with flexibility. In theemergency room of Beth Israel Hospital inBoston, a staff of 45 nurses is managed on 40schedules. An essential aspect of managingthe emergency room is to match theparticular scheduling needs of each

employee with the goals of the unit. Thehospital staff is 78 percent women, andoffers a 12-week unpaid job-protectedmaternity leave. Digital Equipment Corp.offers flextime, part-time work, and jobsharing to employees looking for somethingother than the traditional workday.7

While large employers like Beth Israel andDigital are responding to a changingworkforce, flexible personnel policies are infact most common in smaller firms.According to a 1987 government survey,establishments with less than 50 employeesare much more likely to have work-scheduleor leave policies supporting dependent carethan establishments with 250 employees ormore.8 The respective percentages of smalland large employers providing such policiesare as follows:

SmallerEstablisments(less than 50employees)

LargerEstablishments

(250 or moreemployees)

Flextime 45% 35%Voluntarypart-time 36% 25%

Flexibleleave 44% 40%

Working athome 9% 4%

JobSharing 16% 16%

While smaller companies may be wary ofthe costs associated with direct benefitexpenditures, they do have a comparativeadvantage in being flexible. Bureaucraticpersonnel policies, common in themanagement of a large workforce, are moreeasily avoided by the smaller firm. Byresponding to the needs of individuals on acase-by-case basis, the company can helpemployees solve the work/family dilemmaand lower turnover among valued staff.

90

16 I

Exhibit 4Assessment of Alternative Dependent Care Benefits

Information andReferral Services

Description:

Can be Provided ThroughOn-Site Fairs, ProfessionalReferral Services, orCompany EmployeeAssistance Programs(EAPs)

Motor Strength.,

Most Helpful whenDependent's SituationChanges Rapdily, as isCommon With Eldercare

Ma icor Weakness.

Available SommunityServices May Not beAdequate to Meet WorkerNeeds

Cost:

Relatively Low. Can beshared With Employee

Professional ReferralServices Charge Up to$100 Per Worker Served

sp.:NX;Xmk.

Flexible Work andScheduling Policies

Financial Assistance Direct Service Provision

Description:

Variety of Options toChoose From, IncludingFlexible Use of SickLeave and ParentalLeave, FlexibleScheduhng of theWork Day, Part-TlmeEmployment; JobSharing, and Working atHome.

Major Strength;

Retains Employees asThey Incur Life Changes

Major Weakness.

Difficult to Build Flexibihtyinto Some Jobs

Co St:

Can be MinimalMay Increase Management

Time Dedicated to StaffScheduling andMonitoring

May Increase FringeBenefit Costs

-WU

.1:h)&cription:

Dependent CareAssistance Programs(DCAPs) are NontaxableFringe Benefits that Canbe Used to Finance aVariety of Services

Flexible SpendingAccounts (FSAs) AllowWorkers to Pay forDependent CareExpenses With Pre-TaxDollars.

*tor Strength:

Increases theAffordability of DependentCare

Major Weakness-

May Create EquityConcerns.

A Fringe BenefitUsed by Only a Subsetof the Companysworkers

Cost.

From Minimal (FSAs)to Substantial (FullySubsidized Care

X,

Description.

On-Site Centers, Con-sortium Centers

Summer, Sick-Child, andAfter-School Child Care.

Major Strength.

Expands Dependent CareOptions and Can beExtremely Convenient forWorkers.

Malor Weakness:

May Ehrail Large InitialInvestment of Time andResources.

Co St:

Vanes, Many Ways toReduce Expense andLiability

, ,

Community Programsand

Public/PrivatePartnerships

Description

Group Efforts to ExpandCommunity DependentCare Options andServices.

Major Strength:

All lows for Sharing cfCosts and Risks

Especially Helpful forSmall Business.

Major Weakness.

Relatively Difficult toTailor to the Needs of aSingle Company'sEmployees

Cost.

Can be ReducedThrough Public Subsidiesand Economies of Scale

105 116

Flexible scheduling can take a variety offorms. Under flextime, workers vary whenthey begin or end the working day, and insome cases work more some days and lessothers, keeping the number of hoursconstant. A few workers in flexible jobs areable to vary the total number of hours theywork per week, although typically aminimum number of hours is agreed upon.

Like most flexible scheduling policies,flextime is most common in theserviL _.-producing industries, and especiallywithin retail trade. Jobs in whichcoordination between workers is lessimportant, as in retail sales, lend themselvesmore naturally to variation in work hours.But even in manufacturing, whereproduction typically requires the interplayof many workers simultaneously, 30 percentof establishments offer flextime.

Allowing employees to work part-time ifthey need to is another way to createfl, ibility. Many companies offer thisoption -- at times reluctantly only whenincumbents working full-time ask for it.What is much less common is viewing aposted job as either a full-time or a part-timeposition, depending on the mix of applicantsand their particular needs.

Employer concerns about part-time workrevolve around productivity, management,and cost. There is a belief among at leastsome managers that part-timers will be lesscommitted to the company than full-timeworkers, and therefore that the productivityof a half-time worker, for example, will beless than half that of a full-time worker. Inaddition, hiring more part-timers is alsoseen as increasing management headachesbecause there will be more people tomanage, albeit for less time per person. Andthe overhead costs per hour associated withpart-timers may exceed that of full-time

91

Chapter Four

employees, depending on how fringebenefits are prorated.

Concerns about part-timers are lessenedwhen the part-timt option ceases to be acase-by-case exception for incumbents, andinstead becomes an accepted stage in acareer path for committed, long-termemployees (including new hires). As moreworkers shift away from full-time work, theessential management task is that ofwelcoming the transition. Part-timeworkers who are embraced as an essentialingredient in the company strvcture aremuch more likely to work diligently andremain on their jobs.

Welcoming part-time employees meansmaking a sincere effort to accommodatetheir legitimate desire to work flexibly, andtheir desire to fulfill family responsibilities.By requiring part-time workers to attendmeetings and functions during theiroff-hours, or by repeatedly callingpart-timers at home, managers reveal theirambivalence about the new workarrangements, and subvert what could be aproductive, long-term relationship.

A small but growing number of employersare experimenting with job sharing, whereintwo part-time employees share a single job.The feasibility of this option is dictated bythe content of the job; administrative andmanagerial workers, for example, are oftenrequired to be in the office during businesshours to coordinate various services. Whenthe job itself cannot become part-time,sharing the job can be a creative option. Inpractice, splitting a single job among twopart-time workers may create a slight addedexpense, since a transition period isrecommended (from once a day to once aweek, and from a half-hour to a full day,depending on the requirements of the job),during which the job-sharers meet tocoordinate among themselves.


A more dramatic shift from the typicalpersonnel organization is work at home,intermittently, or on a permanent basis.Allowing workers to do their jobs from theirhomes reduces overhead costs and addsflexibility ta scheduling, but also makesn'any managers uncomfortable.Monitoring home workers' productivity isdifficult, esperially in white-collaroccupations. When discrete tasks can beassigned and monitoring progress isrelatively easy, or when earnings can be tieddirectly to measurable output, working athome can benefit employees withoutsacrificing company goals. While someemployees will flourish on the convenienceof home work, it can also be quite isolating.Both managers and employees shouldconsider carefully the implications ofmoving work out of the factory and office,into the home.

Flexibility is also possible with leavepolicies, including parental leave, leave tecare for elderly dependents, and the flexibleuse of sick leave, Under curi at federal law,the only leave requirement relating todependent care is upon the birth of a child.Maternity must be treated like any otherdisability under a company's short-termdisability policy. Almost half of allestablishments now offer additional flexibleleave policies voluntarily. In 1988, 16percent of medium- and large-sizecompanies offered unpaid paternity leave,while 1 to 2 percent offered paid parentalleave.9

While these leave policies are proliferatingvoluntarily, skeptical empluyers have anumber of concerns. First, they worry aboutthe hidden costs of holding jobs open duringa leave, and the proprised requirement thatthe person on leave be rehired into the exactsame job which he or she vacated. Second,employers may find the intermittent clausein the legislation burdensome, since it

would allow at least some workers to spreadleave time across a two-year period. Third,the,-e is the cost of maintaining employees'health insurance while on leave. Finally,there is a philosophical belief in somecompanies that benefits should benegotiated or offered voluntarily, notmandated by the government.

Proponents of parental leave policies pointto the beneficial impacts on maternal andchild health, the economic security ofwomea, and the occupational mobility ofwomen, citing studies of policies in GreatBritain, Sweden, and West Germany.10 Asfor the burden to employers of carryinghealth care insurance costs, the GeneralAccounting Office has estimated the valueof these costs under the proposed Parentaland Medical Leave Act at about $194 millionannually.11 The effective cost is likely to beeven less than the GAO estimate, since thisestimate does not factor out the costs toemployers who are already providingbenefits voluntarily and under various statelaws.

Even under the proposed legislation, only12 percent of establishments, employing 47percent of all workers, are large enough tobe covered. The current extent of voluntarybenefits indicates that many employersbelieve unpaid leave policies to be a prudentand effeciive way of maintaining productivework relationships.

Financial Assistance ThroughCafeteria Plans and Flexible

Spending Accounts

The number of employers offering flexibleberefit plans and reimbursement plans forchild care and elder care increasedsubstantially between 1986 and 1988. By1 g88 almost four million workers, or 13percent of the private sector workforce, were

92

1 ;1

eligible for one or more of these services, asopposed to only 6 percent in 1986. Mostly,this represents an increase inreimbursement plans.12

For over ten years, the IRS has authorizedthe establishment of dependent careassistance programs (DCAPs) asstand-alone benefits or within flexiblebenefit (cafeteria) plans. A cafeteria planoffers both core coverage, such as medicalinsurance, disability insurance, andretirement, and a flexible pool of money tobe applied to various benefits. If dependentcare is one of the options, employers canprovide direct services, make directpayments to outside providers, orreimburse employees who have receipts forpaid dependent-care expenditures.Cafeteria plans are advantageous in thatthey give the employee choice withoutnecessarily increasing benefit costs. Forexample, a worker covered by his spouse'shealth insurance could select dependentcare benefits instead of health benefit5, withno net increase in costs to the coowany.

In 1988, cafeteria plans were offered topproximately 5 percent of all private sectoremployees in mealum and large-sizefirms.13 An advantage of a cafeteria plandependent-care benefit to the employee isthat the company contribution is nontaxableunder certain conditions. The IRSrestrictions on the tax exemption indicateclearly that the program is designed forfamilies without a full-time caregiver athome. For example, a married workerwhose spouse has no income cannot collectbenefits under a DCAP, unless the spouse isa full-time student, or is physically ormentally incapable of self-care.

Nontaxable benefits are limited to 50percent of the earned income of unmarriedworkers. For married individuals, themaximum benefit is limited to 50 percent of

Chapter Four

earned income or 100 percent of spouse'searned income, whichever is less but ingeneral not more than $5,000. Spouses whoare full-time students are treated as having$200 per month of income in the case of onedependent, or $400 per month of incomewhen more than one dependent is present.

Since DCAP benefits are tax-free, IRSregulations reduce the federal child care taxcredit dollar for dollar for all DCAP benefitspaid. Established in 1981, the child care taxcredit lowers federal taxes by up to $2,400for one child and $4,800 for two or morechildren. Credits apply to child careexpenses only, and maximum credits areavailable only for families wit'a adjustedgross incomes of $10,000 or less. As incomerises the credit falls. For example, a familywith one child and an income of $20,000receives a credit of only $576. Lower incomefamilies may therefore need guidance as towhich program (the DCAP or the child c. retax credit) is more advantageous.

Eligible dependent care expenses underthe DCAP include payments to a child carecenter, babysitter, or nurse; payments madefor services performed outside the home;payments to a nursery school; and paymentsto a nondependent relative who providesdependent care services. Transportation,food, clothing, and educational expenses arenot covered, nor are costs covered for childcare centers (which provide care for morethan six non-residents) that do not complywith all applicable laws.

For the purposes of the program, expensesmust be for the care of a child under age 13who lives with the employee and is claimedby the employee as a tax exemption, or foran individual who is physically or mentallyincapable of self-care, spends at least eighthours a day in the employee's home, and isdependent on the employee for support. Topromote equity across employees,


limitations are placed both on the size of thecontribution and the portion going toindividuals who own substantial fractionsof the profits or capital of an unincorporatedbusiness.

Clearly, the least cumbersome option forthe company is to reimburse employees forpaid out-of-pocket expenditures, but thisdoes require that the worker carry the costof dependent care until repaid by thecompany. Direct payments to outsideservice providers create extra work for theaccounts payable department, but arebeneficial to the employee in that the serviceprovider carries the cost of services untilreimbursed.

Flexible Spending Accounts (FSAs) fordependent care offer the same tax-freebenefits (and restrictions) as DCAPs, butwith an important difference: FSAs arefiranced entirely by the employee. The onlybenefit to the worker, in fact, is a tax break:funds contributed to a FSA are nontaxable.From the perspective of the IRS and theSocial Security Administration, that part ofearnings which is allocated to an FSA doesnot exist, eliminating all federal, state, andsocial security payroll taxes on the income.To ensure equity across employees, theamount that higher-paid employees cancontribute to the FSA is babed on the amountcontributed by lower-paid employees.

Since FSA income is exempt from socialsecurity payroll taxes, savings accrue to boththe employer and the employee. For theemployee, it will also mean a reduction insocial security benefits upon retirement(since fewer lifetime dollars will have beenpaid into the social security trust fund). Therestrictions on eligibility for FSAs are similarto those for DCAPs, and thedollar-for-dollar reduction in the child caretax credit also app. But the FSA hasfurther restrictions which limit its

attractiveness to employees. The first ofthese is that all payments arereimbursements: the worker must presentreceipt- r services to the company. Again,there may be a problem with carrying costs.A second limitation is that the savings to theworker is an abstraction; it is not a cashpayment, but rather a reduction in taxes andtax witholding. Employees may need to beconvinced that the FSA is worth the trouble.

The most restrictive aspect of the programis that the employee must decide before thebeginning of the year how much money willoe withheld in an FSA. For example, aworker with a dependent parent at homemay estimate costs at $1,200, and then signup to have that much withheld during thecoming year. If paid monthly, 100 pre-taxdollars would be deducted from eachpaycheck and placed in the FSA. Thismoney is then paid back to the employee ashe or she submits paid receipts fordependent care services.

As long as the worker spends and presentsreceipts for at least $1,200 worth ofdependent care during the year, he will bereimbursed as from a savings account(without the interest). When a claim isapproved funds are withdrawn toreimburse the employee. However, if anemployee spends more than $1,200 ondependent care, only the first $1,200 will betax-free. Even worse, if he spends less thanhis estimated $1,200 on dependent care, theunspent money is forfeited.

Funds which have been committed to thespending account but which are not used fordependent care expenses can only bereleased following a family or employmentstatus change, including marriage, divorce,birth or adoption of a child, death of thespouse or dependent, loss of spouse'semployment, increase in the number ofdependents, unpaid leave of absence, or a

catastrophic medical condition in theemployee's family.

While the plan-ahead requirements offlexible spending accounts may scare offsome employees, the advantage toemployers is that FSAs require virtually noongoing expenditures. Once put in place,the only cost to the company isadministrative -- managing the flow ofdollars and paperwork back and forth fromthe worker. This extra administrativeburden can be financed by interestpayments on the withheld funds, whichaccrue to the employer. Some companieswhich have set up FSAs have contractedwith outside providers to administer theprogram, hold onto the funds, and makereimbursements to employees. Theseservices are generally provided at no charge;the contractor makes a profit by collectingthe interest from the withheld funds.

Direct Service Provision andPartnerships

The most well-publicized form of adependent-care benefit is the "on-site" ornearby child care center. Relativelyunknown before 1980, a number of centershave been developed in the past decade.Typically, companies establish centerson-site or nearby in response to either aserious (or projected) problem withrecruitment, turnover, or absenteeism, or aspart of a broader policy of progressivepersonnel management. While on-site eldercare is a possibility, this is a virtuallyuntested benefit to date.

Most experts believe that center-based careis, on average, superior to family day care.Center staffs tend to pay more attention tochild development and education, and areoften better trai-ed to do so than in-homeproviders. Centers are also operated bymultiple adults dnd are often large enough

Chapter Four

that a full-time administrative director iswarranted (or required by state law). Thisenhances the ability of the center to planservices and develop programs.Additionally, a single center is alsoperceived by participating businesses to beeasier to oversee than a large number offamily day care providers.

On-site, center-based care is also preferredby working parents because of itsconvenience. When it comes to day care,whether the center is downstairs from theoffice or a ten-minute drive away doesmatter to the working parent. Workersbenefit greatly from the convenience ofvisiting their children on break as well asduring lunchtime. If a child is sick orinjured, the advantages of on-site carecannot be overestimated. Productivity isalso enhanced through on-site care, becausechildren's needs can be met much moreefficiently by parents directly, rather than ata distance on the telephone.

Despite the clear advantages of on-site,center-based care, parents will often chooseto maintain their children in family day careor with relatives. Why? The usual reason iscost. Marty parents are often shocked by theexpense of center-based care, whichcurrently has a market rate of as high as $220per week for infants (the most expensive agegroup for child care). Family day care canbe much less expensive, especially whenprovided by friends and relatives.Therefore, a central concern in planning anon-site center is affordability, both for thecompany and for the working parent.

When creating an on-site center, criticalplanning concerns include the following:14

What exact services will beprovided, in terms of age groups,number of child care slots, hours ofoperation, facilities, and programs?


e What supplementary services willbe offered, including transportation,health care, resource and referralservices, and educational programsfor parents?

What will be the legal, management,and operational structure of thecenter?

What are the goals as to thea:fordability of the program andequity across employees?

How can high-quality care beprovided in a way that is affordablefor both the employer and theemployee?

Deciding on the Servicesto Offer

In planning on-site services, the first step isto determine the mix of services, hours ofoperation, and age range of the children thatthe center will serve. Choices over thesedecisions can have an important influenceon investment costs and user charges, aswell as the utilization of the center byemployees.

