productivity and training

7/31/2019 Productivity and Training

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training for

productivity

Leo Maglen

Sonnie Hopkins

Gerald Burke


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training for

productivity

Leo Maglen

Sonnie Hopkins

Gerald Burke


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CoAc knowled gements.......................................................................

Exec ut ive sum mary ........................................................................

Cha pte r 1: Purposes of the resea rch...........................................Ove rview .................................................... ......................................................

Justific a tion for tra ining ...................................................................................

Aud ienc es for this rep ort.................................................................................

Cha pte r 2: Bac kground to the research ....................................Ove rview .................................................... ......................................................

Returns to tra ining ............................................................ ................................

Othe r p rod uc tivity fac to rs..............................................................................

Va riatio n in prod uc tivity leve ls.......................................................................

Prod uc tivity me asures.....................................................................................

Interrelated ness o f business p rac tic es...........................................................

This resea rch................................................... ..................................................

Chapter 3: Method ........................................................................Ove rview .................................................... ......................................................

Ob jec tive s of the research p rojec t ...............................................................

Sub -sec to rs............................................................. ..........................................

The c onfid en tia l nature of the research .......................................................

The c ase stud ies ..................................................... .........................................

Prep arat ion o f da ta and ana lysis of find ings................................................

Cha pte r 4: Footw ear manufa c ture .............................................Ove rview .................................................... ......................................................

The c ase stud ies ..................................................... .........................................

Ma nip ula tion of the quant ita tive data .........................................................

Prod uc tiv ity results....................................................... ....................................

Alte rnative exp lana tions of prod uc tivity levels............................................

Enterp rise-based tra ining ................................................................................

Enterprise dynamic ................................................... .......................................Sup port fo r bund ling .......................................................................................

Effe c tive tra ining ..............................................................................................

Som e te nta tive c onc lusions...........................................................................

Cha pte r 5: Wire p rod uc ts manufa c ture .....................................Ove rview .................................................... ......................................................


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Training ..............................................................................................................

Prod uc tivity results............................................................................................

Nature of the workforces................................................................................Enterprise dynamic ................................................... .......................................


Cha pte r 7: Sup erma rkets ..............................................................Ove rview .................................................... ......................................................

The c ase stud ies ..................................................... .........................................

Ma nip ula tion of the quant ita tive data .........................................................

Results ..................................................... .........................................................

Inte rpret ing the results.................................................................. ...................Training effe c tivene ss......................................................................................

Enterprise dynamic ................................................... .......................................

The imp ortanc e of tra ining .............................................................................


Cha pter 8: The c om para tive c ase-stud ies method ..................Ove rview .................................................... ......................................................

The servic e ind ustry stud ies.............................................................................

The ma nufac turing stud ies.............................................................................

Constraints................................................... .....................................................

Long itud ina l study ............................................................ ...............................

Me asuring p rod uc tivity ...................................................................................

Me asuring tra ining investment .......................................................................

Infla tio n ......................................................... ....................................................

Me asuring return to tra ining ...........................................................................

A to ol fo r en te rprises .......................................................................................

Enterprise dynamic ................................................... .......................................

Cha pte r 9: Broa der horizons.........................................................Ove rview .................................................... ......................................................

Returns to tra ining ............................................................ ................................

Need fo r tra ining ......................................................... ....................................

Policy .................................................... ..........................................................

Profits and c omp et itiveness ...........................................................................

Emp loyment .......................................................... ...........................................

The shift to servic e-b ased industries...............................................................Training ................................................... ..........................................................

Conc lusion ........................................................ ...............................................

Referenc es......................................................................................

Append ices.....................................................................................


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AcknowledgeThe authors acknow ledge the valuable contribution of many p eople to th

Firstly, the N ational Research and Evaluation Comm ittee is thanked for i

without w hich the research could not have pr oceeded.

Secondly, and especially thanked ar e all the comp anies, man agers and pe

willingly and generously of their time, and w ho w ere prepared to share,

successes, bu t also their problem s. Confiden tiality forbids identifying the

does not lessen the au thors appreciation.

Thanked th irdly are the mem bers of the project reference group w hose n

and wh o looked critically at the m ain find ings and provid ed valuable sug

assisted the analyses.

Mr Carlo De Martinis, General Manager, Energy and Telecomm un ication

Ms Elizabeth Fu gow ski, Research Officer, Engineering Skills Training Bo

Mr Mike Long, Senior Research Fellow, Au stralian Cou ncil for Education

Mr Edm un d Misson, Project Officer, Victorian Depar tment of Edu cation

Dr Yi-Ping Tseng, Research Fellow, Melbou rne Institu te of App lied Econ

Research

Dr Lynne Williams, Principal Adviser Research, Productivity Commissio

Ms Susan Wood ward , Executive Officer, Australian Light Manu facturing

Advisory Board

Fourthly, the helpful comments of an anonym ous, independ ent reviewer

with ap preciation.

Fifthly, we than k the ind ustry training ad visory bodies who gave their su

Lastly, the authors gr atefully acknowledge the sup port of Ms Liz Dent, infind ings of the research and in the pr eparation of this report.

Professor Leo Maglen


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very effective training strategyon-the-job trainin g, especially in new te

combined w ith m ainstream TAFE provision. For the rest, the correlation

return of one-hu nd red-and-ninety dollars in value adding to one d ollar sagain, this appears to h ave been the result of investment in training as p a

strategy rather than in isolation. So tru e expenditure w ould h ave been qu

For the service-based ind ustr ies the m ethod was ineffective except, perh a

hotel office personnel where p rodu ctivity (rooms booked p er hou r) sugg

relationship t o training inv estmen t. The ineffectiveness of the meth od in

might h ave been a consequence of the u niqueness of services, as typified

accomm odation in top-of-the-range hotels, and the locality of sup ermark

factors for which it was impossible to control fully. Hence, what w ere estprod uctivities really were set targets based on th ose differences. Notwith

research found that senior man agers in each of the hotels and in the tw o

wh ich p articipated in the research, considered th at the futu re success of

dep ended on having p ersonnel trained both in technologies and in interp

For manu facturers, training app eared to have d elivered increases in labo

affecting w ork pr actices in a range of ways. Workers with more training

their machinery better with less dow n-time; they w ere more skilled in se

compu ter-based technologies, as well as more traditional prod uction meable to contr ibute more to innova tion. Possibly, there were benefits too, i

between labour and management.

The research along the way identified a num ber of shortcomings in und e

app lying nationally recognised training:

Managers and su pervisors, in enterprises with employees undertaking tr

app renticeships, seldom had any know ledge of the training curriculum ,

teachers from t he p rovider of the off-the-job componen t. The assump tion

app rentice had a concern he or she wou ld ask. There was seldom an y co

complementarity as a result of collaboration.

Many of the man agers in the wire prod ucts enterprises had no know ledg

competency stand ard seven that they existed. This reflects, in part, the

the sub-sector has had in the past in establishing an app renticeship in spr

A m ajority of trainees, especially in footwear man ufacturing N ew App re

to be unaw are of the course they w ere enrolled in, or even that they w ere

nationally recognised course. An instance was foun d too, where a p rivatissued certificates for training that had yet to take place.

There also app eared to be a difference, in practice, in relation to recogniti

Most firms in the stud y for wh ich ind ustry comp etencies were a tool, we

prior learning as mu ch as recognising current competence. The comp eten

was r outinely assessed: for those with p rior training it was expected that


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same time as doing all sorts of other thingsthe m ethod accomm odates

method , too, treats training as an ongoing investment that m ay be in a st

relationship with skill loss, rather than as an isolated even t, the effect of wMoreover, by dealing with concrete examples, the relationships betwee

hu man resource strategy, work p ractices and labour p rodu ctivity are fair

attributes could make it a useful tool, not only for businesses for benchm

also for governm ent in the p romotion of training.