Centers are typically open five days perweek, and may provide services for infants(6 weeks to 18 mos.), toddlers (18 mo toapprox. 2 1/2 years), and pre-schoolers, aswell as to older children both before andafter school and during the summer.Generally, the expense of care tends todecline with age, since in many states, theyounger the child, the lower the mandatedchild-provider ratios. In manycommunities, center-based infant care isquite scarce (since it is the least profitable ormost expensive to provide). Therefore whatare often the most beneficial services for theworking parent -- infant and toddler carecan be relatively expensive services todeliver.

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Centers normally operate about 12 hoursdaily (e.g. 6:30 a.m. to 6:30 p.m.), with hestandard fee covering up to 10 hours of careper day. For example, the parent who dropsthe child off at 6:30 a.m. would have to pickup by 4:30 p.m. to avoid additional charges,while drop off by 8:30 a.m. would requirepick-up by 6:30 p.m.. This kind of flexibilityis advantageous to both the worker and thecompany. An additional benefit of on-sitecare is that the hours of operation can betailored to the needs of the participatingbusinesses. Some centers provide diapersand full meals, while others offer only asnack. For parents, the provision of fullmeals (usually breakfast, lunch, and a snack)is a big time-saver and an important benefit.

Additional services whicf- can add to theattractiveness of centers are unplanneddrop-ins (when space is available and otherday care arrangements fall through),drop-ins for slightly ill school-age children,and well-planned curricula whichemphasize social and educationaldevelopment as well as caretaking.

A good starting point for determining howto structure the services of a center is theemployee needs assessment. Somequestions on the assessment should beaimed at employee interest in on-site care,including cost limitations. This informationcan be used to develop alternative servicestrategies for comparison on the basis of costand responsiveness. Depending on interestlevels, affordability to the company andemployee, and feasibility ofimplementation, an initial service strategycan be set and planned.

Legal and AdministrativeStructures

There are four basic models for thedevelopment of on-site care: 11 as a part ofthe business (either a line department orprofit-making subsidiary); 2) as a separate

non-profit corporation; 3) through contractwith an outside company (usuall)for-profit) which specializes in operatingchild-care centers; and 4) as a consortiumwith other businesses and local institutions.

Few companies have developed child careas a depa rtment or profit-makingsubsidiary, because of the legal risk and thelack of in-house expertise. In addition, anumber of consultants advocate the creationof a separate not-for-profit entity, becausesuch a configuration affords the optimal mixbetween oversight and limited liability.

Chapter Four

Not-for-profits are also eligible for a broaderbase of public subsidy than for-profits.

Typically, some combination of companymanagement and working parents comprisethe Board of Directors of the not-for-profit,which, as a separate corporation, is notlegally bound to the company itself. TheBoard sets general policy for the center.Usually, a paid center director is selected bythe Board to administer center operations ona day-to-day lx.sis. A good example of theuse of a public subsidy by a not-for-profitwas established by Grieco Brothers (see boxbelow).

On-site Day Care at Grieco Brothers

One cost limiting approach to establishing an on-site center is aggressively pursuing outsidesources of funding. Grieco Brothers of Lawrence, Massachusetts, a manufacturer of men'sfinely tailored clothing under the Southwick label, is one company that took such an approach.This family business was faced with a serious absenteeism problem in 1984, and had littlemoney with which to solve it. Turnover and absenteeism were so bad that the company hadto hire permanent floaters to cover missing workers. The predominantly female productioncrew had few affordable child care options; on snow days some women simply brought theirchildren to work with them.

Grieco Brothers solicited the help of a consulting company in the Boston area to overcomethe child care dilemma. Grieco knew that it could not afford any substantial outlay of its ownfunds, so the challenge of the project was to solicit outside sources of support. Obviously, theneed to licit funds slows down the planning and development process. It took one andone-half years to develop a plan, find funding, and open the center. Stumbling blocks includedthe lack of start-up money, and the fact that employees could not afford unsubsidized slotstherefore it was necessary to find a funding conduit for both start-up and ongoing costs. Thesite was large, but needed a lot of work. Initially, Grieco envisioned opening the center fortheir employees only. Much as done on a shoestring.

The project raised $75,000 in start-up money. Key to raising money was a contribution of$20,000 from the Grieco workers' union. Once the union was on-board, many others becameinterested. Polor Clothing, located across the street, was asked to contribute after the decisionwas made to open the center up to the community. Foundation money was also tapped.

The center was set up as a nonprofit corporation, with parents and company representativeson the Board of Directors. The nonprofit was eligible for foundation and state money, and bysetting up a nonprofit entity the liability of the employer is limited. As opposed to contracting

97


out to a service provider or running the center as a functional department within the company,establishing a nonprofit entity allows for parent/corporate control with limited liability. Key toa successful center, whether setting up one's own nonprofit or contracting out services, ishiring a professional, experienced director.

The Grieco Brothers center was set up as a minority business enterprise, and obtained astate operating contract. This ongoing contract subsidizes the center, so that care only costsGrieco employees about $10-50 per week. The company's only significant expense to datehas been in the form of in-kind contributions. Both the company management and theemployees are thrilled with the center.

For-Profit and Other Vendors

While for-profit child care vendors do notqualify for most public subsidies, they havebecome a popular option for companiesinterested in providing on-site child care.The most attractive quality that theexperienced for-profit vendor brings is theability to handle all aspects of planning,development, and implementation. Themost knowledgable contractors comeequipped with architectural blueprints,employee needs assessment instruments,feasibility studies, implementationprograms, and a network of experiencedadministrators. Reputable contractors alsobuy group insurance policies which cover allof their centers, and low er the cost of liabilityinsurance. These efficiencies can result insubstantial savings for the contractingbusiness.

Within the professional child carecommunity there is debate over the use offor-profit contractors. Some experts believethat child care is like a public service thatshould not be subject fully to the demandsof the free market. When importantdecisions are required which imply atrade-off between quality care andprofitability, critics argue that the for-profitcontractor may not have the best interests ofthe child in mind. It is the same argumentthat is made in opposition to for-profit

medical care. Against this argument is thepositive experience of a growing number ofbusinesses with reputable for-profitcontractors.

Whethernot-for-profit or for-profit, the useof outside management can save thecompany considerable time inadministering the day-to-day operations ofthe center. This is especially true if thecenter has a full-time director, as is requiredby most states in day care centers above aminimum threshold size. Many companiesreport that a first-rate center run by acompetent director requires virtually notime to manage oetween annual contractnegotiations. Clearly, the success of anon-site center depends crifically on both theoverall ability of the contractor to provideefficient, high-quality services to business,and the experience and competence of thecenter director. Time spent carefullyselecting a vendor and screening applicantsfor the director position is a very goodinvestment indeed.

Although for-profit centers have the optionof informally reserving child care slots forthe use of the company's employees, likenot-for-profits they can benefit from takingin some children from the community atlarge. Community involvement may in factbe necessary for the relatively smallcompany, which will likely not be able to fill

a child care center of even modest size.There are benefits of having at least 40-50slots in a center, with the most importantadvantage being the ability to afford afull-time administrative director.

Tapping local demand can also be the keyto making a day care center affordable foremployees. In the past, conventionalwisdom cautioned against establishing acenter unless the employee base was of acertain size. Now it is clear that byaggressively pursuing cost-sharing, smallercompanies can lower expensessubstantially, and make on-site care feasible.Many centers give Prst priority toemployees from the participating business,and charge the workers rates which are inpart subsidized by the market prices paid bycommunity parents unaffiliated with thecompany.

Consortium Approaches

For the smaller business especially,collaborating with other private and public

Chapter Four

in3titutions is an effective way to reduceboth start-up costs and ongoing expenses.Consortia usually work through localbusiness groups, such as Chambers ofCommerce or local Private IndustryCouncils, or are centered on clusters ofbusinesses such as those in an office park. Infact, office park managers are finding thatplanning a center is a good way to attractbusinesses to a new development. Thedeveloper and park businesses can thenwork together in planning the center anddeciding on the extent of employer subsidy.

A clear advantage of consortiumparticipation is that it allows a company toplan an on-site center by sharing cost, risk,and managerial time. Typically, theconsortium will be led by a not-for-profitagency unaffiliated with any of theparticipating businesses. A good exampleof a consortium centered around anot-for-profit institution is the HighlandPark Day Care Center in Woonsocket RhodeIsland (see box below).

Highland Park Day Care Center

Most successful consortiums require a catalyst to see them through. In the case of theHighland Industrial Park's day care center in Woonsocket, Rhode Island, that catalyst was thenonprofit Woonsocket Industrial Development Corporation (WIDC) and its Executive Director,Scott Gibbs. In 1987 Gibbs received a call from a local business leader who wondered what,if anything, WIDC was doing about day care. Sensing that it was time to move on this criticalworkforce issue, Gibbs put together a consortium consisting of participating businesses, theWIDC, the Northern Rhode Island Private Industry Council, and Woonsocket Head Start andDay Care, a respected day care and pre-school provider in the area.

Looking back on the development of the center, which opened in January 1989, Gibbs seesseveral critical ingredients that brought it all together: the commitment of top managementfrom a few of the area's most important businesses; the use of a well-known local provider(Head Start); and an organizing catalyst (WIDC) which had the trust of the business community,the real estate expertise to develop the project, and which was willing to dedicate substantialresources (especially of time and effort) in seeing the project through.

1 , 6

99


Gibbs received corporate commitments to the project early on, which proved invaluable whensoliciting public and private donations. Grants totaling more than $250,000 were secured fromthe city of Woonsocket, the state of Rhode, Island, the regional Private Industry Council, andprivate foundations. WIDC donated the !and at the foot of the industrial park for the center,which has 88 day care slots.

Highland Park was developed in a way that required little effort on the part of participatingbusinessPs. Companies sign contracts to reserve day care slots at the center, at an annualprice of $2,000 per slot. By reserving a slot for its employees a company not only is increasingthe availability of care, but t is doing so at a price that is below the market rate or center-basedcare in the area.

The goal of WIDC in developing Highland Park Day Care was to increase day care optionsfor a wide range of workers in Woonsocket. Thus only 64 of the 88 slots in the center arereserved for workers at participating corporations; the rest are filled with children from familieswith low-to-moderate income. These lower-income families pay less than thecorporate-sponsored parents for care at the center, And some qualify for state subsidy.

The center serves a variety of parents and children, and is financed by a combination ofpublic, worker, and corporate dollars. The project was designed so that the grants andcorporate subsidy support all of the development costs (including the mortgage), and userfeespay for ongoing center operations. Neither WIDC nor the participating businesses are involvedin the management of the center, which is handled by Head Start and its center director.

After the first year of operation, 30 of the corporate slots were sold, and all of theincome-eligible slots were filled. Some of the participating businesses have waiting lists andire being approached to buy more slots. Once all of the slots are contracted for, the centerwill be full, the amount of center-based care in Woonsocket will have increased substantially,and the project will be completely self-financing.

Inevitably, consortium participC 'on islikely to offer less convenience andflexibility to workers than a single-companyon-site center. In working with otherbusinesses, the company may have to makecompromises as to location, hours, andservice provision, so that all members of theconsortium are well-served. The numuer ofworkers using the consortium center from aparticipating business will tend to besmaller than if the center was developedspecifically for a single company's workers.So, while the consortium may well be lessexpensive to participate in than asta nd-alone center, it also may be a relatively

less important benefit for the company'sworking parents.

Veterans of consortia efforts believe thatthere are several elements of a successfulcollaboration. FirFt and foremost, one ormore people muFt serve as catalysts for theproject. Someone, whether it be from thecompany, union, not-for-profit institution(such as the Chamber of Commerce, PrivateIndustry Council, or IndustrialDevelopment Corporation), or an outsideconsultant, must take primary, day-to-dayresponsibility for the project. Without suchdedicated effort, busy people will find it

1001 ; 7

difficult to launch a complex collaborativeeffort.

Another key ingredient to a consortium isactive support from top companymanagement. The project will have a cost ineither time, money, or both. Participation ina consortium is a visible undertaking whichchief executives will want to know aboutand consider carefully before sanctioning.Without such support, the necessary dollarsor time commitments may never beforthcoming.

The consortium should also have within itexpLrtise in real estate and in providingchild care to business. If such expertise islacking within the participating institutions,reputable consultants can help fill the gaps.Consultants can provide the necessarycatalyst, develop needs assessment surveysand feasibility plans, aid in fund-raising andgrant-writing, and see the project through tocompletion. As always, consultants in thisarea vary in quality and experience, and acareful consultant selection process could bethe most important task of the consortiumcommittee responsible for the oversight ofthe project.

An example of a successfulcommunity-based child care consortium isthe Lowell, Massachusetts Private IndustryCouncil (PIC). Many public and piivateemployers in the Lowell area were hivingdifficulty recruiting and retainingentry-level workers when theMassachusetts economy Doomed in themid-1980s. Fourteen private employers and12 public employers, working through thePIC, formed a Child Care Committee. Theexpert consultant on the project, MarieSweeny of Boston-based WorkplaceSolutions, believes that the success of theeffort was related directly to the creativityand commitment of the committee.

Chapter Four

One of the f Anctions of the PIC was tooversee local programs for welfare mothersenrolled in the state-funded "ET' traininginitiative. Retaining enrollees in trainingand then on-the-job was a problem for localemployers. Once it was determined thatday care was part of the problem, space waslocated for a child care center in the old millbuilding where training activities weretaking place. The purpose of the center wastwofoldto help enrollees during trainingand to expand child care options for theworkels of the area. The goal was to provideboth infant/toddler care and after-schoolcare.

The Lowell project illustrates thatsuccessful efforts do not necessarily requirecompany expenditures, only commitmentsof time, creativity, and effort. Critical issuesfor the PIC Child Care Committee werelicensing, finding a contractor, and mostcrucially fundraising. It was able to raise$200,000 up-front, tapping city, state, union,business, and foundation monies. The localcarpenters' union agreed to use the site torun an on-site training program, andcontributed labor without charge. To lowerthe cost of child care to local workers, thePIC is working with the state to providesome subsidized day care slots within thecenter.

Affordability and Lquity

The most common perceived obstacle forcompanies when establishing centers is theexpense involved. Start-up costs can besubstantial, at least $150,000 in most cases.Companies should factor the first sixmonths of program operations into thestartup budget, as it takes time to enrollchildren into services.

Ongoing expenses are also an issue, since aday care slot now costs between $100 and$200 to operate per week. Employers arewary of shouldering such costs, as are

1 1 S

101

I


parents especially those whose earningsare relatively low wages. In consequence,many companies, and especially smalleremployers, have relied on consortia anddeveloped innovative models to share costsand make centers affordable for both thefirm and the working parent.

Key to affordability is the issue of equity.Full-cost, center-based care will be tooexpensive for all but the wealthiest families.This does not mean that only professionalswill use a high-cost center. What matters istotal family income relative to total familyexpenses. Married couples will be morelikely to purchase more expensive servicesthan single parents, and the higher thecouple's combined income the moreattractive will be the services. Those withmany children will be less able to affordhigh-cost care than those with one child.

The lower the total costs of the center, theless the need for either extensive corporatesubsidy or high rates for parents. The mostequitable centers are those which either havesliding scales based on income, or therelatively low prices for all employees.Many companies have found that bestsolution to equity is to offer one reasonablese, of prices to everyone, through acombination of prudent cost-containmentand moderate company subsidy.

Cost-reduction has been accomplishedthrough the following creative approaches:

Establishing a not-for-profit andaggressively pursuing publicsubsidy. Many states make monies

, available to subsidize non-profit daycare slots for income-eligiblefamilies. This approach is mostsuccessful when business employlarge fractions of lower-wage femaleworkers, and in those states where

102

child-care programs are relativelywell-funded.

Cost-sharing with other businessesand local non-profit institutions.Con fium approaches lead toefficiencies in development,administration, and day-to-dayexpenses.

Creating a hybrid betweensubsidized child care slots foremployees and market rateslots for unaffiliated parentsfrom the community. Thiscross-subsidi- zation can lead tosavings for both the company and itsworking parents.

Adapting existing space within thecompany to make room for a childcare center. Avoiding newconstruction can reduce start-upcosts significantly.

Being a leader. In a communitywith a shortage of high-quality childcare, the first few centers establishedmay generate significant positivepublicity. This can help fill up thecenter quickly, lowering averagecosts of care.

Thinking carefully about theaffordability of care to theemployee. Both start-up andongoing costs can vary substantially,and these costs will be borne byeither the state, the participatinginstitutions, or the parents ofchildren using the center.Aggressive and creative efforts tolower costs (while maintainingacceptable quaLty) will avoid largecompany subsidies, and will allowfor prices which are within the reachof the average working parent.

One example of a relatively small companywhich has made good use of cost-sharing toincrease affordability is Fabrican M FallRiver, Massachujetts. This curtainmanufacturer employs approximately 250workers, mostly women recruited from thelocal immigrant population. Following adevastating fire in the mid-1980s, thecompany decided to construct afree-standing day care center as part of therebuilding process. The goal of the day carecenter was to recruit from the ,Intappedlabor pool of mothers at home with theirchildren. Clearly, to recruit from thismarket required reducing the cost of care tothe employees.

To limit start-up costs, Fabrican secured aloan from the Massachusetts IndustrialFinance Agency. The $650,000 in start-upcosts, while substantial, are reflected in anew company asset--an attractivesingle-story building. Having the ability toconvert the building into desirable officespace, if required in the future, lowered therisk to the company of the constructionproject.

A local not-for-profit service provider ismanaging the Fabrican center, with thecompany's subsidy coming in the form offree rent during the first year and a low rentin the subsequent four years. In return,company employees using the center payonly $1 per hour in day care expenses. Thebulk of the nonprofit corporation's revenuesare derived from parents in the communitywho fill the majority of the over 100 day careslots in the center, and pay competitivemarket rates.

Emergency and Sick-ChildCare

Most companies are wary of providingflexible subsidies for dependent care thatrepresent direct dollar commitments theseexpenditures may be substantial and may

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Chapter Four

not always translate into efficiencyimprovements. A few companies havedecided to subsidize a variety of programsthrough a reimbursement plan, or throughcafeteria plans such as those describedpreviously. But given cost considerations,the cutting edge indirect services is tailoringprograms to observable human resourceconcerns w4thin the company.

One such example is emergency back-uparrangements and care for the mildly sickchild. For school-age children, the mostcommon unexpected day care need occursas a result of mild illness, but snow days,teacher strikes, and the like can also create aneed for care. For infants and toddlers, mildsickness can be the issue, or the last-minutefalling through of regular day carearrangements. These kinds of unexpectedsituations are a primary cause of parentabsenteeism at work.

For working parents in jobs that lendthemselves to flexibility, a solution to theunexpected dependent care dilemma isflexible work hours. A day missed to carefor a sick parent can be made up, or salariescan be adjusted. But in some cases, thecontribution of the worker is too critical toallow for much flexibility. An example isnursing. Due to the shortage of availablenurses, some hospitals have had to closedown selected units. Under theseconditions, absenteeism is a critical issue. Inresponse, some hospitals, law firms, andother businesses have established servicesfor emergency child care.

Often, for equity reasons, employers feelcompelled to offer emergency services to allemployees, even though all are not critical.Thus emergency services can be expensive.One law firm in D.C., whose lawyers billclients at hundreds of dollars per hour,estimated the cost of emergency core at$50.000. and the savings in reduced

()


absenteeism and increased billing at$130,000.

There are three basic models foremergencycare services: establishing a mini-day careon site; contracting with a number of familyday care providers near the office; andcontracting with on-call providers to go into

the employee's home. In practice, theseservices usually have been partially or fullysubsidized by employers. Thus the servicemakes most sense for worke,s whoseabsenteeism, given the nature of their jobs,is very costly in terms of billability, serviceprovision, and ultimately, the bottom line.

104 121

Chapter Four

Chapter Endnotes

1U.S. Department of : abor, Report of the Secretary's Task Force on Child Care, "Child Care:A Workforce Issue," 1988.

2Results from the Project are reported in Employer-supported Child Care: Investing in

Human Resources (Sandra L. Burud, Pamela R. Aschbacher, and JacquelynMcCroskey, DoverMA: Auburn House Publishing Co., 1984). Although outdated when it comes to referralservices (and silent on the eldercare issue) this book is an information-packed how-to guidefor employers. Based on results from surveys and site visits covering 415 employer-supportedchild care projects in 1982, it walks the interested large corporation or small business throughthe various steps required to decide on a benefit package and establish a program.

3See Howard V. Hayghe, "Employers and Child Care: What Roles Do They Play?," _Monthly

Labor Revim September 1988.

4As reported in Personne1 May 1989.

sAs reported in The New York Times, June 4, 1989.

6As reported in Personnel Administrator, April 1989.

7As reported in The Boston Globe, September 20, 1989.

8Hayghe, September 1988.

9These statistics are from a U.S. government survey, as reported in the Daily Labor Report,April 5, 1989.

10M reported in The Employment and Training Reporter, 3/22/89.

11Statistic from GAO report HRD-88-103, M-, f 1988.

12Results from a government survey, as reported in the Daily Labor Report, April 5, 1989.

13As reported in The Daily Labor Report, April 5, 1989.

14This section draws substantially from Sandra L. Burud, Pamela R. Aschbacher, andJacquelyn McCroskey, Em lo er-Su . .orted Child Care: Investin in Human Resources,Dover, MA: Auburn House Publishing Company, 1984.

122105

Part II

Case Studies

123

INTRODUCTION

This part of the monograph includes the results of on-site visits to and telephoneinterviews with representatives from five organizations that have implementwl

programs and policies to address various aspects of the labor and skill shortageproblem. The organizations and program areas include:

The Alliance for Employee Skills Upgrading, Basic Skius,

Growth and Development and Mobility Assistance

The Highland Park DayCare Center

Lancaster Labs, In

Motorola, Inc.

Superior Technical Ceramics

On-Site Child Care

On-Site Child ,:are

Basic Skills

In-House Basic Skills

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Case Studies

Basic Skills and Upgrading Programs of theAlliance For Employee Growth and Development

The Alliance for Employee Growth andDevelopment is a joint venture of AT&T, theCommunications Workers of America, andthe Internatdonal Brotherhood of ElectricalWorkers. Established in 1986 as a jointlabor-management program, the Alliance isdedicated to providing union representedAT&T employees with the skills andknowledge they need to successfully pursuetheir careers and personal developmentgoals. In so doing, the Alliance providesanother important benefit as well. Itcontributes to the competitiveness of AT&Tby facilitating the development of a skilledand adaptable workforce.

Key to the success of Alliance programs areLocal Committees. These committees,composed of labor and managementrepresentatives, are responsible forplanning and implementing facility orworkforce-specific programs. They serve asthe focal point for local Alliance activitiesand ultimately create the foundation foractive and collaborative human resourcesplanning and development. As ofSeptember 1989, there were 450 LocalAlliance Committees around the UnitedStates, enough to include every coveredAT&T business unit, and 20 IBEW locals.

In fulfilling their responsibilities, LocalAlliance Committees operate with thesupport of a National Headquarters Officeand three Regional Offices. AllianceHeadquarters administers program funds,establishes broad program andadministrative policies, and with itsRegional Offices, provides technical and

109

managerial assistance to Local Cummitteesand their programs. For the year ending inSeptember, 1989, the Alliance administereda program budget of nearly $18 million,derived from an agreed upon contributionfor each month worked by representedemployees.

Since 1986, more than 35,000 employees, orroughly 25 percent of the eligible AT&Tworkforce, has participated in Alliancefunded programs; additional Alliancesponsored services have been provided byexternal funding obtained by the Alliance.Alliance funded programs have rangedfrom personal planning topics such asrelocation and financial planning tocareer-based training programs in criticaloccupational areas, and courses in computerliteracy, basic skills, and qualifying exampreparation. More specifically, between1986 and September 1989, workers receivedthe following types of Alliance sponsoredservices.

T ype ofService

Needs Armament Vocationaland Interest Surveys

Career Assessment andPlanning

Basic SkillsUpgrading

Job SearchAssistance

Occupational SkillsTraining

Personal FinancialPlanning

EnrolledWorkers

40,134

20,354

783

2,483

5,200

19,647

I f , t:2 4. 0


Type ofService

(Pre-Paid) TuitionAssistance

Pre-RetirementPrograms

QualifyingExamPreparationPrograms

Relocation PlanningWorkshop

Return-to-SchoolPrograms

Stress ManagementPnigrams

Other Personal DevelApmentPrograms

EnrolledWorkers

2,031

816

1456

341

970

698

459

Although the availability and nature ofthese programs depend on the unique needsof workers in individual business units, allAlliance programs share a number ofimportant attributes. These attributes arewhat makes the Alliance itself a uniquehuman resources development enterprise.

The first key attribute is the common visionof planned human resources developmentand change. Taken together, Allianceprograms represent a large scale attempt byprivate industry and organized labor to helpworkers develop new skills and becomemore adaptable to change. With asubstantial funding commitment, jointlabor-management collaboration, and anetwork of active Local Committees, theAlliance is able to develop a number ofstrategic initiatives that range fromoccupational and skills upgrading, to basicskills development, to personal life skillsenhancement. Because of its size and rangeof programs, the Alliance offers valuablelessons from which others interested inemployee training can benefit.

Supporting this vision of planned changeis the emphasis placed on individualempowerment over one's career. TheAlliance recognizes that in a competitive,

110

changing environment, employmentsecurity is a more practical and importantobjective than job security at a particularbusiness, such as AT&T. Shifting businesspriorities, competitive cost pressures, andchanging skills requirements create anenvironment where adaptability to changeis valued highly. For some workers, thisadaptability requires a transition from oneAT&T job to another, while for otherworkers it may mean seeking employmentopportunities elsewhere. By providing alleligible workers with the information,resources, and opportunities needed toanticipate change and make plans to addressit, the Alliance believes that it can helpworkers take charge of their careers andachieve a greater degree of employmentsecurity.

Another important attribute is theemphasis placed on career planning. Partlyreflecting its focus on "planned"employment security, the Allianceencourages Local Committees to includecareer planning services along with otherprograms that may be offered, such as skillsupgrading. In addition, stand-alone careerplanning is also emphasized, and theAlliance offers remote career counselingthrough a toll-free telephone number whenit is not feasible to provide it on the locallevel. This strong focus on career planningis intended to help workers establish andimplement a realistic plan of skilldevelopment.

Most of the operational support for workeractivities comes from the Local AllianceCommittees. The dedicated and ongoingsupport that these Committees receivereflect the Alliance's strong belief thateffective programs must be tailored toindividual necds and oased on a jointparticipatory planning process. Thisbottoms-up approach not only ensuresresponsive programs, but it also creates a

foundation for ongoing and proactivehuman resources planning at the businessunit level. Thus, another common feature ofAlliance programs is that Local Committeesmust exist for all facilities or workforcesproviding Alliance sponsored services.

A final common thread of Allianceprograms is needs assessment. Consistentwith its emphasis on planned change, LocalCommittees are expected to commence theiractivities with a needs assessment of workerinterests in training and developmentprograms. This survey-based approachprovides each Committee with a wealth ofvaluable information that is used todetermine program priorities and thosefactors that are critical to successful workerparticipation.

With over three years of experienceproviding training and developmentprograms to active and laid-off workers, theAlliance has learned a great deal about howto best engage adults in a structuredlearning and development process. Whilethis experience has contributed to effectiveprogramming, the Alliance still faces a set ofevolving challengessimilar to those faced byother joint and company sponsored trainingprograms. These challenges include:

How to vitalize and maintaincollaborative human resourcesplanning at the plant or business unitlevel that takes into account bothindividual development needs andcompany priorities.

How to motivate adult workers toengage in career planning andparticipate in training anddevelopment programs.

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Case Studies

How to build program curricula thatcan accommodate varying levels ofbasic and technical skills amongworkers.

How to leverage relationships withexisting federal, state, and localresources.

This case study examines these and relatedissues by reviewing three different Alliancesponsored programs. These programsreflect a few of the strategic directionsadopted by the Alliance and include thefollowing:

Technician for TomorrowTraining Program

This is an upgrading program operatedin the Chicago area and designed toprovide trainees with the technical skillsnealsary to promote career growth inspecific (AT&T) electronics andtelecommunications fields.

English as a Second Language(ESL) Training

This program provides workers withbasic skills in English so they can moreproductively perform their jobs andqualify for other opportunities at theMerrimack Valley Works facility locatedin Lawrence, Massachusetts

Qualifying Exam PreparationPrograms

These programs are designed to helpworkers pass company and industrybased qualifying exams that areprerequisites for admission to sdectedtraining programs and occupations


The Technician forTomorrow TrainingProgram

The Technician for fomorrow TrainingProgram is designed to provide Affianceeligible employees with the skills andcompetencies needed to prepare for a clusterof electronics related jobs such as digitaltesters and technicians. Part of the impetusfor the program stemmed from theincreasingly technical nature of AT&T jobsand the continued transition from analog todigital technology. The Program is targetedon workers in the Chicago area who displayan interest in and an aptitude for these typesof jobs, and who are willing to make acommitment to the program. In offering thisprogram, the Alliance will help workerspursue new career opportunities and helpthe company meet emerging skillrequirements.

The training program is provided by ;heDeVry Institute of Technology, a local forprofit technical training school. Under atwelve month contract with the Alliance,DeVry provides training and relatedcounseling and tutorial support in a numberof related areas using an Alliance developedcurriculum designed for self-paced adultlearning. Training is offered at a sitearranged for by the Alliance and is availableto workers five days a week for up to fourhours a day, including Saturdays. Toaccommodate the trainees' work schedules,program services are delivered between 4:30and 8:30 PM during the week, and from 9:00AM to 1:00 PM on Saturdays.

The decision to adopt a self-pacedcurriculum was intended to provideinterested workers with a flexible approachthat could address variations in their skilllevels as well as competing demands for

their time. The content of the curriculum isbased on 21 separate modules orcompetency areas that range from MathFoundations Refresher, to AC and DCelectronics, to Data Communications andNetworks. Trainees progress from onemodule to the next at a self-determined paceafter they have demonstrated competency ina given area.

The cost of providing this program for atwelve-month period is approximately$226,000. Of this amount, $151,000 coversthe eirect contract with DeVry, while thebalance represents a direct Alliance cost forboth space and equipment. Most of thisrepresents long-term leasing arrangementsand investments in equipment with a usefullife well beyond the duration of the initialcontract.

To participate in this upgrading program,all workers must enroll in another Allianceprogram--Career Planning--and develop aspecific career plan. The purpose of careerplanning is to help workers makeappropriate decisions about their careergoals and understand the steps necessary toreach theses goals. To enroll in theTechnician for Tomorrow Program, anindividual's career plan must demonstratean interest in and an aptitude for this type oftraining and related employment. Ingeneral, enrollment is not restricted on thebasis of basic skills competency levelsalthough those with very low skill levels areencouraged to enroll in a remediationprogram first.

Career planning services are provided byOperation ABLE, a local not-for-profitcommunity organization that is tied to anational network. Under contract with theAlliance, Operation AdLE is responsible forproviding four related services:

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1. Assessment testing and counselingusing a combination of interestinventories, aptitude batteries,and personality tests.

2. Individual counseling sessions todiscuss career goals, barriers toachieving them, guidelines fortracking progress, and job oppor-tunities within AT&T and in thelocal labor market.

3. The development of individualCareer Action Plans (CAP).

4. Assistance with the implemen-tation of CAPs.

In the Chicago area, approximately 4,000workers are eligible for Alliance programs.The Alliance decided to start the Technicianfor Tomorrow Program as a pilot aimedinitially at only a small fraction of thatpopulation, and promoted it accordingly.About 1,000 workers had participated incareer planning and of these, 10 percent or100 had career plans that showed an interestand aptitude in this type of training. These100 were invited to apply for the program.Roughly 75 showed up for the initialorientation, of whom 65 ultimately decidedto enroll. Currently, 48 workers or 74percent of the initial enrollee group are stillparticipating in the program.

Since the prograrr's inception, the Allianceand its contractors have facsed a number ofimportant issues. One has been maintainingworker participation in the program.Despite the self-paced nature of theprogram's curriculum, the course workremains demanding and difficult for manyworkers. While most have enrolled in theprogram for economic reasons (e.g.employment security, career advancement,better wages), sustained participationrequires a long-term dedicated effort.

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Moreover, the absence of any guaranteedwage increase or promotion places anadditional strain c n continued participation.

A related issue is the fact that programcompleters do not receive course credit fromDeVry. While they do receive a Certificateof Completion that helps within AT&T, theycannot apply it towards any fortnal degreeobjectives they might have. The absence offormal course credit also limits the value of'the program to other cmployers.

The Program's instructors as well asrepresentatives from the Alliance bothrecognize this as an issue. They all believethat the effectiveness of the program couldbe enhanced if it included a strongerincentive to participate and achieve plann2dcompetency levels. At the same time, bothparties recognize the challenges associatedwith moving the program towardsaccreditation within DeVry. For one thing,providing course credit would likely makethe program less flexible and adjustable tothe ind ividual circumstances of the workers.This is especially problematic sinc 2 many ofthe individuals enrolled in training haverelatively limited basic skills. One of theprime features of the program is that itaccepts trainees with a non-technicalbackg. )und. While the program'sopen-enrollment approach has theadvantage of casting a wide net ofopportunities for workers, it also has a clearset af implications with respect to the speedby which trainees can progress and the levelof material they can reasonably be expectedto absorb. Determining how to best balancethese tradeoffs is an issue that both theAlliance and DeVry are currentlyaddressing.

Other issues that have surfaced during theprogram include the need for selectedcurriculum improvements that stress moretopical lectures, greater linkages between


instructional materials and jobrequirements, and closer tutorial assistance.

Overall, the Affiance has learned that thereis no substitute for effective marketing, aswell as company and union support.Developing and maintaining workerinterest and support requires a dedicatedlabor-management effort. The Alliance hasalso recognized the feasibility of providingskills upgrading to workers with limitedbasic skills. While there are indeedimprovements that the Alliance and DeVryplan to make, their experience to date hasbeen very encouraging and can serve as amodel for other AT&T business units whereskills upgrading is needed.

English as a SecondLanguage Training

Merrimack Valley Works is an AT&Tmanufacturing facility located in Lawrence,Massachusetts. The plant produces avariety of telecommunications and fiberoptics components, and employs roughly4,500 non-management workers. Most ofthese workers are not American born andover half (2,500 to 3,000) are employod inunskilled jobs. The remainder are groupedinto semi-skilled and skilled positions, withthe former c:roup accounting for themajority.

In 1985, the plant decided to fund anEmzlish-as-a-Second-Language (ESL)program. The program was targeted on thelarge number of non-English speakingunskilled workers and was motivated by agrowing concern over safety issues. With alarge proportion of workers who could notread, write, or speak English functionally,the plant became less confident that theseworkers could understand safety rules andrelated operational procedures. As a result,

a contract was signed with the LawrencePrivate Industry Council who in turnsubcontracted with the public schools toprovide ESL training services.

Over the next three years, the companycontinued to support the ESL program,although state funds were used increasinglyto finance it under a special Massachusettsindustrial development program. By 1987,for example, the state financed 90 percent ofthe program's operating costs. By 1989,however, the state's share dropped to 50percent and threatened to fall even fartherthe following year. While the program haddemonstrated success, these cutbacksthreatened its survival. To ensurecontinued operation and stable financialsupport, the Alliance fully tunded theprogram beginning in 1989. The PrivateIndustry Council is still the primarycontractor, although community-basedorganizations and the area's CommunityCollege are also involved as serviceproviders.

Under Alliance sponsorship, the ESLprogram today has broadened its scope af..1strengthened its relevance to workplaceconditions. It has expanded its targeting toinclude workers that are functionallyilliterate as well as literate in their ownnative languages. Related ly, the programhas also expanded its curriculum andfocused on the development of functionallybased instructional materials.