How ever, furth er testing would need to take place before it were promot

business. It is also conclud ed th at the m ethod is generally ineffective in s

industries probably because, here, there are many uncontrollable factors

prod uctivity. Service-based enterp rises tend to d eliver a service that is u nways, such as location, comp etition and clientele, facilities, style, and/ or

services on offer.

Recommendation 1

That the method undergo further testing in manufacturing and r

indus tries su ch as information technology, before being promote

as a tool.

Enterprise dynamic

The findings lend som e supp ort to the notion that enterp rises wh ich h av

labour p rodu ctivity tend to have a bun dle or characteristics, which this

a high enterp rise dynam ic; for example,

y work p ractices that emp ower the ind ividual w orker to exercise jud ge

respon sibility wh ile working either as a highly skilled specialist or as

manag ing team in a broad ran ge of tasks

y recruitment and tra ining p ractices that collectively ma intain a high le

y encour agement of w orkers to identify with their w ork by receiving r

form) for either high level or consistently good performance

y hum an r esource planning that is a subset of strategic planning; busin

concerned with qu ality enhan cement, client needs, and innovation, a

market and other research

Recommendation 2That any subsequent research on the method include furth

investigation of the relationship between labour productiv

training investment in the context of the level of enterpris

Promotion o f tra ining


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Tra ining sta nd ards and businesses

Drawing in p art on feedback from em ployees, the research has highlight

for operational personn el, of one-to-one, relatively inform al, work-based

able to app ly skills within the context of a particular enterp rise. Firms tha

on-the-job training w ith class-based teaching, and with assessment and r

achievement against customised indu stry standard s, tend to have benefit

investment in training. The research has also suggested that tr aining mu

an event, but as something w hich is integral to the bu siness function by b

everything that takes place. Furth er investigation into linking bu siness p

formal and inform al work-based learning, off-the-job training, national trand custom isation, may be able to shed light on more and less effective b

could assist m any Au stralian firms.

Recommendation 4

That ANTA give consideration to encouraging research tha

business planning, innovation, formal and informal work-

learning, off-the-job training , national training standards a

customisation.

Increasing training effectiveness

As noted above, some firms, which have p urp ortedly been u tilising natio

training, have not effectively linked learning on an d off the job. Collabora

between firms and external training provid ers app ear to have been inade

in others, personnel seem not to h ave been informed of the p otential for g

qualifications through the training they h ave been un dertaking. It is possisolated instances wh ich were incidentally exposed by th is research. But

firms which participated were more likely rather than less likely to be tra

this seems imp robable.

Recommendation 5

That ANTA give consideration to mechanisms for ensuring

collaboration between firms and external training provide

they deal, and for ensuring that personnel undertaking anyrecognised training are made fully aware of that recogni tio

associated qualifications.

Rec og nition o f current c ompetenc e


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1 Purposes of the res

Overview

This introdu ction outlines the pu rposes of the research add ressed by this

broad social and economic context. It also identifies the perceived au dienoutcomes.

Justification for training

Tra ining effec tiveness

As edu cation policy increasingly reflects a belief that learning for w ork sh

lifelong end eavour, knowledge about the effectiveness of the various w ay

learn is assuming growing imp ortance. Whether in p aid emp loyment or l

wan t to kn ow that th eir valuable time w ill be utilised effectively. Furth er

feel confident that their efforts will be rewarded through increased job se

higher earnings, success in the labour m arket, and/ or a greater sense of s

work they undertake. Other constituencies also have an interest in learnin

Fund ing agents seek to ensure that the edu cational programs they sup po

achieve the objectives set for them. And those who employ labour want t

investing in their personnel throu gh training w ill strengthen their bu sineeconomic return. The p rogram of research reported here p rimarily add re

At the same time, however, the report explores some possible implication

government and for curr ent and p otential employees.

A relationship betw een training and prod uctivity is fund amental to the e

vocational edu cation and training system. This project has sou ght to dem

Australian enterprises which provide training for their staff have benefitt

prod uctivity. It has also sought to find ou t about more an d less effective t

In particular, the project has been concerned to establish whether trainingpart of an overarching business strategy or wh ether training effectivenes

the bu siness environment in w hich it takes p lace. Along th e way, some ad

into work-related learning have been gained and these, too, are reported.

Emp loyers and man agers are most likely to be convinced of the effective

provid ed training w here the evidence is transparent Transparency is ass


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Efforts of governments to engender a training culture are un derm ined by

informa tion systems that recognise only the costs of training an d not its r

culture wou ld value learning as increasing the stock of hu man capital. Buof hum an capital is the un derstand ing that it, like physical capital, can be

prod uce a prod uct or service. Valuing potential depend s on m easuring re

Furth ermore, effective business decisions concerning training are not just

train or not to train, and if so, the quantu m of training to provide. In add i

wh o learns, wh at is learnt, how and wh ere learning w ill take place, and h

effectiveness can be optim ised. Business managers m ay call on ed ucation

advise them on such matters. But for them too, emp irically based knowle

strategy is imp ortant . And for both g roups, being able to evaluate the eff

app roaches provides the opp ortunity to find out what w orks best in the cparticular enterp rise.

Ideally, any method that is promoted as a potential management tool, sho

enterp rise. This means being app licable to any indu stry sub-sector and to

This research attem pts to evaluate a possible method in terms of the first

investigating tw o manufacturing and two service-based sub-sectors. On t

enterp rises that are investigated are, in the m ain, mediu m to large ones. P

of the method to small businesses is, how ever, explored in discussion.

Audiences for this report

This report has been p repared for three major aud iences:

v the fund ing agent: the report aims to d emonstrate that its contracted been met, with the rider that, subsequent to th e signing of the contrac

National Centre for Vocational Edu cation and Researchs (NCVER) N

Evaluation Committee ind icated in face-to-face meeting that the projeiterative. That is, the approach should be modified on the basis of exp

adh ering rigidly to the p roposed m ethod. This was readily agreed to

exploratory nature of the project. Nevertheless, the researchers have

general intentions of the original proposal

v vocational education and training (VET) auth orities (ANTA and Stateauthorities): from both a policy and a p romotional persp ective they h

research that seeks to demonstrate a relationship between training in

productivity

v the VET research community: other researchers have an interest in comethod and find ings in relation to their own r esearch, critiquing them

them wh ere appropriate

Other group s who w ould be interested in the findings of this report inclu

v enterprise managers/ owners w ho emp loy labour: as ind icated in the


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2 Bac kgto the res

Overview

The research literature, as relates to this research p roject, is reviewed , and

explained.

Returns to training

Emp loyee performa nce

In a recent review of international research into the relationship between

hu man capital and its return s, Blund ell et al. (1999) observe:

Employers fully or partially fund the training of workers in the hope of gainin

investment in terms of being a more productive, more competit ive and conseq

firm in the future. In practice it is very difficult to measure this return[T]

workers receiving higher real wages. These real wages have to be paid out of

therefore should provide a lower bound on the likely size of productivity incre

productiv ity gains are likely to be higher than thisThere are numerous diffi

the returns to education and training for firms. In the first instance, it is extr

obtain data on firm productiv ity, competitiveness and profitability. Furtherm

in identifying empirical counterparts to general and specific training [whichhas as each d elivering different retu rns to the em ployer and employee

whether and how much of the costs are borne by workers and by employers. F

difficult questions regarding causality (does company training cause the firm

performance or does a better (poorer) firm performance foster (require) expen

Because of these difficulties, there is a paucity of studies that have directly as

education and firm training on company performance.