At the outset of the program, the LawrencePublic Schools relied upon a traditionalinstructional approach to teach basic skills.This strategy soon proved problematic sincethe course material had only limited links totasks workers perform on the job. As aresult, efforts were initiated, and stillcontinue, to crea te a more functionally basedESL curriculum. Currently, the curriculumteaches basic skills by focusing on such work

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13 u

related tasks and issues as the job postingprocess, policy directives, the plant'sabsentee control plan, and commondepartmental vocabulary.

The curriculum itself is divided into twobasic parts, grouped by level of Englishproficiency according to a ten point scale.One group includes workers who have verylimited basic skills in botit English and theirnative language (Levels I to IV); the othergroup includes workers with somewhathigher skill levels (Levels V to X). On anoperational basis, each of these two groupsis further subdivided by skill level to createhomogeneous learning environments. Aswith the Technicians for TomorrowProgram, the ESL program is self-paced.

Entrance into the program begins with abasic skills assessment that is used tofacilitate the sorting procqss and establishindividual goals. On the bads of test resultsand slot availability, workers are placed inthe program. Those testing at Levels I to IVare serviced by a local communityorganization while the remainder receiveinstruction from the area communitycollege. Progression from one level to thenext is based on standard programcompetency tests.

The program operates fora 40 week periodbetween September and June, and offersinstruction for four hours a week. Half ofthis time is spent on basic academic skillsand half is spent on vocational skills, such ascommunication. The workers and thecompany split the hours that are devoted totraining (i.e., half on company time and halfon the workers' time).

Participation in the ESL program is strictlyvoluntary. While consideration had beengiven to mandatory participation, the plantdecided against it for two reasons. The firstreason was projected cost. Mandatory

Case Studies

participation would require an expansion offinancial resources beyond thlt which couldbe afforded. The second reason was aconcern over the legality, accuracy, andethics of testing. For mandatoryparticipation to work, the plant wol'Ai haveto test or otherwise screen pi ospectivetrainees to determine whether programenrollment was necessary. Because ofuncertainty regarding test results and theiruse for selection purposes, includingpotential breaches of confidentiality, theplant concluded that any benefits ofmandatory participation would be offset bythe potential risks of the selection process.

Since program participation has remainedvoluntary, enrollment levels have beenmodest. Several factors contributed to this.Older workers have been much lessmotivated to participate in the programwhile transportation and day care needshave presented a problem for others.Additionally, not all workers have themotivation, interest, and ambition to pursueadditional education. According toprogram and plant representatives, manyworkers are generally satisfied with thetypes of jobs they already hold.

However, those who did participate havedemonstrated commitment to the program.Up to 75 percent of enrollees returned to takecourses at higher levels for which they havequalified. This high level of continuedparticipation reflects the long-termdedicated effort needed to make substantialgains in English proficiency.

There are many ways that the program andthe Alliance have tried to strengthensupport for the program and motivateworkers to participate. One includes afocused attempt to build support amongplant supervisors. While the programconducts its own marketing and issupported by an in-house liaison,

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supervisors are also relied upon to informworkers of available program services andto help identify those who can benefit fromparticipation. Moreover, since the weeklyhours of participation are split between theplant and the worker, the supervisors mustbe willing to forego the lost output.Although they cannot deny participationper se, the lack of supervisor support candeter workers from enrolling in theprogram.

To address this, supervisors have receivedtraining and related materials to informthem of the program and its benefits and tohelp them determine which workers arelikely candidates for participation. This hashelped a great deal, although supervisorsupport remains an ongoing issue. Largelythrough the efforts of an in-house programliaison, supervisors receive ongoingattention and support throughout the year.

Counseling and related services are alsoprovided to plant workers through anin-house Employment Resource Center.This Center is the hub of all Alhance relatedservices and provides workers withcounseling, career planning, and referral toother programs.

To date, the ESL program is viewed by boththe plant and the Alliance as a success. Itserves approximately 120 workers eachyear, has an attrition rate of roughly 25percent, and a completion rate of 75 percent.Several hundred workers have upgradedtheir basic English skills, and many havechosen to participate in the program on amulti-year basis. While the programcontinues to face challenging issues, it hasdemonstrated the feasibility of upgradingthe basic skills of workers with very limitedabilities in both their native language andEnglish.

,

Qualifying ExamPreparation Programs

Like many companies, AT&T requiresemployees to pass Qualifying Exams priorto admittance to certain traming programsand job classifications. These tests are usedto screen out employees who are believed tobe deficient in the basic skills needed tosucceed in these training programs andoccupational areas. To afford moreemployees the opportunity to further theircareers, and to help the company fillemerging occupational needs, the Alliancecurrently offers programs to help workersprepare for the qualifying exams.

A major impetus for this program was thelow pass rate among several workers. Inseveral locations where these exams weregiven without preparatory courses, only 20percent of the candidates passed. Afterhaving the opportunity to take the testpreparation programs, the pass rate hasincreased to about 75 percent. By providingthis service to workers, the Alliance hascontributed successfully to the upwardmobility of its constituent workforce.

The Qualifying Exams most utilized byAT&T are the Business Telephone Battery(B-TAB) for clerical jobs, the TechnicalTelephone Ability Battery (T-TAB) fortechnical jobs, and the Customer ContactTelephone Ability Battery (CC-TAB) for jobsdealing with the public. To help workerspass these exams, the Alliance has used onemajor vendor, Bell Atlantic EducationalServices. Currently, Local AllianceCommittees have sponsored testpreparation programs in nearly 150locations.

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The programs' curricula involve between30 and 36 hours of instruction. During thistime, enrollees receive instruction in testtaking skills and help in brushing-up onskills they have not utilized regularly.While the program has not yet reached allworkers interested in participating, it hasserved close to 2,000 workers. As

Case Studies

mentioned above, those who participatehave a pass rate of roughly 75 percentcompared to 20 percent fornon-participants. Although this is ashort-term program, it has proved to be aneffective vehicle for facilitating the mobilityof workers within AT&T.

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The Highland Park Day Care Center

Introduction

"Our role is to develop projects that are goodfor thebusiness community which would notbe undertaken by the private sector on itsown."

This is the mission of the WoonsocketIndustrial Development Corporation(WIDC), according to its Executive Director,Scott Gibbs. One of only three privatenot-for-profit development corporations inthe state of Rhode Island, WIDC put itself onthe national map in 1989 by constructing aday care center financed in part by localbusinesses.

This case study reviews how a consortiumapproach was used to finance and developa local day care center situated at the foot ofthe Highland Industrial Park inWoonsocket. The case study is based oninterviews with the WIDC ExecutiveDirector, representatives from the day carefacility, and two of the corporateparticipants in the consortium: ConsumerValue Stores (CVS) and Eastland Bank.

The center's story highlights theimportance of three crucial ingredients indeveloping a day care facility through aconsortium, including:

1. A catalyst who has the ear of thebusiness community and who will seethe project through;

2. Endorsements for the project frtop management in participa vcorporations; and

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3. The selection of providers who arerespected within the local community.

In addition, it reveals the special ability ofa not-for-profit corporation to provideaffordable day care services to a wide rangeof workers from small as well as largebusinesses. But the case also highlights thelimitations of programs developed byhigh-level strategists: in comparison to daycare centers designed with heavy employeeparticipation, the top-down model may beless sensitive to the particular needs of thearea work force.

Woonsocket is located in northern RhodeIsland, about half an hour's drive fromProvidence and an hour from Boston. Thecity's population is primarily ofFrench-Canadian descent. There is littlemigration either into or out of Woonsocketand thus the ethnic community has taken onthe feel of an extended family.

WIDC was incorporated in 1968 withnot-for-profit status under section 501 (c) (4)of the Internal Revenue Code. Over the lasttwo decades the corporation has become anintegral part of the rea's economic base,with its primary role being the develop": ?Titand management of two local industrialparks. WIDC has close ties to the GreaterWoonsocket Chamber of Commerce, has anannual operating budget of $100,000, andsupports a small professional staff. The21-member board of WIDC is compiised ofmany leaders in the business community,including CEOs from the local banking, realestate, manufacturing, hospital, retail, andpublishing industries.

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Given the traditional, geographicallystable nature of the population inWoonsocket, human resource problemswere relatively minor until the mid-1980s.This was especially true for the larger, moreattractive companies in the region. CVS, theexpanding retail giant with 1800 stores in 14states and headquartered in Woonsocket,has an outstanding reputation among localworkers. According to its PersonnelManager, during the recession of the early1980s, 100-150 workers would come off thestreets looking for jobs at CVS each week. Inher 1 3 .'ears of service she has seengenerations of Woonsocket residentsworking together at the company. It is a"unique world," where about 75 percent ofthe non-exempt (hourly) office anddistribution center staff live within fivemiles of Woonsocket.

Up until a few years ago, CVS never had aproblem recruiting or retaining staff in theircorporate offices and distribution center.The company's superb reputation maderecruitment straightforward at both thesalaried and hourly levels. Then, however,the economic boom in New England startedto have its effects on the local labor market.Employers in the fast-growing regionaleconomy had to grapple with a growinglabor shortage, in part fueled by the loss ofworkers to other local businesses who hadlured them away. Even CVS started to haverecruitment difficulties at the non-exemptlevel as it hired continuously to fuel steadygrowth.

For its part, CVS responded to the laborshortage by expanding programs whichwere consistent with its progressivepersonnel philosophy. A urion-freecorporation, CVS's human resource staffmaintains an open-door policy with itsemployees. The corporatdon has become amajor participant in the local adopt-a-schoolprogram, enhanced its educational

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assistance activities, and offers college creditevening classe.: on-site through theUniversity of Rhode Island. The corporationrecruits part-time workers from the localhigh school and taps into the area'svocational-technical school for secretarialand printing services to get special projectsdone. These programs have helped to formenduring bonds between CVS and theschools' incipient work force.

Eastland Bank, headquartered inWoonsocket, RI, has assets of approximately$1 billion and employs more than 500 peoplethrough its headquarters and 14 branchoffices. Like CVS, the bank has begun to feelthe recruitment pinch over the last severalyears. Eastland responded in a number ofways, including developing a trainingprogram for Southeast Asian immigrants incorjunction with the regional PrivateIndustry Council and the InternationalInstitute of Rhode Island. The Institute is anorganization based in Providence, RI, whoseobjective is to enable immigrants andrefugees to become self-sufficient,productive members of society. Thevocational ESL course was held in the bank,and resulted in the hiring of 7 of the 14trainees. Besides gaining 7 employees,Eastland has benefited from the training bybuilding stronger ties with the burgeoningAsian business community and labor force.

In large pail-, this program reflects thebank's willingness to participate ininnovative efforts when warranted. Forexample, Eastland employs large numbersof part-time and female workers, and is opento exploring slici possibilities as flextimeand work sharing

While both CVS and Eastland Bank havecreated dependent care programs, neitherhas done so in response to the expressedneeds of its employees. The stability of thelocal work force tends to moderate labor

shortages and the economy has slackened inrecent years -- relaxing the intense demandfor workers. Even so, both companies havemade proactive moves to develop child carebenefits in an effort to anticipate and correctfor potential problems in the future. Forexample, the Bank contracted at modest costwith Options for Working Parents, a childcare resource referral agency associatedwith the Greater Providence Chamber ofCommerce. Workers with child care needscan receive information and referral free ofcharge about licensed state-wide facilitiesthrough this service. Eastland has used itsparticipation in this program as a marketingand recruitment tool, creating child carebrochures and including information aboutthe program in its want ads. For its part,CVS offers a pre-tax dependent care flexiblespending account, and both companiesparticipated in the Highland Park Day CareCenter consortium.

An InnovativeConsortium: TheHighland Park Day CareCenter

The Highland Park day care consortium isthe brainchild of WIDC, working inconjunction with Woonsocket Head Startand Day Care (Head Start). Head Start isalio a not-for-profit entity, incorporatedunder section 501 (c) (3) of the IRS code. Likemany Head Start programs, the one :nWoonsocket is well-respected within thecommunity. It administers a number ofprograms, including preschool day care,after-school care, Head Start, ESL, ,:ndsummer youth training The agency hasbeen in operation in Woonsocket for over 15years, has an annual budget ofapproximately $800,000, and employs a paidstaff of 60 as well as a numbei of volunteers.

Case Studies

The day care center opened its doors inJanuary 1989 at a time when the greaterWoonsocket area had only two full-daychild care centers, neither of which offeredinfant or toddler care. In addition tocenter-based care, there are about 10licensed family da y care providers workingout of their homes in Woonsocket as well asa large number of unlicensed providers.The center is a colorful, fanciful buildingbuilt into the side of the hill leading up to theHighland Industrial Park. Included in thefacility are multi-level infant, toddler, andpreschool areas, a conference room,reception area, offices, a full-service kitchen,and a modern outdoor play area. The statehas set a maximum of 88 slots for the DayCare Center.

The Highland Park Center serves severalwell-defined groups of parents. The firstincludes employees of corporate sponsors.For a per-slot fee of $2,000 per year for fiveyears, businesses can reserve spaces in thecenter for their workers. The participatingemployees also pay a fee for use of illecenter, but the employer subsidy is aguarantee that the purchased spaces will beavailable for workers. For example, CVSsigned a contract to reserve 20 slots in thecenter at $2,000 per slot per year, for a totalcost of $200,000 over five years.

Businesses can expect to benefit fromparticipation in the consortium in severalways, including recruitment and retentionof valuable employees, and enhancedcommunity and public relations. Especiallyfor workers in the Industrial Park, the Centeris a convenient location for day care, andemployers' involvement reserves spots fortheir children in a center run by a respectedprovider. Also, the working parents benefitfrom day care prices that are about $20 perweek below market rate for center-basedcare, made possible by the employers'subsidy.

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If the number of employees who want touse the Center exceeds the number of slotsbought by their company, the CenterDirector creates a waiting list. As spaceopens up, workers are offered slots on afirst-come, first-served basis. Slots becomaavailable when a child is taken out of theCenter voluntarily, or when a participatingemployee leaves the company. It is up to thecorporate sponsor to decide how long thechild of a for,ner employee will be allowedto stay in the center while the parents findalternative care arrangements. For example,each month the day care Center Directorgives the CVS Personnel Director a list ofemployees with children at the center. ThePersonnel Director cross checks the listagairst the names of all workers who haveleft the Company, identifies formeremployees who are using the Center'sservices, and asks those ex-workers to makealternative day care arrangements within a"reasonable" period of time (usually withintwo months).

in addition to serving employees of thecorporate sponsors, Highland Park DayCare is designed to provide child care forlow- and moderate-income workingfamilies. Twenty-four of the 88 slots arereserved for the children of families whomeet U.S. Housing and Urban Development(HUD) income guidelines. The maximumqualifying income varies with family size.Currently, for example, a single parent withone child may earn almost $25,000 and stillmeet the guidelines. Overall 45 of thecenter's slots (or 51 percent of the total) mustbe filled with families that meet the HUDguidelines. Thus, in addition to the 24 lowto moderate income slots, at least 21 of the64 corporate slots must be filled with thechildren of HUD-qualified working parents.

Parents who wish to use the centercomplete a worksheet to determine whetherthey meet the HUD income guidelines.

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Some of those that do meet the guidelineshave incomes sufficiently low that they also(..ialify for state child care subsidies, whichthe Center requires parents to apply for. Theincome cutoffs for a state subsidy aresubstantially lower than the HUDguidelines: while a family of two can makealmost $25,000 under HUD, to qualify for astate subsidy requires an income of no moret an $15,000. The subsidy is automatic aslong as a family's income does not exceedthe maximum allowed for those receivingstate day care funds. The Center has had nopi- blem filling these 24 low- tomoderate-income slots.

In its original conception, the center was tobe used solely by Ht..-%qualified familiesand by the employees of participatingcorporations. However, of the 64 slotsmarketed to corporate sponsors, only 30have been contracted for after one year ofoperation. CVS has bought 20, EastlandBank 5, and other businesses an additional5. CVS has filled all 20 of its slo,1 and keepsa waiting list, but of the remaining 10purchased slots, there are 3 which have notbeen filled by workers from theparticipating corporations. As a stop-gapstrategy to increase use of the center, ahandful of market-rate slots have beencreated to serve the children of parents fromthe community who are unaffiliated withthe participating corporations. It is hopedthat over time more corporate participationwill allow the Center to phase out these slotsand reserve its services exclusively for itsoriginal target groups of income-eligibleparents and corporate-sponsoredemployees.

As with other day care centers, rates varydepending upon the age of the child and thenumber of days of care. Part-week care isavailable, but part-day care is not. Feesinclude breakfast, lunch, and a snack, whichprovide two-thirds of the child's daily

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nutritional requirements. Rates also varydepending on how the family qualified forthe center's services. For full-week services,the corporate-sponsored workers pay $110for infant care (6 weeks - 18 months old), $90per week for toddler care (18 months - 3years old), and $70 per week forpre-schoolers (3-5 years old). Cost varieswith age because Rhode Island, like moststates, requires a lower child/provider ratiofor younger children than for older ones.These corporate rates are about $20 pei weekbelow the market prices paid by workingparents unaffiliated with corporatesponsors.

If a family meets the HUD guidelines andqualifies for a State subsidy, the Stateguarantees the center $89 per week forfull-time infant or toddler care, and $61 perweek for pre-school care. The relevant Stateagency determines how much of this fee willbe paid by the parent and how much by theState, with the parent paying as little as $2per week A large groun of workers whoqualify for State subsidies includes womenwho are former Aid to Families withDependerk Children (AFDC) recipients.Many of ti _.se women are in trainingprograms administered by the NorthernRhode Island Private Industry Council(PIC), which is given priority for filling 10 ofthe 24 non-corporate slots. Once theycomplete training, the post-AFDC womenqualify for Rhode Island child care subsidiesfor six months, no matter their income level.Unfortunately, many of these women find itdifficult if not impossible to afford theCenter's services once this six-month periodof State subsidy expires.

The Center has developed a sliding scale ofpayments for parents who meet the HUDguidelines but do not qualify for a Statesubsidy. For a two-person family, thistranslates into an income level between$15,000 (State cutoff) and $25,000 (HUD

Case Studies

cutoff). The minimum that these parentspay is $70 per week for infant/toddler careand $61 for pre-school care. Rates increasewith income, but no one pays more than thecorporate rate.

Center Management andFinandng

The Highland Park Day Care center isowned by the WIDC, which has contractedwith Head Start to administer the Day CareCenter. In addition to teachers, Head Startemploys a full-time Center Coordinator,who is supervised by the Executive Directorof Woonsocket Head Start and Day Care.The lease between W1DC and Head Start iswritten so that Head Start collects thecorporate funds at $2,000 per slot; thesefunds are then passed through to WIDC.The Development Corporation is not in theday care business and therefore did not wantto be a partner in the operation, but only asa iandlord. If 50 corporate slots (I'd $2,000per slot) were allocated the lease wouldgenerate $100,000 in income per year forWIDC. The corporate slot fees weredesigned to provide a market return toWIDC: with prime office space inWoonsocket renting for $13 per square footand the center having approximately 7,700square feet results in revenue of $100,000.($13 x 7,700)

The construction phase of the project wasfinanced through a mix of sources. WIDCowns the Highland Industrial Park andcontributed Park buffer land valued at$200,000. The turnkey cost of the Center,including design, construction, and allfurnishings was approximately $850,000,not including the value of the land or thetime commitment of WIDC and Head Startstaff. Two public grants, each for $100,000,were also solicited and approved: a


development grant from the State, and anequipment grant from the City ofWoonsocket. Additional foundationfunding totaled $50,000. The regionalPrivate Industry Council donates $7,500annually, and in return is guaranteed that 10of the 24 income-eligible slots will bereserved for its clients.

The initial project budget is shown below.It was slightly modified during theimplementation phase, but is in essencereflective of the actual financing packagethat was developed.

I. Construction Phase (Dollars in Thousands)

Building Construction $768

ArchitecturW Engineering/Construction Management $ 55

Construction Financing Fee @ 10% $ 13

Origination Fee 1% of $600,000 $ 6Legal/Accounting $ 5Builders Risk Insurance $ 10

TOTAL CONSTRUCTION COST $857

Grants (State, City, foundations, PIC) ($257)

TOTAL COSTS TO BE FINANCED $600

II. WIDC Annual Expenses during Post-Construction Phase (Dollars in Thousands)

Mortgage $600,000, 20-year mortgage Fixed for5 yrs. @ 10% $70

Project Acounting/Bookkeeping $ 2

Structural/Maintenance Reserve $ 3Insurance $ 5

Payment-in-lieu of Local Property Taxes $ 5

TOTAL ANNUAL WIDC (LANDLORD)POST-CONSTRUCTION COSTS. $85

With 50 corporate slots sold (plus the$7,500 annual payment from the regionalPrivate Industry Council), the project isdesigned to earn a $22,500 profit for WIDC,which would be passed back to Head Start

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to improve staff salaries. Currently, with 30corporate slots sold, WIDC project revenueis $67,500, and the annual operating loss isthus $17,500

Case Studies

The operational budget for Head Start and through fees paid by parents and (forDay Care is listed below, and is financed low-income families) the State.

III. Head Start Annual Operating Expenses forHighland Park Day Care (Dollars in Thousands)

PersonnelSalariedFringe (20%)

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$ 36

SuppliesFood, excluding state subsidy for income qualifiedOther

$ 2

$ 4

UtilitiesRepair/ MaintenaceInsuranceTraining/SubstitutesPrinting/AdvPrtising/Travel

$ 8

$ 2ci 2$ 4$ 2

TOTAL ANNUAL HEAD START OPERATINGEXPENSES $251

IV. Head Start (Projected) Operating Revenuefrom Highlard Park Day Cale (Dollars in Thousands)

Infant Tuition $110 weekly x 52 weeks x 13 infants= $ 74

Toddler Tuition $ 90 weekly x 52 weeks x 17 toddlers= $ 80

Preschool $ 70 weekly x 52 x 44 preschoolers= $160

Tntal Revenue with 50 corporate slots $314

* 80% OF TOTAL REVENUE $251

The 80% revenue estimate ($251k), which result of turnover, and differentials betweenequals estimated operating expenses, State subsidized rates and the facility's dayaccounts for vacancies during start-up, slots care -..ost structure.going unfilled for short periods of time as a

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Issues in ProjectDevelopment andImplementation

In the early 1980s, Woonsocket Head Startand Day Care had considered building anew day care facility, but was hesitant giventhe then-depressed condition of the regionaleconomy When the economy improveddramatically and CVS began to feel the laborshortage pinch, a high-level manager fromthe Company contacted WIDC's ExecutiveDirector, Scott Gibbs, and inquired aboutwhat the Development Corporation wasdoing about day care. Shortly thereafter,Gibbs began meeting with Head Start todevelop a plan. W1DC was not interested inthe project unless it served the needs of low-to moderate-income families because it wasfelt that the market was not providingreasonably priced services for workers atthat level. Also, given its businessorientation, W1DC wanted to launch acorporate-sponsored day care center thusthe resulting mix of business andincome-eligible slots.

W1DC and Head Start combined to make aformidable team Together, the twoinstitutions provided for three of the fourcritical ingredients for developing asuccessful day care consortium: 1. anestablished, respected, day care provider; 2.real estate expertise; and 3. a catalyst(W1DC) which could market the program totop corporate management and was willingto dedicate substantial time to developingthe project and seeing it through tocompletion. The fourth piece of the puzzlewas local corporate support at the highestlev.1:, ,Nliich W1DC was in an ideal positionto solicit. Working with personnel directorswas viewed as a less efficient marketingstrategy since human resource plans have tobe approved by top management anyway.

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WIDC began by contacting an architect todesign a plan for the center which could beused to market the concept to business. Thedecision was made to construct atop-of-the-line, architecturally interestingbuilding. This was consistent with WIDC'soverall mission to pursue big-citydevelopment excellence within asmall-town environment. Not too longafter, CVS and Eastland agreed to purchasea number of slots fora five-year period. Thisperiod was chosen because the proposedmortgage costs were fixed for the initial fiveyears and WIDC wanted predictable incomeand expenses during this pilot period. Withall corporate contracts coming due in fiveyears Uanuary 1994), WIDC would have theoption to sell or convert the property at thattime if conditions warranted such a move.CVS respected Head Start and said that itwould withdraw from the project if for somereason Head Start was not the serviceprovider. Head Start also committed duringthe development stage to a five-year leasewith WIDC.

With solid local corporate support in hand,WIDC was able to line up State and Citygrants with little delay. Luckily, the Stateeconomy was booming in 1987 and 1988 andthe public fiscal situation was quite healthy.The State grant of $100,000 wasappropriated through a customized billdesigned specifically for the project. Theterms of the grant are that at least 51 percentof the Center's slots will be used for low- tomoderate-income families. The City's$100,000 came out of block grant funds.Since this is federal money, use of the fundsfor construction would require adherence tothe union wage scale under the Davis-BaconAct, and this would have increaseddevelopment costs substantially. Thus,block grant funds were used to purchaseequipment only.

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With commitments from CVS, EastlandBank, Head Start, the State, City, andfoundations, WIDC approached four localfinancial institutions for financing. The$650,000 mortgage was attractive to localbanks because it was supporting a projectworth over $1,000,000 (including the valueof the land). Through a competitive process,Eastland Bank was chosen to finance thefacility as a result of its attractive interest rateand willingness to fix the rate for six monthsin advance. A condition of the loan was thatWIDC have written contracts for at least 30corporate day care slots over five years at$2,000 per slot. The capacity of the Centerwas determined by the size of the availableplot of land, and through discussions withofficials from the State regulatoryapparatus. The space was originallyllepsed for 101 slots but later reduced to 88following a second review of thearchitectural plans.

During the development stage, CVS andEastland Bank conducted brief, informalsurveys of their work forces to gaugeinterest in the Day Care Center. CVSidentified 220 people who would beinterested in the Center now or in the future.CVS viewed this response as a voice voterather than a careful assessment of potential&mind. Eastland's 21-question February1987 survey was developed by WIDC andasked about family income, number ofchildren, interest in various day careservices at various prices, and problemsrelated to day care needs. Of the 187employees who returned the surveys, 33who expressed some need for serv-ces.

When it came to actually obtainingcorporate signatures on paper, WIDC foundCVS and Eastland reluctant to commit to thenumber of slots which were initiallydiscussed -- mostly because this wassomething new and actual demand wasunknown. WIDC then negotiated with each

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company and finally CVS signed on for 20slots and Eastland for 5. Five othercorporate slots were purchased by localbusiness leaders who had relationships withWIDC and were asked to support theprogram.

Support from manufacturers was notforthcoming, in part because second- andthird-shift workers would not be served bya center open only during regular businesshours. So with 30 corporate slots paid forand all of the pieces in place, the Centeropened its doors in January 1989. TheWIDC and Head Start Directors, as well asthe Center Coordinator, all contributed upto 20 hours per week for almost two yearsduring the final 18 months of developmentand construction of the project.

Assessment of theWoonsocket Day CareConsortium

In strict financial terms, the Day CareConsortium is not yet a complete success.One year following its opening, only 30corporate slots have been purchased,leading to a $17,500 annual loss for thelandlord, WIDC. Sixty-seven children areusing the Center, many are part-week, andthe operating revenue does not yet cover theoperating expenses. State regulators havelimited the number of slots in the Center. Anexpanded total capacity would allow HeadStart to maintain its 84 corporate andincome-eligible slots while drawing in moreparents from the community to help balancethe operating budget.

From the beginning, WIDC has argued thatcorporate day care cannot be looked at froma strict bottom-line standpoint. The benefitsof lower turnover and enhanced recruitmentare too difficult to measure and cannot take


the place of a company's overall perspectivetoward employee day care. From the outset,WIDC believed that a corporation is eitherprogressive and innovative or it is not, anda few thousand dollars here or there will notnecessarily make the difference as towhether a company will participate.

As an example of the lack of importance ofthe bottom line, WIDC noted that a CPAassessed the after-tax cost of the $2,000 percorporate slot to the participatingbusinesses. Given Rhode Island's tax creditfor corporate day care and the use of flexiblebenefit accounts, the accountant estimatedthe real after-tax cost of a day care slot as$1,000 a 50 percent discount. But WIDCmaintains that this information did notaffect corporate sponsorship one way or theother. Especially for medium and large-sizebusinesses like CVS and Eastland, either youbuy into the concept of corporate day care oryou do not. Younger executives especiallythose with working spouses -- were mostinterested.

The Day Care Center is a visibleaccomplishment for the community thatwould not have been spawned withoutWIDC's unique role as a not-for-profitdevelopment corporation. Whether in thefuture WIDC owns the Center or it is sold toanother corporatior or provider isimmaterial, as long as the resource ismaintained in the community and isoperated to serve the needs of localbusinesses and low- to moderate-incomefamilies. But from the standpoint of theparticipating companies, the day care centerhas offered an important benefit.

CVS has had much success with its 20 slots.The corporate headquarters are located inthe Highland Industrial Park, and thecenter's convenient location has served theneeds of its workers well. On opening dayonly 5 employees ha enrolled their children

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in Highland Park Day Care, but all 20 slotswere filled within seven months. After oneyear the Center was maintaining a growingwaiting list for CVS. The enormous localpress generated by the Center and CVS'sparticipation in it caught the eye of a numberof employees working in nearby CVS retailstores, and this has expanded the waiting listeven further.

So far the equity issue has not surfaced atCVS, and use of the Center is equallydistributed across hourly and salariedworkers. But the Personnel Manager isconcerned that workers will be unhappy iftheir children are maintained on the waitinglist for a long period of time. Participationin the Center has brought only positivepublicity and the parents using the facilityhave come back with rave reviews. WIDCis negotiating with CVS to buy an additional20 slots which would accommodate those onthe waiting list and put both WIDC andHead Start in the black. For CVS, thelong-run issue is whether or not theCompany is willing for equity reasonsto provide an ample supply of day care slotsat the Center. A related concern is whetherparticipation in Highland Park will createequity problems nationwide, as CVSemployees call for similar services in otherlocations. In other words, CVS must decidewhether Highland Park is a pilot program orthe beginning of a broad-scale corporate daycare initiative.

Eastland Bank's 5 day care slots have filledmore slowly; howevt r, 15 months after thecenter's opening 4 children had been placed.The Human Resources Officer attributes thelack of an immediate response to therelatively high cost of care. Parents weresimply astounded at the Center's rates.Some realize that the quality of care atHighland Park would be developmentallysuperior to that offered by a neighbor,friend, or relative at home, but they also pay

less for family day care. Despite efforts totalk to parents individually, to hold openhouses at the Center, and to publicize theCenter in the Bank newsletter, widespreadinterest simply was not immediatelyforthcoming.

The relatively small number of workersparticipating at Eastland may be in partattributed to the fact that the Bank is a 5-10minute drive away from the Center. Also,the mix of workers and the availability ofextended family networks may vary acrossthe two companies. Additionally,Eastland's offices are more geographicallydiffuse, while CVS has a large concentrationof workers near the Day Care Center. Insum, Eastland and some of its workingparents have benefited from the Bank'sinvolvement in the Highland Park Day CareCenter, while the level of participation hasbeen relatively modest. For CVS,participation, and possibly the overallbenefits to the organization, have beengreater.

Case Studies

Highland Park has increased theavailability of top-quality day care inWoonsocket, esp2cially for low- tomedium-income families. CVS employeesfind it conveniently located and at a cost thatis below the market rate for comparablecenter-based services in the area. However,the sticking point from the employees'perspective has been cost. Althoughreasonable, given its quality, area residentsare not accustomed to spending $70-110 perchild per week for day care. Clearly, not allof the working parents at either CVS orEastland view Highland Park as a viable daycare alternative for them, preferring insteadthe use of lower-cost relatives or neighbors.In this light, the consortium can be seen as apilot program, one which established theidea of corporate-sponsored day care inWoonsocket. To reach out and fully meetthe needs of its working parents, theparticipating corporations must come toview the Center not as an end to theirinvolvement in the day care business, butrather as a beginning.

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Case Studies

Dependent Care Benefits at Lancaster Labs Inc.

Introduction

"I believe our company represents the verybest of American business, because we haveshown that family values are quitecompatible with good business practice."

This is the vision of Dr. Earl Hess, founderand President of Lancaster Labs Inc. (LLD inLancaster County, Pennsylvania. LLI is oneof the nation's fastest growing and mostrespected independent testing companies,providing analytical services to a widevariety of industries. During the last half ofthe 1980s the company's annual growth rateaveraged 35 percent. By the end of the fiscalyear 1989 LLI, a company started as a familybusiness in 1961, had expanded to over $16million in sales and employment of 341people.

LLI's personnel requirements range fromrelatively unskilled laboratory assistants toPh.D. chemists, with approximatelyone-to-one ratio of those with degrees tothose without degrees. Turnover averagesabout 15 percent per year and isconcentrated among the less-skilled labtechnicians who earn approximately $6 perhour, and among less-tenured workers ingeneral. As a small high-growth companycompeting in markets with publicly heldgiants (such as those owned by Coming),part of 1.1I's comparative advantage isbased on its ability to attract and letainemployees. It offers extensive training,advancement, and entrepreneurialopportunities early in a worker's career, aswell as a range of benefit programs andpolicies. Growth opportunities are

reflected, for example, in an entry-levelmanagement training program and througha dual-career track that providesadvancement along both managerial andtechnical job ladders.

A primary human resource goal for thecompany has been to provide a set ofcultural amenities and professionalopportunities that will retain and challengethe experienced employee. This goal hasbeen directed particularly toward womenemployees since they account forsignificantly more than half of LLI'sworkforce and have significantrepresentation as technici-ns, chemists, andmanagers (as well a in the moretraditionally female occupations). Inrecognition of the opportunities foradvancement and the company's sensitivityto women as well as family responsibilities,Working Mother magazine (Octoter 1989)chose LLI as one of the 60 best companies forworking mothers in the United States.

LLI's constantly evolving personnelpolicies now include drug testing, overtimepay for salaried employees in specialcircumstances, educational and counselingassistance, and the funding of anon-management employee advisorycommittee. Flexible spending accountshave also been established for both medicaland dependent care expenses, with theresulting company savings in payroll taxespassed on to employees through increasedfinancing of medical insurance.

IAA has also used summer programs forcollege students as a recruiting device, andnow trains entr) level lab technicians at the

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local vocational technical school. LLIchemists serve as instructors and use acompany-developed curriculum. Thosewho successfully complete the courses areguaranteed a job. In order to retain andpromote company-trained lab assistants,LLI is working with the community collegeto institute an associate's degree program inchemistry.

LLI's national recognition as a humanresource innovator is tied closely to itsestablishment of an on-site child care centerin 1986. In that year, the staff was 62 percentfemale and had an average age of 32 years.There was an intuitive feeling among thecompany leadership that something shouldbe done in the dependent care area toaddress the needs of its workforce, and toensure longer-term retention and skilldevelopment. Constantly changingtechnology in the laboratory industry makesit particularly difficult for women to re-enterthe workforce after a long absence duringtheir childbearing years. An on-sitedependent care program would helpaddress this by offering a convenientalternative to lengthy disruptions in one'stenure with the firm. However, at that timeno company in Lancaster County had anon-site day care center. Upon the suggestionof his Vice-President for Human Resources,President Hess decided to move forwardwith the center.

This case study reviews the structure of thedependent care program at Lancaster Labsand then discusses key development andimplementation issues. The center is ownedby LLI and leased to a professional day careprovider. In return for lower rent andmaintenance subsidies from LLI, theprovider offers services to the company'sworking parents at day care rates that areapproximately 20 percent below marketprices. As the leasee, the provider has alsofreed the company of any significant liability

exposure or day-to-day operationalresponsibilities. In addition thehigh-quality, center-based care has givenLLI a significant boost in recruitment,retention of valued employees, and positiveindustry, community, and even nationalpublicity. It has also demonstrated that it isfeasible for a small business to addressdependent care needs through what isusually perceived as a risky and expensivesolution often reserved for larger firms.