Barron , Black and Low enstein (1989) sought em ployer op inion on th e pro

their workers at various p oints dur ing the first three months following trthose surveyed, training imp roved p erforman ce, with about half the retu

received by w orkers.

Bartel (1995) stud ied the em ployee records of a large company. Using em

rankings, she found that ind ividuals wh o received training d uring 1989 w

lik l t i i i th i f ki b t J


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Effec t of tra ining on prod uc tivity

Stud ies in th e literature w hich h ave sought to d etermine wh ether training

prod uctivity levels by measuring them are few.

Dockery et al. (1997) measured costs and returns for enterprises with ind

using Australian case stud ies. They conclud e that there are returns, espec

indentu re period, but that the retu rns are less than most emp loyers of app

them to be. Returns can be increased by having app rentices spend more t

requiring less skill. But they also note that employers prefer to recruit tra

training their own app rentices rather than recruiting ones who have beenThis would suggest that em ployers expect to be able to accrue longer-term

better apprentices than provided du ring the indentu re, giving an incentiv

in higher-level skills for those they intend to retain post-app renticeship.

Black and Lynch (1996) used a large longitud inal survey of US manu factu

manufacturing firms, that provided training input figures for 1990 and 19

man ufacturing, a positive association betw een enterprise pr odu ctivity lev

by emp loyees in formal, off-the-job training, bu t not in service-based en te

nu mber of employees who u nd ertook training app ear to have an effect inother hand , the findings suggested a positive effect of compu ter training

of the service-based firms.

Using p anel d ata for 36 steel finishing lines in the US, Ichniowski, Shaw a

conclud e that the effect of training on p rod uctivity depend s on its being o

complementary h um an resource pr actices. Their stud y is revisited below

A survey of over two h und red Taiwanese automotive parts manu facturer

1995) foun d value ad ded as sale price minus m aterials cost to be positiveboth the d irect cost of enterpr ise training and ind irect cost (back-filling et

that $28 spent on training a worker on average retur ned $430. They also m

point that the investment level assumes other resources such as increased

wou ld not be requ ired to achieve it.

Income effects of education have prov ided the main sou rce of eviden ce f

enterprises from signalled ability and / or higher level skills and kn owled

assump tion that the returns to individuals result from rew ard for higher

contribution. Maglen (1993), and McNabb an d Richard son (1989) revieweAustralia in relation to the rest of the w orld. How ever, there are few simi

add ress enterprise-based tr aining, and those that do, fail to p rovide a con

Lynch (1992) using US survey d ata on youth found , for youn g non-colleg

pr evious off-the-job training h ad a positive wage effect, but not cur rent o

nor cur rent, or pr evious, on-the-job training. Krueger an d Rouse (1998) u

stud ies of a US man ufacturer and a service based comp any th at looked a


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Breaking d own by industry sector at the 2-digit Australian Stand ard Clas

Occupations (ASCO) level and comparing m edians, Rogers (1999) found

mor e prod uctive than their smaller counterpar ts in all sectors except serv

Variation between enterp rises remained h igh. Table 2 shows figures for t

investigated in th is research project. It is app arent from th e figu res that th

particularly for the smaller groups, are strongly positively skewed.

Table 2: Annual labour productivity in four industry sectors

Sectors Productivity levels ($0

Small-to-medium sized firms Large fir

Median IQR* Media

TCF manufacturing 33.7 42.0 66.5

Metal products manufacturing

Accomm., cafes and restaurants

44.9

39.7

33.3

37.1

79.2

77.6

Food retailing 29.5 21.4 38.8

Source: Rogers 1999

Productivity is defined here as sales (net of change in stocks) less materials purchases an

*Inter-quartile range

While firms have an interest in maximising their labour productivity, it d

high labour productivity is synonymous with high profitability. Rogers fi

enterprises (14 employees), that although they have relatively low labou

enjoy high profitability. This he explains as p robably reflecting small bu s

low capital-to-labour ratios. That is, small businesses as comp ared with la

invest more in people than in advan ced technologies, and the latter they o

buy. Both these strategies reduce up -front costs which is impor tant for sm

low startup capital levels.

Contrasts between pr odu ctivity and profitability u nd erscore the imp orta

figures cautiously by being aw are of what is behind them. Case studies h

providing insights into the complex of factors operating, including compa

technologies. They also allow for greater control of variablessize and n

service for examp lethat is, if the pop ulation of enterp rises available for

sufficient numbers of ones that are, indeed , similar with respect to factors

variables un der stud y.

Productivity measures

A further issue is the natu re of the prod uctivity m easure itself and how u

Hilmer (1991) points ou t:

Th f ll i i d d i i i h l i h


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More practical problems are associated w ith traininggaining reasonably

measu rements of it. Barron , Berger an d Black (1997) who com pared em pl

hours of training for their employees with the emp loyees own assessmen

former group reported 25 per cent more hour s of training than their work

nu mbers of reported training incidents were similar. They conclude th at

evidence for formal training being more accurately measured than inform

surp rising given that the latter is less distingu ishable from n ormal w ork.

deciding wh at deserves to be called training; another is firms recording o

that provides comparability over time or with other firms. On the issue of

interesting to note th at Krueger and Rouse (1998) foun d a p otential sourc

ten to twenty p er cent of employees who had not taken training, reportin

Then there is the issue of selection. As Ashenfelter and LaLonde (1996) po

offer training to their employees rand omly; they prov ide it where they be

the greatest benefit. That w ill usually be as p rodu ctivity improvem ent in

through prom otion; but it can be for other reasons such as reward . This m

with and without training difficult to interp ret. For those w ho look at w a

wage levels can give misleading ideas of relative prod uctivity since wage

are mor e comp ressed than are the associated p rod uctivity differentials (A

1998). The result, incidentally, is that firms have an incentive to increase t

workforce.

Interrelatedness of business practices

Strategic dec ision-ma king

As discussed (above), business decisions that contribute to achieved level

complex and interconnected. While day-to-day decision-making typ ically

that a re amenable to small ad justm ents, strategic decisions in the allocatio

and infrastructure, and about the core level of labour an d hum an capital,

Changes in prod ucts or services may only take place through minor ad ap

existing range an d dealt with in th e short ru n. But m ore innovative chang

services constitute major bu siness strategy. Fur therm ore, decisions aimed

maintaining levels of productivity and profitability through technologica

the sam e time, involve substan tial risk. Yet it is innovative capability, eith

an early follower, which is essential to the survival of many businesses.

Dosi (1997) emphasises that d ifferences in this capability constitute a key

winners and losers:

[A] stylised fact emerging from studies on innovation and diffusion is the p

in knowledge and problem-solving capabilities that firms embody, their relati

together with wide asymmetries in performance, highlighted also by the persis


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technologies and outputs. Less strategically directed choices about huma

resources, on the other h and, even w here they includ e training for person

deliver the same level of benefits. To illustrate, one of the research team w

owner to explore why a p rogram of training pu rchased for people on the

to have had no imp act on prod uctivity levels. Interviewing the p articipan

great ma jority already had the skills delivered by the cour se. In fact, it ha

others more p rodu ctive, but the effect would have been too small to be ob

leveland m ay have been counteracted by w hat app eared to be alienatio

of the others. This is not to suggest that the best training is narrow, highly

In some circum stances it may be. At other times it will be broad -based bu

the needs of the organisation.

It follows that research into the effectiveness of enterp rise-based training

examine wh ether the level of effectiveness relates to the amoun t of trainin

whether provision of training results, at least to some degree, from strateg

comprehensive business planning. At the heart of such an app roach is the

imp rovem entin client service, in quality, in new ventu res, in the functi

organ isation. Hence, these are likely to be characteristics of firms th at are

and users of training.