Dependent Care Benefitsat Lancaster Labs

The establishment of the day care center atLLI was driven by a commitment to familyvalues, with the central business purposebeing the recruitment and retention ofworking women in their childbearing years.The on-site day care center at LLI is adjacentto the work site, accommodates 112 full-timeday care slots within its main building, andhas a separate outdoor pavilion and playareas. Since the Lab is currently housed in asingle large structure, the day care center isa visibly important development on thework site, independent but just next to theLab itself.

In public, non-profit day care centers, it isillegal to deny access to anyone. Thus, oneadvantage of a private, for-profit center isthat slots can be reserved explicitly forcompany employees. t LLI, pregnantemployees who anticipate a demand for thecenter notify the company liaison, who thencontacts the center director. Although thecenter is open to the public, placing LLIemployees is its first priority. So far, therehas been room for all who want a spacewithin two weeks. It has been possible tofind slots for the company's children rapidlybecause after a year and a half the center isfilled to only two-thirds of its full-day,

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full-week capacity. In part, the extra spacewas planned for, as LLI wanted the center tobe able to accommodate its future growth.The long-term goal of LLI is to have thecenter completely filled with the children ofits own personnel.

The operator of the day care center is MagicYears Childcare and Learning Centers, Inc.,one of the nation's first companiesspecializing in employer-provided day care.Magic Years leases the space from LLI,which owns the building. The centerdirector has some control over operationsbut the basic policies and curriculum are setcentrally by Magic Years. Hours are from6:30 a.m. to 6:00 p.m. Monday throughFriday. The center provides breakfast,lunch, and a snack. Summer day camps areavailable for school-age children, withpick-up and return at the work site. TheMagic Year's on-site director is prepared tooffer after-school programs during the.academic year but so far -- given therelatively young average age of thecompany's workforce-- there has been littledemand for this service.

Children are required to attend at least twofull days or three half days per week and halfday attendance is only allowed for preschoolchildren, not for infants and toddlers. Theregular full-day tuition rates are based upona 10 hour day, with additional charges of $5for all or part of the eleventh hour, and $10for additional time after that. Parents arestrongly encouraged to pick their childrenup by the 6:00 p.m. closing time and aresubject to a $2.00 per minute charge foradditional care past 6:00 p.m.

Out of the 90 children currently using thecenter, about 50 are the sons and daughtersof LLI employees. The company has notkept track of the fraction of parents who usethe center, nor has it attempted to assessformally the impact of the center on

Case Studies

recruitment, turnover, and retention.However, there are some indications thatthe child care center is viewed by employeesas a key benefit.

Within three months of announcing theplans for the center in 1986, 12 employeeswere pregnant. Of the approximately 30-40mothers who have given birth since thecenter opened, virtually all have returned towork at LLI. It is the sense of the humanresource staff that most of the parents whoare not using the center have access torelatives who provide in-home child care.

By leasing to a professional serviceprovider which provides a full-time, on-sitedirector, LLI has avoided any significantmanagerial and administrative duties.Magic Years takes full responsibility forcomplying with the detailed child careregulations set by the PennsylvaniaDepartments of Education and Welfare.Center employees report to the director, notto LLI, but the company must give approvalto any substantive change in centeroperations. All collection of fees is handledby Magic Years, which contracts directlywith the employees. Apart from negotiatingthe annual lease with Magic Years, the onlyadministrative expense for LLI isapproximately two hours per month of thetime of the company's human resourcecoordinator. Most of this time is spentplanning "fun activities" such as having thechildren trick or treat through the companyoffices.

The liability of LLI is limited by requiringMagic Years to carry at least $1 million ofinsurance for injury to one person or for oneoccurrence. Magic Years is contracted toindemnify and hold harmless LLI from "anyand all claims, demands, suits, or expensesincluding reasonable attorneys' fees, thatrelate to or in any manner arise out of theservices to be performed under this

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contract " According to the Labs lawyers,the only liability that it has is against thekind of accident that could occur anywhereon its property, such as a visitor slipping andfalling on the sidewalk. Presumably, MagicYears, which operates a number of day carecenters, purchases liability insurance underan umbrella policy at considerable per slotsavings which is then passed on to theparents using the center.

The ongoing expenses to the company foroperating the center are minimal. Accordingto the Vice-President and Director ofHuman Resources, the total cost ofdevelopment and construction of the centerwas $300,000; the lease with Magic Yearsprovides a return on that investment whichis "good" but below the market rate by 1-2percent. Another initial cost was theadministrative time dedicated to thedevelopment of the center, estimated atapproximately 100 hours. Further subsidycomes from water, sewer, building,grounds, and maintenance expenses, paidfor by LLI and estimated at $5 to $6 thousandper year, as well as ongoing administrativetime of approximately 2-4 hours per month.

LLI guarantees that the equivalent of 20full-time day care slots will be used by itsemployees and will pay for the cost of theseslots if they are not filled. However, inpractice LLI has not had to pay these slotcosts, since the center has been in heavydemand by its employees. By the end of1989, about 50 of the center's 90 childrenwere company employees and the facilitywas operating at about two-thirds of itsfull-day, full-week capacity.

In total, the ongoing subsidy of theprogram by LLI is limited to providing alease with Magic Years that is 1-2 percentbelow market rate and through ongoingmaintenance, sewer, and water expenses.This subsidy is passed on to company

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employees through day care rates that areapproximately 20 percent below those forcommunity parents using the center. Sincemarket rates in the county are low bynational standards to begin with, this meansthat LLI can offer premium center-basedservices at extremely attractive rates to itsemployees.

LLI employees working at least 20 hoursper week may finance up to $5,000 of theirday care expenditures with pre-tax dollarsthrough deductions into acompany-administered flexible spendingaccount. This reduces the federal income taxburden to the employee as well as the FICA(social security payroll tax) burden for boththe employee and the employer. Since LLIadministers the flexible accounts,turnaround ti-le for reimbursements isminimal. At 1990 rates, the expenses of oneinfant in full-time day care for 50 weeks($3,900) are fully payable using pre-taxdollars, whereas the expenses of one infantand one toddler ($6,450) are 78 percentpayable in pre-tax dollars. While the costsof care are determined by the number ofdays which children attend, parents mustindicate dates of attendance for t week nolater than the previous Friday. Thus,planned absences are not paid for, butunexpected illnesses are paid for. If theparents plan five consecutive days ofvacation for their child they must pay for oneday of service for each five days of absence.

The rates which Magic Years chargesparents are negotiated with LLI every yearand are approximately 20 percent lower forLLI employees than for members of thecommunity at large. These discounts areoffered by Magic Years in return for thebelow-market lease and maintenanceservices provided by LLI. There is anadditional 25 percent discount for thesecond and subsequent child from eachfamily enrolled in the center, with the higher

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rate applying to the most expensive form ofcare. In other words, a parent with an infantand a toddler would pay for the moreexpensive infant care at the regular LLI rateand receive the toddler care at a rate whichis about 35 percent below that for an LLI

employee with a single toddler enrolled inthe center. The state of Pennsylvania setsmaximum caregiver to child ratios as 1:4 forinfants, 1:5 for toddlers, and 1:10 forpreschool and kindergarten students. Feesare set accordingly, with the highest fees forinfants. The community rates are set to becompetitive with other area providers andvary according to the number of daysenrolled. For example, full-time infant careis $94 per week for the community Ind $78

per week for LLI employees, whereas thethree-day rate for toddlers is $60 per weekfor the community and $53 per week for LLI

employees. As an added bonus, diapers areprovided without additional charge for theLLI children.

Development,Implementation, andExpansion

The sophisticated stand-alone child carecenter now in place at LLI represents theoutcome of an evolving process ofexperimentation and expansion. Theoriginal center was a 29-child facility whichmade use of modified space in the Labbuilding. Following a building expansion inthe winter of 1985-86, top managementlooked at the floor plans and realized therewas room to install a child care facility. Thetentative decision in the winter of 1986 to

open the original center was made withvirtually no hard data on anticipateddemand or expected benefits. Topmanagement had been playing with the ideafor awhile and the building expansionprovided the necessary space. LLI

Case Studies

contracted with a local couple who wereearly childhood development specialists toimplement the on-site day care program.

This original provider was paid anup-front management fee of "around$2,000", according to the company'sHumanResource Coordinator, in order to conductand analyze an employee needs assessment,to provide for licensing, inspection, andcode certification of the space, and to giveLLI a list of needed equipment such as cribs

and toys. The space required somerefurbishing, such as new carpeting andpaint. LLI estimates the development costof the 29-slot center as less than $5,000,including the time of the Coordinator,licensing costs, purchased equipment, and

remodeling.

The needs assessment was administeredafter the tentative decision had been madeto establish the center in order to plan theimplementation process. Questions wereasked about workers' jobs, children, familyplans, problems related to child care, andimpact of child care arrangements onabsenteeism and future work plans. In total,

131 employees were given the survey inJanuary 1986 with the service providersachieving a 79 percent response rate.Twenty-ore children were identified whoseparents would prefer or would consideron-site care (7q percent of thechildren underage 12). Among parents, cost was less of aconcern than scheduling and convenience.Parents estimated that, on average, duringthe past six months they had missed 1.5 fullwork days and 4 partial work days due tochild care. One-fourth of the respondentswere planning on having children within thenext five years.

Many workers, including those withoutdependent children, expressed a willingnessto donate furniture or toys and to helprenovate the dav care space. Volunteers

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worked on the center part-time for about aweek, with about 6-10 perscns participating.In-house maintenance stafi did most of therenovations under the advisement of theoutside providers.

The Human Resource Coordinator wasmeeting regularly at this time with othermembers of the employee benefitscommittee of the local Chamber ofCommerce. Other committee membersthought that the center was likely to be amistake -- in any case, nobody wanted to bethe first in the community to provide on-sitecare. At first, the concerns of area employersseemed warranted. LLI had guaranteedpayment on 12 of the centers 29 slots and onthe day the center opened, in August 1986,there were only 3 children signed up. Oneof these was the child of the Vice-Presidentand Director of Human Resources who'spersonal involvement in the Center helpedto promote the program. Besides word ofmouth, employees were made aware of theprogram through the company newsletterand paycheck flyers.

Over the next six months, demand for thecenter's services grew steadily and otherarea employers became more enthusiasticand interested in thy experiment. Sin thecenter had no regular director, the HumanResource Coordinator was spending 8 to 10hours per month helping to manage thechild care program: some of this time thecoordinator believed, resulted from the lackof business background of the initial vendor.The problem was not that the care wasinadequate, in fact it was received favorablyby the participating parents. But LLIbelieved that the vendor's lack of businessexperience was showing up in a poorbudgeting process, lack of concreteinformation on costs and revenues, and thesignificant amount of LLI staff time that wasrequired to help manage the center.

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At a seminar on child care during thespring of 1987, the Human ResourceCoordinator met a local Magic Yearsdirector and was attracted to the company'sapproach to providing day care services tobusiness. Magic Years was asked to give apresentation at the Labs which promptedLLI to change providers. The initial vendormade the decision to terminate therelationship with LLI promptly and withlittle advance notice, Magic YPars was ableto take over the management of the 29-slotoperation. The new vendor saw thepotential for expansion at LLI and waswilling to devote a director to the center at alittle less than one-half time.

The decision to develop the new 112-slotfacility was made based on both the needsassessment's projection of the future familyplans of employees and as a consequence ofthe rapid growth of the company. Since theoriginal space being used for the center wasneeded for Lab expansion, LLI worked withMagic Years to develop a new facility.Magic Years was able to provide plans forcenters of various sizes which met stateregulations and provided advicethroughout the planning and buildingprocess The local zoning ouard gave aspec al exemption to allow the center to bebuilt on land that was zoned residential.

The new 6,500 square foot facility openedin the summer of 1988. The state ofPennsylvania requires that all child carecenters with more than 50 slots be staffed bya full-time director. The presence of thisdirector, provided by Magic Years, virtuallyeliminated the need fc day-to-daymanagement or oversight of the center byLLI personnel. The yearly negotiation of thecontract has been focused upon the rates too paid by community members and LLI

personnel for day care services. Other thanthat, the Lenter seems to be running itself.

Assessment of the ChildCare Experiment atLancaster Labs

.11=1111

Dr. Earl Hess and Lancaster Lab havedemonstrated that it is possible for a smallbusiness to develop an on-site day carecenter which has minimal company subsidyand no explicit government subsidy, b,itwhich costs on average only about $1 perhour for employees to use, payable inpre-tax dollars. Working parents praise thecentet'r convenient on-site location as wellas the quality and affordability of the care.The company provided the initial financingand is receiving a fair return on itsinvestment. It incu. = ongoing expenses of afew thousand dollars per year, mostly formaintenance, water, and sewer charges.

The benefits to the company have gonewell beyond the original, narrow goal ofretaining working mothers at the Labs.Many working fathers utilize the center andfind it to be a valuable employee benefit. Asa public relations and recruitment tool, thechild care center has been an enormousboon. Lancaster Labs now has a nationalreputation in its field as an innovative,caring employer. The human resource staffreports that applicants ranging in age fromtheir teens to their fifties have cited thecenter as a symbol of the company'scommitment to the well-being of itsworkforce.

As the company grow s and its work forceages, LLI may be faced with a new set of daycare challenges. It is envisioned that overtime more of the center's slots will be filledby Lab employees. Since these workingparents pay less for day care than those inthe community at large, the per-slot revenueof the center will drop. It is possible that thevendor will have difficulty providing

Case Studies

discount services to Lab employees whencommunity parents are no longer using thecenter old paying full price. On the otherhand, as the center's toddler and preschoolrooms fill to capacity the per child cost ofcare is reduced and some of these savingscould be passed on to LLI employees.

Another challenge in the future will beproviding affordable care as the average sizeof LLI families grows. Many parents arenow planning for their second child, and forthem day care costs will increase. At currentdaycare center prices, lower-paid workersmay find it uneconomical to continueworking at the Labs. The human resourcestaff is aware of the problem and isconsidering whether or not further subsidyfor two-child families is advisable.

A clear lesson from LLI is that selecting theright provider is crucial. A good providershould not only be experienced in deliveringquality day care, but also must know localregulatory requirements and be able toprovide professional services to business.With a professional prolrider, a day carecenter can virtually manage itself.

A second lesson is that there are spillover...enefits of being an innovator. Part of thesuccess of the child care center at LL1 is that

it was the first in Lancaster County. Onlyone company can be first and being first hashelped establish the Labs' exceptionallypositive human resource managementreputation in the local community, in itsindustry, and even in the national press.

Dr. Hess serves on the Board of Directorsof the U.S. Chamber of Commerce and inthis leadership position he has spread theword to other employers that doing what isright is also good business. He admits thatthe message is not easy for many of hiscolleagues to hear and that come localbusiness leaders have even chided him for


raising worker expectations of what being agood employer means. But Hess is pressingon with his innovative plans. His newdreams are on-site elder care and fitnesscenters, tentatively planned to open in 1991and 1992, respectively. The basic idea withthe elder care center is that the children andparents of employees would spend at leastpart of the day with each other and that theelders' center would be adjacent to, or partof, the child care center.

The elder care center will not be builtunless Lab management perceive it to be

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good for the health and viability of thebusiness. Like the child care center "... thiswon't be a giveaway, either" says theHuman Resources Vice President. She plansto work with local employers and senioragencies to assess the extent of potentialcommunity demand for the center'sservices. Some local employers are no doubtskeptical about the viability of on-site eldercare. Then again, while some of those sameemployers raised an eyebrow when EarlHess opened up his child care center, a feware now opening similar centers of theirown.

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Basic Skills Training at Motorola Inc.

Introduction

Even within the Fortune 500 companies,basic skills training is a relatively new gameand the players have had to learn muchalong the way. Motorola Inc., the electronicsgiant with over $9.6 billion in annual salesand over 100,000 employees is a case inpoint.1 The company's entry into the basicskills business was "through the back door"according to Susan Hooker of MotorolaUniversity (the corporation's education andtraining center), developing out of a broadercommitment to product quality.

While Motorola's emphasis oninvestments in quality and basic skillstraining are fueled by corporate-widephilosophy and policies, management has astrong belief in the benefits ofdecentralization. Each sector, division, andgroup at Motorola has a great deal ofautonomy; as a result, specific traininginitiatives vary significantly across thecorporate lines of business. Basic skillstraining at Motorola has thus developedthrough the interaction of plant-levelexperiments, policies in each division, andcorporate initiatives.

This case study begins with the corporatetraining policy at Motorola and thenproceeds to discuss the basic skills programsthat were developed within a particularsector (Communications Sector) of Motorolaand a plant operating in a division withinthat sector (the Fixed Products Divisionplant in Schaumburg, Illinois). TheMotorola experience highlights the benefitsof developing basic skills programs from the

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bottom up, not from the top down. Theinitial efforts were established in a singlefactory and have since expanded withcorporate support and encouragement intomany of the other factories and lines of

business at Motorola.

The Motorola experience alsodemonstrates that even large corporationshave had to essentially start from scratch in

developing basic skills programs.Community colleges and public schoolsystems are just now beginning to tailoradult education curricula for on-site,company-funded training, and thecorporations themselves have little in-houseexpertise in this area. Fortunately,companies like Motorola have paved theway for others and the United States isslowly developing a set of institutions thatsupport workplace basic skills. Even so, theMotorola case reveals that basic skillsprograms are more complicated to developthan one might think, and require carefulplanning, development, andimplementation.

Corporate-wide Policies atMotorola

Two new initiatives at the corporate levelsupport and reinforce the basic skills effortsin each Motorola sector, division, and plant.The first is a peer review process, wherebytraining managers will visit each other'sbasic skills programs and share information.This internal evaluation approach, usedearlier in assessing quality improvementprograms, was a key reason why Motorola


received the first Malcolm BaldridgeNational Quality Award for manufacturingin 1988. As the primary stakeholders in thedelivery system learn from each other, it ishoped that these visits will lead to theadoption of "best-in-class" basic skillstraining programs on a case-by-case basis.Second, beginning in 1990 corporate policywill require a minimum of 5 days ofjob-related training per year for eachMotorola employee. To support thisrelatively strong commitment to employeedevelopment, since 1984 policy requires thatat least 1.5 percent of payroll is devoted totraining.

The basic skills objectives being established:it Motorola are also reflected in thecompany's use of a Basic Abilities TestingBattery, or BATB. Beginning in 1990, allapplicants for direct labor positions aregiven this validated, job-related test, whichfocuses on screening prospective workersfor minimum job-related competencies inreading, math (decimals, fractions, andpercentiles, which are prerequisites forstatistical process control), visual acuity,forms completion, and simulated worksituations. Some sites also administersituational structured interviews and aone-hour assessment center to selectedapplicants.

Asa result of this testing program, virtuallyall new hires at Motorola :re proficient inbasic skills. Recruiters are workingaggressively to seek out applicants withsolid academic backgrounds with the goalbeing to have all new hires score at job-levelcompetencies on the BATB test, subject tothe broad parameters of the company'saffirmative action plan. It is therefore thelonger-service workers within thecorporation, not its future recruits, thatpresent the basic skills challenge.

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The Motorola training and educationstrategic plan for 1990-94 has as one of itsgoals that by 1995 basic skills for the entirecompar- workforce will be at a level whereall can be trained and retrained throughouttheir working lives. So far, 40 differentdelivery systems have been established orprojected for basic skills programs. It isestimated that by 1995 the company willhave spent $35 million on basic literacy.Following extensive experimentation withvoluntary participation on 50 percentcompany time, many of the company'sdivisions are now moving towardmandated basic skills training on 100percent company time.

How Motorola Got Intothe 1,Sasic Skills Business

Basic skills programs at Motoroladeveloped out of business necessity, from aneed for improved product quality. Likemany U.S. companies, Motorola's historicadvantage has been in design engineering,not low-cost, error-free manufacturing. Butin competing with the Japanese, who areexperts at producing in volume at highquality, the corporation has been forced toincrease its quality initiatives. Nowhere hasthis been more true than in the developmentof the cellular subscriber division wherebasic skills training got its start at Motorola.

The corporation, in collaboration withAT&T, created the original cellular phonetechnology and by 1981 had invested $100million in this development effort. In 1984Motorola began manufacturing phones, butbecause the Federal CommunicationsCommission was swamped with thousandsof licensing applicatiors and the granting ofthe first licenses was delayed for 18 months.That, in turn, brought sales almost to a halt.During that 18-month window the Japanese

developed a product that, while it had fewerfeatures than Motorola's, was virtuallydefect-free.

Motorola's competitive position wasworsened by Ja pan ese dumping and by high

costs of production within its own facility inIllinois. By the end of 1985 the decision wasmade to move all production to the far east.

The general manager in Illinois arguedstrenuously against the move. Hisproposalfor a one and one-half year trial period wasaccepted, during which time he wouldattempt to increase productivity and qualitysufficiently in order to forego the closing of

the U.S. facility. The approach of the cellulardivision was to implement on a broad scaletechnical system changes and social systemchanges that had been tried, to a greater orlesser degree, within other Motorolafacilities.

The technical changes began with aredesign of the cellular phone, emphasizinga reduction in the number of parts. Theplant also moved to just-in-time inventoryand full implementation of statisticalprocess control procedures. Measurementsystems were upgraded and the largenumber of job grades were reduced to asingle job grade. In addition, the factory wasredesigned to encourage teamwork;inspectors were eliminated as each workertook responsibility for self-inspection, andthe problem of over-engineering, commonto U.S. manufacturing, was also addressed.The social system changes were: productdesign which included manufacturingpersonnel (to ensure "manufacturabllity"), amove toward flexible jobs and workers,early involvement of suppliers in thedevelopment process, and a commitment to

error-free quality as opposed to simple

productivity

Managers within the cellular division andon the human resource staff believed that a

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key to the success of these changes wasupgrading the skills of the houtlyworkforce. However, in no way was this a

scientific assessment based on quantitativedata. Rather, it was simply clear to thoseinvolved that the new emphasis ontechnology, team communication, andcross-training (where all members of a team

learn all of the relevant jobs) would require

a more educated, flexible worker.

To provide motivation for workers todevelop their skills, a skill certificationsystem was established. Within the singlejob grade, wages were established basedupon certification points plus merit pay.Certification points were earned by

performing a job for 40 hours defect-free.Much of the skill training was deliveredon-the-job, but it became increasinglyevident that at least some of the workers didnot have the basic skills needed to completejob-related skill training.

Th e basic skills program within the cellular

pla" a was developed in a virtual vacuum ofinformation about worker competenciesand needs. It was management's sense thatthe initial need was for mathematics.However, like many companies, Motorola

had foregone workplace testing in the 1970s

and early 1980s following a discriminationlawsuit. Therefore, there was no clear sense

of what worker competencies in fact were.

To select the first employees for the start up

of a new manufacturing line, the CellularDivision attempted to assess the skill levelsof current workers to be sure they couldlearn basic statistical process controltechniques. Initially, of 180 assessed, only 15

were able to demonstrate the desired skilllevel. Forty others volunteered to attend an

on-site mathematics class which wasestablished through a local communitycollege. That program was run fifty percent

on company time, six hours per week for

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four weeks. But even after completing thecourse, only about 40 percent of the traineeswere able to demonstrate the required skilllevel for learning SPC techniques. Clearlysomething was very wrong.

Nearby Harper Community College in13,.:atine, Illinois, was called in to developfurther the cellular basic skillsprogram. Theexperts at Harper realized quickly thatworker difficulty with the word problemsused in the asse3sment process were in largepart due to low levels of readingcompetency. Harper began offering Englishas a Second Language (ESL), reading, andmath courses at the plant.

The systematic changes put in place in thecellular division were a tremendous success.The factory remained in Illinois. Cycle time(the time it takes to convert piece parts intofinished product) was decreased by a factorof 40 and the productivity of the line withupgraded personnel was five times what theoriginal industrial engineering estimatespredicted based on technical changes in theline alone. As a result of the successes incellular, other Motorola business unitsbecame interested in the innovations put inplace there.

The success in the cellular division wasseen in product quality and the bottom line;however, there was no effort to evaluate thespecific role played by the basic skillsprogram. Nonetheless, as the story of thesuccess was told to other managers, muchemphasis was put on the criticalcontribution played by basic skillsdevelopment. In consequence, by the end of1989 every one of Motorola's U.S. factorieshad developed a basic skills upgradeprogram, mostly in c onsort with communitycolleges. Given the belief indecentralization, there has been nocorporate effort to develop a modelprogramand differences remain as to whether the

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training is voluntary or mandatory, andwhether it is on 50 percent or 100 percentcompany time

Basic Skills TrainingMotomla Conununications Sect44

Fixed Products Division Plant InShaumbtug, Illinois

With this overview of basic skills trainingat Motorola, we now discuss the programthat was implemented within a specificplant: the Fixed Products Division plant inSchaumburg, Illinois. The purpose of thebasic skills program within this plant inSchaumburg is to lift all line workers up toa level of basic skills competency which willallow them to meet the job requirements.The plant's work force includes manyimmigrants who do not speak English andmany of the longer-service workers who arenot high school graduates. The programemphasizes English, math, and readingcompetencies which are geared to thejob-related standards. Since virtually allnew hires at Motorola will have met thesestandards, the emphasis of the basic skill'sinitiative in the plant is on the incumbentworker population.

Like the cellular division, the plantmanager and training specialist inSchaumburg chose Harper CommunityCollege as its local service provider. Harperis down the street from the Schaumburgfacility and is a national leader in adult basiceducation.2 The college was chosen basedon its reputation ane the positive experiencereported by other Motorola plants.

At the College, the Chair of AdultEducational Development notes that theHarper program used in Shaumburg is moreflexible than most. Harper is able to offer

courses on a variable credit basis, with 15classroom hours per credit. Each coursecycle can therefore be as short as twice aweek, fifty minutes per class, for eightweeks. Short cycles allow for the flexiblereallocation of instructors and students asneeded. On a per-student cost basis, classesare only economical if they include at least15 persons at approximately $1.50 perstudent per instructional hour. Harper iswilling to offer smaller classes to Motorola,but only if the company agrees to pay theminimum 15-student cost.

Harper uses the classroom model ofinstruction mostly because it is economical-- the College must serve a district thatincludes some 6,000 businesses and,therefore, one-on-one instruction is simplynot feasible. As with most providers,Harper is still learning what it means toprovide job-related training based onjob-related reading, math, and writing tasks.Mostly, the College uses its standard adultbasic education curriculum, but has beensensitive to where that fits in withMotorola's training goals. For example, theMotorola Statistical Process Control trainingcourse requires the competenciesestablished in Harper's first two mathcourses, so these are the courses offered.Once these basic competencies aredeveloped, workers are ready to take theMotorola basic skills test and move intomore advanced, company-providedtraining.

The logistical requirements of offeringon-site training programs at Motorola weresuch that a dedicated staff member wasnecessary just to serve this one company'straining demand. The College has been verysupportive of the liaison concept developedby Motorola, whereby a staff member is paid

Case Studies

for by the company to create and administereducational programs on-site. This bridgeperson is in the best position to developjob-related (functional context) curricula.The goal at the Schaumburg plant is thecreation of a complete literacy task analysiscombined with a job task analysis in order todevelop a customized basic skills programfor the plant's workforce.

Reflective of the emphasis placed uponskill development by one of the managers, afull-time trainer was hired to coordinatefactory skill upgrades. With the support ofa grant from the state of Illinois, the trainerimplemented a number of programs toimprove off-line skill upgrading. A grantfrom the local Private Industry Council(PIC) was also critical in establishing thebasic skills program. "It is highly unlikelythat the Manufacturing Manager wouldhave paid for the initial experiment in basicskills out of her own budget," notes theTraining Manager. "But once seeing thebenefits, she has now taken over the fundingof the program."

One of the trainer's first tasks was toconvince workers to sign up for basic skillstraining on a voluntary basis. She spentthree weeks going from one worker to thenext within the plant, talking to them aboutthe program. On average, workers enrollingin training have spent 160 hours in basicskills so far, with 50 percent of the trainingtime paid for by Motorola. The estimatedcost to the company in 1989 for basic skillstraining in the Schaumburg plant was $375per person, excluding student salaries. With400 peopie projected to be enrolled intraining on company time, the trainerestimated the budgeted 1990 cost of basicskills in this operation to be $600,000.

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Development andRefinement of the BasicSkills Program hiSchaumburg

The Schaumburg plant is part of theCommunications Sector at Motorola, a largebusiness accounting for over $3 billion insales and over 50 percem of total companyoperating profits in 1988.3 Following up onits positive experience with basic skills inSchaumburg and other locations, in thesecond quarter of 1987 the entireCommunications Sector implemented asystematic program of voluntary basic skillsassessment and training called "NewDirections." The program was launchedwith a general article describing the changescoming in manufacturing. The next part ofthe communication to employees was an18-minute videotape introducing theChairman of the Board (and son of thefounder) at Motorola, Bob Galvin. Thevideo included examples of the actualchanges that were taking place throughouttheSector, followed by a presentation by theManufacturing Manager (who discussed thespecific changes for their own organization).The goal was to get basic skills programs upand running in all plants and to increaserecruitment into existing courses like thosein Schaumburg.

In his message, Galvin had severalobjectives. The first was to stress the needthat all workers have for lifelong learning.A favorite Motorola metaphor comparesworkplace training to going up a downescalator. Galvin stressed to his workersthat skill requirements are going up whilethe adequacy of existing skills is declining.Walking up the escalator through lifelongtraining is needed just to keep from fallingback down again. Galvin's second goal was

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to reassure long-time employees that theywere still valued members of the team andthere were no plans to let them go. Thismessage was especially critical at Motorola,where all employees join the "service club"after 10 years.

The service club at Motorola has been a defacto guarantee of lifetime employment --before a manager can lay off a member of theclub, he or she must do everything possibleto retain that worker, and any layoff requiresthe signature of the Chairman of the Board.So by restating his commitment to theselong-tenure workers, Galvin wasattempting to lower the level of anxietysurrounding entry into basic skillseducation.

For two years, ESL, math, and readingclasses have been provided in-house at anumber of facilities in the CommunicationsSector (including Schaumburg) by localeducational providers. The program waspromoted through meetings withsupervisors and managers, anddissemination of a New Directions brochureand pretest. The brochure, entitled"Preparing for New Directions," stresses thatproduction operators will increasingly haveto be able to:

Read vend tickets, build books andmaintenance manuals.

Read simple blueprints, sketches,diagrams and drawings.

Record data correctly.

Do addition, subtraction, multi-plication, division, percentages,ratios and fractions.

Understand written and verbalinstructions and explanations.

Work without close supervision.

15.

Work together and share work withpeople from all levels.

Solve problems.

The brochure then goes on to explain thatMotorola is giving tests to new applicantswhich cover such areas as reading, visualpursuits, arithmetic, and forms completion.The worker is then asked to answer a fewquestions on his or her own, with answersprovided in the back of the brochure.Workers are encouraged to get in touch withtheir supervisor, training department, orpersonnel department if they cannot answerthe questions.

The first two exercises in the brochure aresample jobs tasks: preparing a specificationchart and calculating sums, averages, andranges for statistical process control. Thenthere are sample test questions onarithmetic, reading comprehension, visualpursuit (following the lines in a circuit), andforms completion. Some of the trvith andreading exercises resemble workers jobresponsibilities, such as filling out a timecard. The purpose of the brochure was tohelp workers determine if they need help,and to encourage them to voluntarily signup for the classes.

In most sites, 60-70 percent of the workerswere taking the pretest, but problemsoccurred when it was suggested thatworkers enroll in classes. For some workers,the complications were logistical:baby-sitting, transportation, etc. For others,there was a hesitancy toward entering intomore school. Managers in personnel andline supervisors in each site talked toindividual workers on the floor in an effortto overcome fear and scheduling difficulties,but recruitment into the voluntary programsremained a sticking point. And the trainingproviders had much to learn in terms ofdeveloping job-related skills efficiently: "For

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the most part, we were getting positivefeedback on the classes from the workers,but workers were still not making thenecessary progress to perform the changingrequirements of their jobs," according toSylviu Ohanesian, Sector Manager foremployment services.

The Sector is now entering into its secondphase of basic skills operations, a phasewhich we might call "job-related." The goalis to develop a curriculum which maximizesthe performance in job-related tasks. Thebasic skills curriculum development is nowbased more on job competencies - the skillsneeded to provide entry into moresophisticated work and training. Formathematics, that means whole numbers,decimals, fractions, and percentages. Forreading, grade levels are demeaning andmisleading, so development efforts aregeared toward establishing job-related,competency-based instruction.

The Motorola Basic Abilities Test Battery(BATB) is a validated job-related test whichis administered to all production operatorsto determine who meets the jobrequirements and who needs to enter intobasic skills programs (New Directionsclasses). The latter group is then given theTest of Adult Basic Education (TABE), astandard assessment instrument, for classplacement and determining competencies.Supplements to the English, reading andmath classes were developed whichincorporate job-related competencies, suchas completing earned hour reports,calculating means and ranges on controlcharts, etc. In addition, the sector realizedthat it had a need to develop in-houseexpertise and direction for its in-houseclasses therefore, a professional adulteducator was identified for each of its majorlocations.


Since there was no identifiable career pathfor such a person within Motorola, theCommunication Sector's innovativesolution to this need for a basic skills expertwas to develop a liaison position with thelocal training provider. In Schaumburg, forexample, Harper College provides adedicated full-time educational liaison, paidfor under contract with Motorola. Thisliaison is directing the development ofjob-related curricula orienting theinstructors to teaching the material,providing feedback on students' progress,maintaining the quality of the instruction,counseling the students, scheduling theirin-house classes, etc. Computer aidedinstruction (CAI) is under consideration tomeet the needs of certain students and tohelp improve the quality and cycle time ofthe instruction.

All facilities within the CommunicationsSector have implemented the NewDirections testing and classes as mandatoryprograms on 100 percent company time.The Sector managers believed that thetraining had reached as many workers aspossible on a voluntary basis and it was timeto involve everyone. It may be that thosewho resisted the voluntary classes were thepeople who had the greater basic skillsdeficiencies and who were less motivatedthan the volunteers. But the impetus formaking the programs mandatory was fromthe line management, who saw theimproved quality and ability of those withthe basic skills to move rapidly up thelearning curve into new jobs and tooutperform those without the training.

At first, operations managers were onlywilling to finance the voluntary program for50 percent of training hours, but over timethey began to see the real need to establishcompany-funded mandatory basic skillsprograms. There were two key issues in theimplementation of the program: (1)

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establishing a full-time adult educationliaison in each site, and (2) providingdedicated classroom space in each site. Inpreparation for establishing the full-scale,mandatory New Directions program, theCommunIcations Sector developed adetailed communications andimplementation guide for use in eachfacility. The implementation process beginswith meetings to help the supervisor tounderstand the need for change, and thenmoves on to workshops for managers andsupervisors in problem-solving, stress, andcultural issues to assist employees who maybe resistive and/or threatened by thechange; a "town hall" announcement of theprogram, and then small departmentmeetings to answer employees' questions.Each employee will take the Motorola BasicAbilities Test Battery; and those targeted fortraining will receive the TABE and moveinto classroom-based training.

The classes need to accommodate all shifts,a.id are designed to be between 10 and 20persons each. The Communications Sectoris committed to offering classes to targetedworkers for up to four hours per week oncompany time, possibly six hours per weekfor ESL. It is estimated that it will take anaverage of four years for workers who are inESL classes to meet the job requirements.

Lessons from Motorola

The catalyst for change at Motorola hasbeen new technologies and a heightenedneed for virtually error-free productionquality. After a period of hiring workerswithout any systematic regard for their levelof basic skills, Motorola finds itself in aposition where it must upgrade its workers'capabilities significantly. Against this, it hasa company culture which values employeerelations and has made de factocommitments to its long-tenure workforce

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Case Studies

Training Programs at Superior Technical Ceramics

Introduction

Superi o r Technical C eramics Corp. (STC) islocated in the small Vermont town of St.Albans, near the Canadian border.Employing a work force of almost 100, STCmanufactures cusiom ceramic products fora variety of uses, selling to other businessesacross a range of industries. Mostproduction runs are small or medium insize, requiring frequent setting up ofmachinery for new jobs. Sales haveexpanded significantly during the past fouryears but like in.7.ny manufacturingenterprises over the last decade, STC hasbeen able to increase output and saleswithout significantly expanding itsworkforce. The business has been in thefamily of the company's president for about100 years; however the company waslocated in the mid-atlantic region until 1975.