Huma n resourc e management

Various auth ors over recent years have argued that the hu man r esource f

enterprises cannot be d isengaged from the business settings in wh ich it o

Arth ur (1994) classified hu man resource systems as ones aimed at reduci

through tight control of workers and ones that seek improved performan

committed, discretion-exercising personnel. In commitment-orientated fir

controlling firms (US steel mills in Arthur s stud y), work p ractices requir

decision-making by operational personnel. In th em th ere was a preferenclevels rather than bonuses; there was a higher prop ortion of skilled m ain

workers; and training w as more likely to ad dress new skills, comm un icat

solving. On average, too, decision-making and p roblem-solving were mo

contrast, in controlling m ills, employee behaviour w as closely m onitored

basis of outpu t. Engend ering a commitment to th e values of the organisat

important. Arthu r found that prod uctivity as tons of steel produ ced p er l

scrap r ate, were both more favourable in the m ills whose managem ent st

committed em ployees.Greater p rod uctivity also was found by Macdu ffie (1995) to exist in US au

emp loyed a set of related w orker-emp owering p ractices as p art of flexibl

contrast to mass p rodu ction systems. Those practices integrated w ith m an

that sought to redu ce inventories and stocks, and dem anded that operati

skilled and adap table, team-based problem-solvers. Somewh at d ifferent t


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than w here prod uction involved closely supervised, narrow jobs with no

decision-making.

A stud y that sought to examine the relation between hu man resource prastrategy in a service ind ustry is that of Hoqu e (1999). In a sur vey of over

med ium-to-large UK hotels, Hoque looked at the m atch between busines

hu man resource strategyexternal fit, and the synergy betw een the var

pr acticesinternal fit. Each hotel was categorised as a cost r edu cer, qu

other. Human resource management practices were taken to include sta

conditions, recruitment that aims to ensure match to the values of the org

culture, team work and role flexibility, focus on qu ality in w ork and meri

Hu man resource outcomes considered in the research included organisat

job satisfaction, sta ff flexibility an d qu ality of w ork. H uman resou rce pra

enhancer group app eared to have been somew hat more effective in deliv

resour ce outcom es; how ever, the practices were strongly related to the gr

quality performance, although not its labour p rodu ctivity. By contrast, hu

pr actices were jud ged as ineffective where cost-cutting w as the overrid in

that had a hum an resource strategy and imp lemented their hum an resou

coherent package, outperformed those that did not. Interestingly, for the

this report, the other group behaved m uch m ore like the quality enhanc

cost-cutter grou p. The lack of relation to labour p rod uctivity in any of thenoted and may have had som ething to do with the way it was measured .

that the find ings lend su pp ort to th e importan ce of both external fit and i

A fairly consistent p icture emerges across the stud ies, except for th e issue

incentive and performance payment. McNabb and Whitfield (1998), usin

the UK Workplace Industrial Relations Survey, found matching enterpris

performance to the system of employee involvement in it to be comp lex,

profit-related pay consistent with upward decision-making. Ben-Ner and

the issue from a rights of ownersh ip persp ectiveownership of an assecontrol its use and to enjoy its returns. Worker empow erment p asses on t

that control right, and various finan cial incentive systems prov ide for som

retu rns. But w hether control is exercised in the interest of the organ isatio

An ind ividuals high p rodu ctivity level might be achieved at the cost of o

inconsistent with the interests of the organisation; broad -based profit-sha

d iscour age the free rider. Recognition of high-level performan ce of emp lo

an important ingred ient in bun dling hum an resource management practi

best do it app ears to be problematic.

This research

Enterprise dynamic


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For convenience, the above bun dle will be referred to as a high d ynam i

low d ynam ic of enterpr ises wed ded to the status qu o of rou tine, closely

the pr odu ction/ delivery of standard ised p rodu cts and services. The term

been chosen in preference to innova tive work p ractices and high invo lv

so as to captu re overar ching business strategy, and in pr eference to flexi

manu facturing and the like in ord er to includ e service-based enterpr ises

It cannot be concluded from the studies cited above th at the h um an resou

dynam ic enterp rises will, on average, always be less financially rewar din

dyn amic ones in the sam e indu stry group . Indeed, Macduffie (1995) expr

that:

Innovative work practices are likely to contribute to improved economic perfothree conditions are met: when employees possess knowledge and skills that m

employees are motivated to apply this skill and knowledge through discretiona

the firms business and production strategy can only be achieved when emplo

discretionary effort.

Albeit, there is increasing acceptan ce in Au stralia that the countrys econ

dep endent on the growth of knowledge-based firms prod ucing high-qua

pr odu cts and services (the h igh skills rou te of Finegold and Soskice 1988)

that concentrate on long ru n, mass prod uction of identical outp uts ru n a out to copierspossibly offshorewh o are able to deliver the same ou tp

cheaper price, or being displaced in the m arket by pr oviders of more inno

services. Of cour se, as Finegold (1999) has recently acknowled ged, mass

inconsistent w ith high quality, the achievement of w hich almost certainly

skilled labour. But the threat from innovators remains.

With these factors in m ind, this research r eport attemp ts to examine find i

ind ividu al firms in the context of the conditions of the ind ustry sub-secto

operate and their relationships to the broad er economy.

Methodolog ic a l issues

In choosing to employ comp arative m icro-stud ies to investigate the effec

investment in training to achieve high levels of labour productivity, the re

especially draw n on the w ork of Sigmun d Prais in the UK and his extens

colleagues in Europ e and elsewhere. That work, that extended over nearl

been review ed by Maglen and Hop kins as a precursor to this research (19

within that program of research relevant here have been international com

nu mbers of enterp rises that investigated labour p rodu ctivity and skill lev

prod ucts/ services examined in this way and reviewed by Maglen and Ho

v metal pr odu cts, in the UK, German y and Neth erland s (Daly, HitchenMason, Prais & van Ark 1992)


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links learning and skills to w ork p ractices that in turn link to labour p rod

stud ies the ind epend ent variable (as the pr oxy for learning and skills) wa

academ ic and vocational qualifications held by personnel. In this research

enterprise expend iture on training. At the same time h owever, it has been

to collect information on recruitmen t so as to avoid the p ossibility of equa

effects with training d ifferences that could m ore easily be explained by d

qualifications at recruitment.

The research p rogram of Prais and colleagues involved intercountr y com

objective of explaining the (then ) low pr odu ctivity of the UK relative to th

economies, in terms of a comp arative lack of skills as conferred by v ocati

edu cation. In contrast, this research has been u nd ertaken only in one cou

Certainly, two of the industry sub-sectors investigated are similar to ones

work of Prais and colleagues. However, the objective has neither been to

techniques nor to attemp t comparisons with their results. In r eality, the la

imp racticable. Even if it were realistic to allow for the intervening period

terms, changes in the natu re of prod ucts, materials and processes (manuf

and in expected level and nature of services (service-based industries) wo

comparisons. Furtherm ore, Prais and colleagues p ublished ratios of mean

measures, necessitating access to unpublished data before any compariso

mad e. In ap plying a comparative case-stud y app roach to enterprises withwh ere they are to be differentiated by level of training expend iture, the a

this has any appar ent relationship to the level of labour p rod uctivity achi

has been necessary to examine distribut ions rather than mean s. Of cour se

colleagues u nd ertook comp arable studies within the country, but because

research, did not focus on intra-coun try d ifferences. In one instance, how

differences in qualifications between similar firms with in the UK as relati

d ifferences (Daly, Hitchens & Wagner 1985). How ever, no information w

relationship.

Some au thors have su ggested that the observed d ifferences in p rodu ctivi

could just as easily have been explained as arising from technology and m

differences (Cutler 1992; Chapman 1993; Shackleton 1995), or cultural dif

countr ies along with d ifferences in the associated attitu des to work (Khl

The technology explanation has some validity in some of the comparison

wh ere the au thors found little difference to exist. It also mu st be acknowl

colleagues intentionally avoided controlling for technologies with the rat

availability is a factor in decisions made by firms in relation to introducin

explanation has m ore validity but wou ld be less applicable to comp arisoncountr y, as in this research.

As men tioned earlier in this chapter , a precondition to stud ies of this type

nu mbers of similar enterp rises in ord er to be able to m ake meaningful co

colleagues had the ad vantage, with a few exceptions, of stud ying firms in


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Germany, France or the US that are su fficiently similar in their ou tpu t, an

is attempted to control for other va riables such as size, technologies and l

There is also the problem of self-selection. It is probable that th ose who ain this study manage organ isations in which training is rated as importan

conceived of as possibly importan t. While self-selection w ould not inva li

between the stud ied enterprises, it may d isallow generalisations being m

of a sub-sector as a whole. It also may m ean that the observed spread in t

levels is likely to be skewed toward s the up per end of the popu lation d ist


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3 M

Overview

The detailed objectives of the research are listed and the method used to

explained. Additional information is given in the following chapters concindividual sub-sectors.

Objectives of the research project

The project has been u nd ertaken in order to:

v determine w hether u se of case studies in Au stralia to compar e similayield a method for measuring the effect of training investment by ent

levels of labour prod uctivity. The method was tested in two m anufac

service-based industry sub-sectors

v provide evidence to enterprises, government and other interest groupeffectiveness

v develop the m ethod so that it could be used by enterprises themselve

provide information on costing training and estimating retur ns

provid e indicators of the need for and suitability of training th at c

enterprise identify issues that m ight deter enterprises from u sing the m ethod

that their concerns might be ad dressed

explain the conceptual and practical issues relating to measuring pvarious indu stry sectors and identify factors in an indu stry or su b

be considered in app lication of the method

provid e gu idelines for interpreting tr ainings imp act on p rofits an

suggest further research, in p articular into how the method might

application by very small businesses, community service, primarysectors

Sub-sectors


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The chosen sub-sectors were:

v footwear m anufacture

v wire products manufacture

v accomm odat ion sections of four and five star hotels

v chain-based superm arkets

For each of the three nat ional ITABs which were based outsid e Victoria, t

Victorian State ITAB wor ked w ith the p roject team on behalf of its nation

assisted in obtaining th e agreement of seven or eight en terp rises in each s

par ticipate in the stud y. Enterp rises were selected with the objective of a

comparability in relation to:

v sizewith a preference for medium-to-large enterprisesit was conind ividu al personn el characteristics wou ld be more likely to yield aty

small enterprises

v locationall urban-based, and with th e aim of balancing costs againsof the project by having about two-thirds in Victoria and one-third el

Strictly speaking, work sites were selected rath er than enterp rises. Hen ce

be of one site of a firm th at operates out of a number of d ifferent locationdifferent case stud ies could be of different sites of the one firm. The latter

sup ermarkets, each of which belonged to one of two chains; it also applie

footwear stud ies, where each site was known comm only by different bra

belonged to th e same comp any.

The confidential nature of the research

The project required and was granted the app roval of the University of MResearch Ethics Comm ittee. Given the sensitive natu re of the research an

confidence nature of some of the material, app roval comm itted the team

identities of the enterpr ises against individu al case stud ies in any r eports

materials. Appr oval also comm itted the team to ensu ring that any survey

anonym ous, and to requesting, in each case stud y, an opp ortunity to brie

un ion repr esentative (if there w as one), on the p roject.

The case studies

Set ting up the c ase stud ies

Initial contact was mad e by phone with the chief executive officer or hum

man ager of those enterp rises that an ITAB had iden tified as suitable. The


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The field work

Each case study involved:

v obtaining figures on a financial year basis for a series of metr ics, for th199798, and for 199899 JuneDecember (given that the case studies

un der taken in th e second half of 199899). The metrics chosen were l

value add ed, training expend iture and num bers of personnel with, if

breakdow ns on nature of employment and target groups in receipt o

app ear as append ix B wh ich is available on the world w ide web: see

v gaining a profile of the enterprise through structured interview at ma(appendix C, see p.65) and, in all but one instance (where permission

observation

v discussion abou t the project with a union rep resentative or equivalenagreement of th e chief executive officer)

v investigation of an y sub-sector-specific or site-specific variables to bewh en analysing the results

v surveying p ersonnel (except in two instances where p ermission w as w

voluntary, anonym ous w ritten questionnaire (appendix D, see p.65)

Collec tion o f qua ntita tive d a ta

In order to maximise the poten tial value of the case stud ies, it had been in

collect a comp rehensive ran ge of quantitative m easures of business perfo

soon became ap parent th at this would be problematic on tw o fronts: man

advan taging competitors even where id entity is protected, and lack of d a

accessible form w ith consequent m anager concern about the w ork that w

extract the figures. Therefore, the quantitative data requirem ents of the reto concentrate on th ose metrics essential to it.

In discussion w ith the p erson assigned to extract the d ata the following p

v labour hours are the hour s worked d uring the year that have d irectlycreation of the output (tha t is, they exclud e annu al and sick leave etc

provided for each sector in the relevant chapter of this report

v labour tu rnover is the num ber of people leaving the site in a year; it i

with d ownsizing, they might not be replacedv total personnel is the average total number of people employed at a s

v outp ut is the total amoun t prod uced by the enterprise in a year measmonetary term s; further d etails are provided for each su b-sector in th

this report

v training expend iture is the amoun t spent by the firm on training bot


27/128

Ob servation of work

This typically involved a w alk around the work area in the comp any of th

manager (for examp le, manufacturing or op erations manager, executive h

although in sup ermarkets the team member w as usually unaccomp anied

preferable to observe work after rather th an pr ior to interviewing the man

practices, as this led to a better un derstand ing on the p art of the research

Sometimes personnel were invited to sp eak with th e researcher about the

not at all sites. In the man ufactur ing ones, both noise and hazard levels ty

an op erative would have to stop w ork before any discussion could take p

some of the enterprises in the study set outpu t rates for personnel. The re

concerned n ot to do anyth ing that might thr eaten their achievement, anddetriment of an operative. The escorting m anager in all cases discussed th

researcher, and answered any qu estions.

Questionnaires

Questionnaires, along w ith postage-paid retu rn envelopes, were supp lied

manager w ith a request that they be distributed to p ersonnel directly con

prod uction/ service delivery process, typically operatives/ room attend anleading hand s, sup ervisors, office personnel who contribute to prod uctio

(in fact, in m any instances they were m ore broadly d istributed). It was str

instrument w as voluntary an d th at no pressure should be ap plied to pers

It was stressed also that it should be mad e clear to personnel that answer

and confidential and that the emp loyer w ould r eceive no information on

return. Liaising managers agreed to sup ply a box to make return simpler

coming back that w ay. Alternatively, respond ents could m ail their r espon

Liaising man agers were asked to confirm the nu mber of qu estionnaires d

absences and other changes in p ersonnel could h ave meant th at the nu mbprojected was n ot achieved (in tw o instances it was exceeded and add itio

provid ed). Where there was a m eeting w ith a un ion representative, the q

explained in terms of the above, together w ith its purp ose and content.