The decision to relocate to Vermont wasaided by access in the northern part of thestate to natural gas pipelines (used to fuelthe company's ceramic furnaces) and by afavorable state-financed loan package tobuild the current facility, the firstconstruction in the St. Albans industrialpark. Most of those in the local workforcehave a farming background with littlemanufacturing experience. However, it isan english-speaking population and ahard-working one, according to companymanagement, which aids in the ability topromote from within. The company'swages, near the average for manufacturingin the area, compare favorably to thoseavailable in the local agricultural, service,and tourist industries.

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Given the highly technical nature ofceramic manufacturing, STC is faced withpervasive skill shortages among itsshop-level staff. Typically, each worker isoperating his or her own machine or set ofmachines, filling an order which hasdetailed technical specifications. A uniquecomplication in machining ceramics is thatthe pieces shrink when fired in the furnaces,and therefore the products must bemachined to close tolerances with a built-inestimated shrinkage factor. The unfiredpieces are brittle, adding to the risk ofbreakage during production. Shorterproduction runs are handled by individualoperators working at thur stations; longerruns require more sophisticated set up andmonitoring on automated machinery. Asthe pieces move through the shop andvarious operations are performed, theceramics gain added value, and mistakesbecome costly. Any mistake along the wayin reading blueprints, estimating shrinkagefactors, setting up the machines, or inoperations themselves is difficult to catchuntil final inspection following firing, andcan become quite expensive.

Each area of the shop has a supervisor, setup personnel, supervisory (lead) operators,and line operators. Turnover amongentry-level operators is high during the firsttwo years, a sorting process which helpsdetermine who among the young work forceis really cut out for the company's exactingproduction work. The unique set of skillsrequired in the manufacturing processmeans that it can take a numbei of yearsbefore workers on the line are producing attheir full capacity. The first shop-level job isoperator, and most operators are young


workers with a high school degree. Overtime the most skilled, meticulous, andambitious operators are promoted as spaceand skill permit.

Over the last ten years, new technology hasincreased the company's demand for skilledset-up personnel, ceramic engineers, andtechnicians. Two years ago STC recruited itsfirst mechanical engineering techniciansfrom the local technical college, at a rate ofpay nearly double that of less skilledshop-level workers. These technicians havetaken responsibility for implementingcomputer numerical control productionwithin the plant.

Across the various manufaCuringprocesses at STC, setting up each specializedproduction run requires reading blueprintsand making basic algebraic andtrigonometric calculations. In themid-1980s, the company's President sensedthat its engineers were being relied upon toperform set-up and monitoring operationsthat could be done by properly trainedshop-level supervisory personnel.Unfortunately, such workers are often inshort supply.

The company believes that its skill shortageis due, in part, to the school system'soveremphasis on "paper pushing" to theneglect of classic blue-collar skilldevelopment. On top of that, the stategovernment is perceived as more responsiveto environmental and tourism concerns thanto local manufacturing needs. "We have aperpetual opening posted for a machinist,and they are simply not available,"according to the company president.Always on the lookout for a shop generalistwho undeTstands the broad contours of theproduction process, company managementbelieves that these people no longer seem toexist. Whether the cause is a changingworkforce or changing technology or both,

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STC has had no choice but to developvirtually all of its workforce skills internally.

With its specialized productionrequirements, "job shop" production runs,and lack of extensive resources for trairing,STC is a typical small manufacturingconcern. What is less common is theinnovative way the company has tackled theproblem of skill shortages among itsshop-level personnel. Beginning in 1984,STC instituted a set of company-developedbasic skills programs, designed anddelivered by its own ceramic engineers. Theresult has been a dramatic increase in thenumber of promotable operators, a decreasein the amount of time spent in set up andsupervision by the engineers themselves,and qualitative improvements inproduction efficiency.

STC's training programs are all created andtaught by company engineers to developjob-related worker skills. The originalcourses offered were shop math andblueprint reading, which have become theprerequisites for specialized courses such askiln, safety, and quality inspection. Theclasses are offered on 50 percent companytime, with participants selected by topmanagement based on perceived potentialin the company. Although participation intraining is not sufficient for promotion, ithas, over time, become necessary forpromotion. In fact, the training programshave become a key vehicle for assessingworker motivation, ability, and careerpotential.

This case study reviews the structure anddevelopment of STC's basic skills andrelated training programs, and in so doingreveals some instructive lessons. cTC hasshown that diverting in-house resources totraining can pay off significantly in buildingcritical skills, without the need for expensiveoutside assistance. It also demonstrates that

"home-grown" programs may be easier tomake job-related and to tie into promotionthan classes designed and administered byoutside educational experts.

The STC experience also reveals some ofthe limitations of internally developed anddelivered training. In this environment,success depends on the communicationskills of company staff, and on their interestand competence in teaching. Quality ininstruction is critical for any trainingprogram and it is the rare person who is bothtechnically proficient and has the gift to bean energetic, patient, clear, and innovativeteacher. The STC experience also shows thatsome skills may be more easily taught byin-house personnel than others. But overall,the STC leadership has proven that it ispossible for a company of virtually any sizeto fill some critical gaps in its skillrequirements.

Structure of the TrainingPrograms

The skills required of all shop workersbeyond the entry level are basicmathematical calculations (includingfractions, percentages, and simplenumerical con" rsion), basic algebra, basictrigonometry, and blueprint reading.Subsequent to completing basic training inmath and blueprint reading, workers enrollin courses which relate to particulardepartments, production processes, ormanagement tasks, such as AcceptableQuality Level (AQL) Inspection, Kiln,Safety, Production Papers with ComputerImpact, Threads and Threading, GeneralCeramic Theory and Concepts, andIndustrial Leadership and the Economics ofManufacturing.

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The courses are wholly company-specificand have been developed and taight by theengineering staff in response to identifiableskill shortages within the plant. These aretraining programs which in retrospect thecornpany leadership believes it could notadequately function without. This isespecially true of the basic math andblueprint courses. Orders from STC clientsare quite technical in nature and must betranslated accurately into detailed machineset up and production specifications. Manyof the ceramic pieces go through a numberof production stages, therefore calculationmistakes or set up errors could happenanywhere along the way. Competent shopmath and blueprint reading skills arenecessary to avoid costly errors incalculating set up requirements andshrinkage factors.

The courses are taught by companyengineers in a classroom setting (thelunchroom equipped with a blackboard) onapproxirnately 50 percent paid companytime and 50 percent workers' time.However, this was done without incr-,singtotal payroll costs by using a part (heregular work day. The single shift withinthe plant normally ends at 4:30 p.m..Workers enrolled in training enter theclassroom at precisely 4:15 p.m and punchout at the end of class. Classes run for 30-45minutes once pei ,veek, but workers are notpaid for time spent in class after 4:30.

The classes are offered during thetraditional academic year, in the fall andcontinuing into the spring, beginningsometime after Labor Day and wrapping upsometime before Memorial Day. Becausesummer is a time of vacations and an earlierend to the shift day, neither engineers norworkers are interested in staying late at theplant to teach or take classes. The classes areheld once per week, with the total numberof weeks being in part determined by the

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progress which the participants are makingwith the material. Some classes aredesigned to be longer than others, with eachclass being given an "estimated nui time."For example, the basic math course isapproximately 2 weeks long, while thesafety course meets only tv-:ce.

Unlike many training interventions, thoseat STC serve to screen workers forpromotion as well as to traia them. Themanual skills required of the operators aretaught on the shop floor, but the companywas finding that promotion required alarger set of skills that were not so easilytaught through on-the-job experiences. Theinitial list of workers in ited for trainingconsists only of those that the companymanagement believes have potential foradvancement. The courses help to assessfurther the job-relevant qualities ofindividuals. The training has thus becomean aid in identifying workers who have themotivation and basic ability to become leadoperators and set-up personnel.

Not all shop workers are invited toparticipate in the classes. At the beginningof each fall, the members of the trainingcommittee, which consists of theVice-President/Manager of Engineering,the Plant Manager, and the senior designengineer (who instituted the original shopmath/blueprint course), review theemployee list and discuss each worker'spromotion potential and current skill level.Operators are generally in their twenties andover half are women. Most have graduatedfrom high school, but very few havc anysubsequent schooling.

The number of w,,.kers is small enoughthat members of the training committeehave had the chance to observe and Interactwith all of those on the list. At the timeworkers are selected for math or blueprintreading courses they are usually at the

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entry-level operator or lead operator level.However, even the technicians haveparticipated in shop math and blueprintclasses in part to learn some additionalcompany-specific skills, and in part to gaugethe quality of their formal training.

Workers are selected for the basic skillscla3ses if management believes they havethe potential to be promoted. Thoseworkers who are chosen are stronglyencouraged to participate. In addition,without encouragement or publicity a fewuninvited workers will ask for approval toenroll in the classes, and these workers arealso let in. Each class is designed toaccommodate no more than 10-12 workers.

1.-he classes are not open-entry, open-exit,or self-paced, but the tempo of the class is setflexibly by the teaching engineer in responseto the perceived abilities and progress of theclass. By inviting only those with thehighest estimated potential, managementcreates classes which have less need forindividualized tutoring.

The design engineer believes strongly thatthe basic skills programs v-:,uld benefit allworkers, but there are sev al reasons whyparticipation is restricted. First, those thatare selected can generally move through theclasses at a more rapid rate than the averageoperator, who would slow down the pace ofthe class considerably. Second, there is areal cost to the engineers' time in instructionand opening up courses to all shop-levelworkers in a small, individualizedclassroom setting would raise costsconsiderably. Third, the company presidentexpresses a traditional view of smallbusiness manufacturing: "There is not roomfor all operators to be promoted, and not alloperators want to be promoted. Man, arecontent doing their line jobs and do not wantadded responsibility."

With the exception of the math andblueprint courses run by the designengineer, most of the courses are run by twoengineers, the "primary" and "secondary"instructors. Both teachers are present ateach class, with the secondary instructoracting as a teaching assistant. Engineers donot volunteer to teach classes like theworkers they are selected by the trainingcommittee (but they can refuse to beinstructors if they so choose). The instructorprepares a course outline which is reviewedby the committee. Students are required toprovide a three-ring notebook to hold classmaterials, and instructors are encouraged toprovide daily class handouts. Homeworkassignments and quizzes are given at theindividual discretion of the teacher, but heor she is encouraged to develop some sort offinal homework assignment or exam.

Following the completion of the course,instructors are rEquired to submit anotebook to the trahiing committee whichcontains the detailed curriculum, classmaterials, and daily assignments. Thisreduces the preparation tin required whencourses are repeated and smooths thetransition between instructors whenturnover among the engineering staff leadsto the appointment of a new courseinstructor.

The courses are designed by the individualinstructors and generally include a blend ofcompany-developed and outside materials.The combined math/blueprint coursetaught in 1987 had as its purposefamiliarizing students with basic appliedmath and special topics that are "useful ineveryday STC manufacturing." Below is anoutline of the first semester of the year-longcourse:

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Case Studies

I. Basic Number TheoryII. Basic Number EquivalenceIII. Basic AlgebraIV. Ratios, Proportions, Basic EquationsV. Basic Shrinkage TheoryVI. Boundary Condition Testing TheoryVII. Basic Instrument ReadingVIE Basic Instrument ApplicationIX. Basic Blueprint DefinitionsX. "Advanced Blueprint"

The second half of the course covered basicand applied trigonometry as well as selectedadditional topics. In addition to achieving alevel of competence within each student inthe above areas, the goal of the course wasto develop additional skills which make useof the basics developed Li the class. In ctherwords, it was hoped that the class wouldlead to the creative application of theseconcepts on the shop floor.

As in any training program, motivationand attendance varies J ly across theparticipants. Instructors are required to takeattendance (ostensibly to keep payrollcorrect), but even so up to 50 percent of theenrollees either participate sporadically ordrop out of the courses altogether. Someworkers drop out due to a lack ofmotivation, while others are sending asignal that they are unlikely to be able tomaster the material. Dropouts are rarelypromoted and often end up leaving thecompany within the following year.

The course requirements vary across theclasses, but all teachers are encouraged todevelop some sort of final assignment orexam. The math and blueprint coursesinclude weekly homework and a final exam.The design engineer, who teaches thesebasic courses, notes that the grades arecurved, with the highrst or second-highestscore set to 100 and the other grades set inrelationship to that score. In this way


workers' scores are on average higher andnot too discouraging.

The plant manager notes that eachworker's quantitative score is not used as anabsolute, single indicator of promotability.Rather, he places the score within the contextof the worker's performance in the shop,overall motivation, attendance, and effortlevel within the course. In some cases,openings are filled with workers who mayhave struggled with the courses, but whowere diligent students, are competent inother ways, and who may be the best peopleavailable to staff those higher-levelpositions.

In looking over his attendance and gradebooks for the last several years, the math andblueprint program instructor realizes thatalmost all of the enrollees who haveremained with the company have indeedbeen promoted on the shop floor. But he-so sees that those workers whose

attendance or performance was poor tendedto leave STC altogether. Clearly, these lessmotivated or less able workers sensed thatopportunities within STC were going to becircumscribed, and the ambitious amongthem acted accordingly.

Program Development,Refinement, andExpansion

The initial math and blueprint classes atSTC were developed and first taught in 1984and 1985, respectively. The courses weredeveloped on the basis of the instructor'sknowledge of what was required on theshop floor and where the skill gaps were. Inthe first year, the courses were broadcastthrough flyers given to each employee, and

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there was open, voluntary enrollment.Based on the experience with that class, theinstructor realized that little could beaccomplished in a setting with such a widevariety of worker backgrounds, motivation,and skill.

The decision to make the classesmandatory and by invitation only was madeby what was to become the trainingcommittee, along with the president of thecompany. In essence, the change was aneffort to more efficiently target scarceengineering resources to those employeeswho would benefit most within thecompany from company-specific training."It just wasn't efficient to give basic mathcourses to a slow, line worker who wants tohelp his grandson with his homework," saidthe instructor. By targeting motivatedemployees with a high likelihood ofpromotion, the training was able to mostefficiently fill the training gaps at STC.

Targeted worker training also had the sidebenefit of improving employee motivation.Workers who questioned why they werebeing referred to training were advised tomeet with the company president, whomaintains an open-door personnel policy.The targeted worker would be advised bythe president that the training was noguarantee of advancement, but thatenergetic participation in the class was adefinite prerequisite for promotion. Sowithout making any specific promises, theemployees were given the impression thatthis training was likely to lead to more payand responsibility on th? job. Such a directlink between training and promotion islikely to increase the motivation of theambitious.

By the fall of 1988 STC had run three fullsets of math and blueprint courses. At thistime most of those that had been targeted forbasic training had received it, and the

company decided to expand the traininginto a broader range of job-specific courses.Standard policies and procedures weredeveloped and other engineers wereinvolved in course development andteaching.

There has been no effort to assess in anyquantitative way the costs and benefits ofSTC's training initiatives. The onlysignificant costs are fifteen minutes of lostproduction time for each 30-45 minutes cfworker training and the value of theengineers' time as teachers. The plantmanager estimates that he spent 30 hourspreparing his management course and thenan additional one hour of preparation timefor every 30-minute class. Over time, thec^urses become shorter as the teachers gainexperience and decide what needs to bemaintained in the curriculum and what canbe eliminated.

The STC president sees the benefits of thetraining as fundamental: "We can fill moreorders than we otherwise could. Moreopenings are being filled with reasonablyqualified people ,ted from the shopfloor." As skills hill ,ve on the floor theneed for engineering supervision decreases,and more machines are being usedefficiently.

Assessment of TrainingPrograms at SuperiorTechnical Ceramics

There are several unusual aspects of STC'straining that are interrelated and reflect thestrengths and weaknesses of the program.This is truly a home-grown set of courses,developed, implemented, and taught by thecompany's engineers. By developing its

Case Studies

own training, STC was able to avoid the useof expensive outside consultants orproiessional educational providers. Theengineers were uniquely qualified toidentify skill deficiencies on the shop floorand to design a curriculum to remedy thosedeficiencies.

Over time, the company realized that themost resource-efficient training programwould target services on promotableemployees: this targeting was not onlyefficient but increased worker motivation toparticipate in the classes. For a smallcompany which is reluctant to invest inwork teams and pay-for-knowledgesystems, targeted training helps to limit thenumber of workers who are building skillsa nd expecting commensuratecompensation. Even with targeting,however, workers report some frustrationwhen their add cd training does not translateimmediately into higher compensation.Clearly, there is a tension between trainingworkers, paying them more for their higherproductivity, or losing them to other, largeremployers who could benefit from theirbudding skills.

The original courses in shop math andblueprint reading were clearly a success inthat the training investment was small andthe most critical skill shortages werealleviated. However, the subsequentexpansion into other courses is instructiveand highlights some of the limitations ofin-house programs. Math and blueprintwere the ingenious creation of an engineerwho happened to have the personality typeof a natural-born teacher. He had tutored anumber of technical courses in college,taught skiing on the slopes of Vermont, andenjoyed conducting the training programsat STC. Not all professionals are excellentteachers, however, and some of the otherengineers have even resisted taking on theirappointed roles as instructors. Now that all

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engineers are participating, there arecomparisons being made between thevarious teachers, and this is an addedheadache for the training committee.

Given the difficulties in expanding thisprogram into other areas, one wonderswhether training would have ever gotten offof the ground at STC without the fortuitoushiring of an engineer in 1982 with a gift for

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teaching. The new challenge for thecompany is to move into more advancedkinds of engineering training. According tothe company president, "the problem is, foradvanced engineering we have to figure outa way to train the trainers first, and then getthem to train the shop-level workers, and itall has to happen before turnover erodesyour investment."

U S GOVERNMENT PRINI,N1, Iclrh 32 l'tB 2 8 2 8 6

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