Draft summaries

Following each visit, a draft sum mary of the findings was prom ptly pr ep

liaising man ager with a requ est for any changes, add itions or deletions, a

satisfactory and return to the research team.

Loc a l fac tors

Case-study firms in the two manufacturing sectors compete in national m

factors are unlikely to create significant differences in dem and for their p


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4 Footwear manufa

Overview

This chap ter repor ts the case-study results for the light manu factur ing su

manu factur ing, and an alyses them in accordan ce with th e objectives of th

The case studies

Seven footwear manu facturers agreed to participate in the p roject, two of

sites associated with th e same compan y bu t w hich employed somewhat d

Five of the manu facturers pr odu ced light-to-med ium-weight shoes and th

footwear of heavier weight. The preference would have been to have eigh

all in the form er category; bu t the small size of the ind ustry in Australia nproceeding with seven and a greater variation in prod uct than was first h

In order to preserve anonym ity while prom oting ease of comm unicating

fictitious nam e has now been allocated to each of the man ufacturer s. The

Caress, Dream, Ecstasy, Felicity and Glamou r.

Table 3 brings togeth er a few key characteristics of the enterpr ises, by wa

Table 3: Footwear manufacturers: some enterprise characteristics (sumEnterprise Number of

employees

Mode of

operation

Claimed

competitiveedge

Planning

Anodyne 100200 Production

line

International

brand,

responsiveness

Five-year

strategic plan

Bliss 100200 Production

line

Brand

positioning

No strategic

planningCaress 200300 Teams Flexibility,

responsiveness

Annual

business plan

Dream 100200 Mix of

productionline and

Responsiveness Goals set by

parentcompan


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Manipulation of the quantitative dataProduc tivity levels

Manufacturers supp lied figures for outp ut in tw o formsnum bers of pa

per ann um , and value ad ded per ann um as sales minus m aterials costs. S

wh olesale prices; these had to be adjusted w here pr odu cts were going to

includ ing the intermediarys mark-up .

Each also supplied w hat was considered to be the hour s of labour p er ann

nu mber of direct hours of work w ithin the factory that had gone into pro

As well as the labour hour s of operatives and leading hand s or team lead

includ e the hou rs of supervisors worked on the floor in the pr odu ction p

Store and w arehousing hours w ere not to be included as they have more

layout and external arrangements than the skilled natur e of the prod uctio

of maintenance personnel were to be includ ed w here they contributed di

The majority of manu facturers u sed outsour ced labour to prod uce some

therefore factory output had to be corrected for this. After investigation,

of 0.42 was settled on; that is, it w as assumed that m anufacturing one p ai

up pers is the equ ivalent of making 42 per cent of a pair from scratch. A fi

also for the p ercentage of outpu t each financial year that h ad utilised outs

Some of the m anufacturers used p remad e soles while others mad e them

assumed that the lesser value being add ed in the m anufacture of shoes fr

wou ld be balanced by th e lesser amount of labour required. On th e other

d ifferent levels of complexity in the ranges of the manu factur ers, both se

sites, suggested that a raw m easure of prod uctivity as num ber of pairs pr

could not be expected to deliver comp arability. Information w as neverthe

complexity mix, in expectation that it wou ld assist interp retation of resul

ratios were sought for prod ucts of low (for example, a simple sandal), me

an average walking shoe), and high complexity (for example, a high-heel

Prod uctivity levels were calculated for each of the three-and -a-half financ

hour of labour and value add ed p er hour of labour, corrected for outsour

applicable.

Tra ining expend iture

All manufacturers sup plied figures for total training expend iture as train

non-management, and five of them for the whole of the enterprise as well

represented w hat m anufacturers believed their costs to have been, based


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Hence, what were p rodu ced w ere measures of average training expend it

case stud ies), and p er capita non-man agement (all seven case stud ies).

In ord er that figu res for 1998

99 could be u sed, it was assumed that trainthe first half of the year would be mirrored in the second half so the figur

The approach assumes that labour p rodu ctivity had been the same Janua

previous July to December. This is a reasonable assum ption for value ad d

involves some over-estimation of nu mber of p airs since making the su mm

by m aking the m ore labour-intensive, winter one. (In fact, what was su pp

case stud ies und ertaken toward s the m iddle of the year was the full finan

Productivity results

Ma in quantita tive da ta

Table A1 (see app end ix A) provides the collected results for the various m

decided to concentrate on the n on-management set, both because it is com

justify ing t ra ining at non -man agem ent levels is a p rior ity for the VET sec

that level, assumptions about distribution of expenditure are less problem

across the four indu stry sub-sectors stud ied that it was not u ncommon fothe managem ent training bud get to go on one person, say for an overseas

seen, however, that the tw o sets of figures, per capita and per capita non-

very little.

Figure 1 shows p rodu ctivity levels as value ad ded per h our of labour aga

expend iture p er capita non-m anagem ent for that financial year. A correla

0.714 was obtained. One problem is the outlying p oint to the right being w

most recent period m arkedly increased the level of expenditu re and , pres

yet to capture a r eturn. The other is the heavier weighting for some of thea consequence of a greater amount of data.

30

40

50

60

70

80

edperhouroflabo

ur

Figure 1: Labour productivity in value terms against yearly training e

non-manager by the footwear manufacturers


31/128


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0

0.5

1

1.5

2

2.5

3

3.5

0 500 1000 1500

Mean annual training expenditure per capita non-management

Meannumberof

pairsperhouroflabour

Glamour

Bliss

Dream

Anodyne

Felicity

Caress

Ecstasy

Figure 4: Average amounts spent on training each non-manager eachfootwear manufacturer

500

1000

1500

2000

2500

0 0

Figure 3: Labour productivity in simple numerical output terms agai

average yearly training expenditure per non-manager by ea

footwear manufacturer


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Figure 5: Labour productivity in value terms each year for each

footwear manufacturer

0

10

20

30

40

50

60

70

80

GlamourFelicityEcstasyDreamCaressBlissAnodyne

Estima ting return

If it is tentatively accepted that a causal relationship exists between the am

(within th e range 0 to $1400) by an Australian footwear m anu factur er on

non-managem ent personnel, and the d ollar value those personnel delive

estimate of the return on investm ent can be made. (On the basis of this re

be dedu ced abou t add itional return throu gh investing more than about $employee.)

The regression line in figure 2 has the form p = 0.0336 t + 7.17, with a stan

wh ere training is the ind epend ent variable t and labour p rodu ctivity is th

variable p.

To estimate retu rn then for each $100 invested each year an average of 0.0

per hou r, that is, $3.36. Over a year, assum ing 46 weeks at 37.5 hours p er

$5800an average r eturn of fifty-eight to one.

An alternative w ay of defining the pu tative training effect is to say that tr

potential to increase prod uctivity as value add ed p er hour from about sev

fifty dollars plus or minus, w ith two-thirds achieving v alue add ing levels

forty and sixty d ollars (based on the standard error).


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Alternative explanations of productivity levels

Organisa tiona l d ifferenc es

In ord er to investigate whether findings sup port or contradict alternative

differences in labour p rodu ctivity experienced by th e m anufacturers, org

differences, as identified through enterprise visit and interview, have bee

A2 and A3 in ap pendix A list the major characteristics and produ ction ch

enterprises. Potential alternative sources of the productivity differences a

Nature o f prod uc t d ifferenc es

Ecstasy and An odyne have both p rodu ced very w ell presented, heavier q

rest have prod uced in th e light-to-mediu m r ange. While this is probably

of prod uctivity Ecstasy has achieved, it is not su fficient to explain the d if

the enterp rises. Nor is produ ct innovation a sufficient explanation. Neith

performers h ave seen innovation in the r ange as a p riority nor, in the p as

although it now sees innovation as important. But for the oth ers, where c

have been viewed as essential this, presumably, has meant having p ersonthose changes. So prod uct innovation as a source of value ad ding cannot

training , because it can be a precond ition to realisation of innovative idea

Qua lity d ifferences

Bliss and Dream h ave had a lesser qu ality emp hasis, while the four h ighe

been most committed to pr odu cing a high qu ality prod uct. So, the trends

consistent with th e prod uctivity differences bu t, like innovative d ifferencconsequence of training d ifferences.

Ma rket d ifferences

A small propor tion of the outp ut of Anod yne, Caress and Ecstasy is sold

While this has expand ed th eir respective markets to a sm all degree, it app

have been the cause of the high retu rn on labou r of the latter tw o, in par t

seems more likely that it has been the emp hasis on quality that has enablto penetrate overseas markets. Domestically, all manufacturers operate in

market that d emand s quality at a price.

Enterprise size d ifferenc es


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Work prac tic e a nd tec hnolog y differenc es

Whether enterp rises have been team -based or prod uction-line-based doe

d ifferences in pr oductivity. For instance, wh ile two of the three highest pmov ed to self-managing teams, the highest has not. For it, teams are gro

work well together but they are closely directed with no expectation of se

In terms of technologies, the pattern across the enterpr ises was a mix of n

automated , comp uter-based machines and older m achines, requiring a m

machine-setting techniqu es (table A3). The p roportions var ied, with Bliss

highest p rop ortion of old p lant and Ecstasy the lowest. But p rod uctivity d

easily explained for those in betweenfor instance, Glamou r had fairly a

technologies but not high productivity. Rather than technology differencefor the different productivity levels, it appears that introduction of newer

been a stimu lus to training. Such a pattern wou ld be consistent w ith find

chapter 2). Hence, the lack of training investmen t by Bliss app ears to hav

consequence of staying with established technologies. In contrast, it app e

found it necessary to train heavily to gain maximum benefit from the tech

introdu ced. On the other hand , Anodyne has viewed autom ation as a me

need for people with high levels of manu al skill and th e provision of leng

pr ogram s. Of course, this is not necessarily contradictory. Autom ation reskillssuch as program ming skills. And fewer p eople may be required f

(although in this indu stry, reduction in w aste appears to be the sour ce of

But it is questionable wheth er there is a reduction in the length of training

wou ld d epend on the existing skills of operators.

Lac k of routine ma intenance

A failure of operators to perform rou tine cleaning and lubr ication can res

incidence of breakdown and consequent reduction in efficiency. Even wh

plan t, time is lost in changeover. The findings suggest that th is could hav

some of the p rodu ctivity differences observed. Operators at Bliss, Dream

in their rou tine servicing w hile those at the other four enterprises all adh

simple maintenan ce rou tine. But again, the d ifference cannot be dissociat

was claimed at Caress, the recent high level of adherence to this requirem

result of training.

Bonuses

The enterprises cannot be differentiated on the basis of bonuses.

Personnel differences


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25 per cent. Others hav e been lower : Anodyne 14 per cent, Bliss 7 per cen

and Felicity abou t 15 per cent.

In terms of edu cational backgrou nd , figures in table A5 suggest th at Ecsta stronger general edu cation, particularly in maths and science/ technolo

of the work of Prais and co-wor kers as a lead-up to this research, Maglen

concluded that m athem atical and scientific or technological know ledge o

provid e p rodu ctivity benefits. While qu estioning w hether th is has been a

Ecstasys high p rod uctivity levels, it mu st be acknowledged th at the resp

was low; it is possible that m ore edu cated p ersonnel responded disprop o

the somew hat h igher level of schooling su ggested for Dream than for som

manu facturers r eflects the higher prop ortion of responses from people in

occup ying non -operational or oth er floor level positions (table A6). Ecstabenefited too, from a h igh propor tion of its workers being first language

(table A4), assisting communication and reducing the need for English la

The questionnaire asked respond ents to state whether th ey had complete

enrolled in modules or courses that go toward nationally recognised quali

example a TAFE award course) and to list the courses and the app roxima

commencement an d comp letion (if applicable). It also asked them to give

curren t job. In analysing th e responses, position titles were matched to lis

example, a footwear apprenticeship was seen as directly relating to the titor team leader, and a Certificate in Office Practices to file clerk but not

an Advanced Certificate in Information Technology was treated as direct

and a Certificate in Hor ticulture to neither . A few responses required a bi

instance app renticeship was taken as being in footwear. Footwear techn

to be on the floor u nless apparent to the contrary, for instance in p rodu ct

A6 summ arises the results. Caress and Ecstasy appear to have been sligh

of their workers on th e floor app eared to have u nd ertaken post-secondar

training directly related to the w ork that they p erformed . But again the ri

the returns for Ecstasy.

What is apparent h owever, are the small prop ortions of people in any of

considered that they have u nd ertaken some or part of a nationally recogn

particularly p uzzling given that six of the enterprises ind icated th at they

un dertaking the national award courses in Footwear Prod uction (see tabl

one return ed qu estionnaire referred to th emthe respondent claimed to

the Certificates I and II in Footwear Pr odu ction thr ough recognition of pr

and was now un dertaking the Certificate III. A very small number of retuCommu nications or Health and Safety but not as mod ules of award cour

those were treated as belonging in the right h and column in table A6). No

an ap prenticeship be interpr eted as m eaning New App renticeshipliste

of those returns pr ecluded that explanation. Instead, the finding suggests

little und erstanding of the relationship of some of the training they are un


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Enterprise-based training

Reasons to train

Sum maries of what the general manager or d epu ty of each enterpr ise con

pu rposes of training app ear in table A7. Their expressed v iews amou nt, e

positions. The first, for Bliss and Dream , the basic position, justifies traini

survivalenabling p rod uction to p roceed, to stay in bu siness. The sec

position, as expressed by the other five, has training d elivering much mo

survive. Purposes were elaborated in terms of growth of the business, pro

and the like, and for tw o of them, Anodyne and Caress, the interests of th

general manager of Caress said:

We have got to deliver an investment outcome for the company. If we ar

training we are doing it for a purposeWe need also to create opportun

genuinely grow. There are so many people [employees] who dont see

become brain dead and go through the motions [of work]. These are no

each other. When we measure training we should be measuring both of

the personal development as well as the company development.

Certainly, cultural change was m entioned at Dream, suggesting some mo

elaborated position and consistent with the very recent increase in trainin

overall, the two positions align with the tw o p opulations of training inve

the higher.

Enterprise dynamic

An associated issue for this research has been to establish whether find in

training being most effective when in context of a bun dle of other p racti

wh at has been termed a high enterp rise dynamic (see chapter 2).

Work p rac tic es

Three of the five higher t raining investors, Caress, Felicity and Glamour,

work practices that are consistent with the first two characteristics ascrib

enterprises: emp owering the ind ividu al worker to un dertake a broad r an

exercise jud gement and responsibility, and team-based work with team -b

solving. It appeared d uring th e indu stry visits that Caress was furthest d

teams; they were nearer to the au tonomou s ideal than elsewh ere. So it is

surp rising th at it seems to h ave gained a somew hat higher level of return

t i i th h th th t B t E t h f ll h


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Business and hum an resources strategy

The fourth and fifth characteristics concern business strategy and its relat

resource planning.

In accord ance with characteristics that have been p roposed as being asso

rather than a low d ynam ic, Bliss has not h ad a strategic planning p rocess

Innovation, and research and development were rated not imp ortant an

view was expressed that there w as a need for new id eas but there was no

their generation or capture. Nor has there been any hum an resource deve

(table A7), succession plan ning or system of skills recognition. Similarly f

app roach has not been a feature. Research and development h ave not bee

prod uct innovation has been limited to styling. As explained above, humdevelopment is now a prime concern but this did not app ly over most of

research. Nevertheless, it has had a set of comp any stand ards that it has r

match to the national training standards.

For Anod yne, there has been a five-year plan that is now seen as failing t

change. Research, innovation and development have been viewed as som

An aging and long-serving workforce has meant hu man-resource plannin

priority issue, although imm inent retirement of managers has generated

succession. The comp any codified its requ ired skills in the mid-90s, as a btraining but th e relationship to n ational standard s is not known .

Consistent w ith a h igh d ynamic, Glamour, Felicity and Caress have each

thorough and forward-looking p lanning process. That has not m eant mo

rather, each has sought to opera te cohesively and coheren tly. All saw res

development with a small r and a small d as imp ortant, as part of the p r

innovative products. Each also appeared to be customer conscious with

key objective to d eliver value for m oney (table A2). Each has recently so

strategically with su ccession at higher levels of the organ isation, and each

development plans that link directly (Caress and Glamour) or indirectly t

(Felicity). All three have adopted the national footwear competency stand

them to the needs of the enterp rise. Caress has continuously monitored f

has adopted the term recognition of curren t competency in preference to

learning. In p ractice this has meant p aying a recruited qualified tradesp

but n ot at the highest level until he or she is competent as per the custom

Ecstasy, too, has seen r esearch and development as important, as a sourc

process innovation. An imp roved strategic planning p rocess is considere

improved operation where work in p rogress and outp ut of unsaleable ite

drop ped . For it, too, succession p lanning is being introdu ced. N ational fo

standard s at Levels I and II have been adop ted, customised to the n eeds o

In general th en Caress Ecstasy Felicity and Glamou r can be d istinguishe


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It would be counter-prod uctive, or indeed, dow nright foolish, to suggest

mon ey on training is all that a bu siness has to do to achieve high labour p

some might infer that the m ethod th at has been investigated in this resea

by such an assump tion and therefore question the mod els validity. It is bpr ovides the an swer. Businesses are likely to invest in training as one tine

strategy. Employers and m anagers in the case studies reported here w ho

in this way , see it as an essential compon ent of their metap horical fork. T

provided insights into why some enterprises, such as Ecstasy and Caress,

somewhat greater returns for their investments than h ave, say, Glamou r

Effective trainingGiven a set of coheren t business p ractices, a further issue is what sorts of

effective for peop le on the floor. In the research rep orted here, as typified

been a sequence of on-the-job indu ction training (which all the enterp rise

and the on- and off-the-job development of competency against customis

stand ard s at Level II, with Level III being und ertaken by tr ainers. Techni

pr ogressed to the Certificate IV in Workp lace Leadership . For Ecstasy, cu

footwear stand ard s have been those at Levels I and II; these have been co

pu rpose short courses.

The employee questionnaire asked in wh at ways the respond ent had lear

job. Most people believed th at they had learn t their job by h aving another

and / or show them what to d o (table A8). Few considered that they had l

through courses or classes. Of course, this does not mean th at those who

class-based learning foun d it to be irrelevant or ineffective; it may sim ply

been offered w hat they th ink of as formal class-based training. But th e re

for most emp loyees in the footwear manu factur ers, one-to-one, on-the-job

delivered the m ost valued form of learning. Even so, there may be some ldem ands a more structured, class-based ap proach, such as is required for

Ecstasy, table A7) and for program ming other computer-based m achiner

In other word s, wh at app ears to have been most effective, has been semi-

job, competency-based train ing supported by class-based learn ing, as req

probationary p eriod app ears to have become p art of the recruitment p roc

effective screening of the app licant w ho had , seeming ly, the greatest pote

performance in the position. Ideally, formalised training takes over from

indu ction as soon as the r ecruit is fully appointed.

Some tentative conclusions

Firstly, it appear s that differences in training investm ent have contribu ted


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Fourthly, wh ere training has been coup led with a d rive for innovation in

high p rodu ct quality, and/ or technological innovation, and routine main

personnel, training h as contributed to their achievement.

Fifthly, wh ere employees have a strong ground ing in m aths and science o

well-developed English language skills these have delivered extra produc

Finally, the research suggests that tra ining with in the context of a high en

assisted firms in achieving high levels of labour p rod uctivity.


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5 Wire p ro

manufa

Overview

This chapter reports the case stud y results for the m etal and engineering

products manufacture, and analyses them in accordance with the objectiv

The case studies

Seven wire products manufacturers agreed to participate in the project. F

allocated: Ad ept, Brilliant, Crackajack, Dazzle, Elan, Flawless and Glister

the case stud y interviews, Glister proved unable to sup ply the qu antitativ

was d eleted as part of the project. Investigations at Flawless revealed th a

only a small par t of prod uction at the site. Regrettably, desp ite checking ihas been unable to sup ply figures for outpu t and labour, specific to wire

for outp ut produ ctivity estimates. Except for a sm all reference to it in pas

deleted from the project. Brilliant withheld agreement for observation of

participation in th e questionnaire comp onent of the stu dy. It required, als

solely with one of the d irectors of the comp any. Adept was able to supp l

two most recent years of operation. This has left five case stud ies for w hic

are available for two or more years, with a shortfall in sup plementary inf

them. They are more varied in size and th eir produ cts more varied than w

preferred. To illustrate, if case studies were to focus on wire products, prbeen to have them all, say, in spring-making, or all in w oven w ire produ c

Table 4 brings togeth er a few key characteristics of the five enterp rises fo

quantitative data were collected.

Table 4: Wire products manufacturers: some enterprise characteristics

Enterprise Number of

employees

Mode of

operation

Claimed

competitive edge

Plannin

Adept 2050 Mixed Skills Five-yea

strategic

Brilliant 2050 Single

person

Low overheads,

responsiveness

Two-yea

strategic

C k j k C ll l C i Fi


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sizemicro businesses. Thirdly, there is a concern amongst many manuf

given to supp orting industry-wide r esearch is not spent on the business a

un acceptable cost. And fourthly, many of those manu facturers w ho d o no

have been researched extensively over the p ast decade and so do n ot wisagain. Nor w as it the desire of the research team to concentrate on the lat

likely to invest heavily in training, and so not give the sort of spread the m

investigation d emand s.

Manipulation of the quantitative data

Produc tivity levelsManufacturers supp lied figures for outpu t in tw o formstonnes of meta

value ad ded as sales minu s materials. Sales were wh olesale pr ices. Excep

also passed on p ercentage waste figures.

Each sup plied wh at was considered to be the hours of labour p er annu m

nu mber of direct hours of work w ithin the factory that had gone into pro

As well as the labour hou rs of operatives and leading hand s or team lead

includ e the hou rs of supervisors worked on the floor in the pr odu ction p

Store and w arehousing hours w ere not to be included as they have more

layout and external arrangements than did the skilled natur e of the prod u

hour s of maintenance personnel were to be included wh ere they contribu

production.

Prod uctivity levels were calculated , for each of the thr ee-and-a-half years

metal processed p er hour of labour, and as value add ed p er hour of labou

was also accepted as a prod uctivity measure in accordance with th e recom

Hilmer (see chap ter 2).

Some of the m anufacturers have sent out a small amount of their w ork in

treatm ent; that is, special coating of some sp rings has been ou tsourced. It

labour is assum ed to have been negligible and so no allowance has been m

savings for man ufacturers are, of course, in p lant and equipment rather t

Tra ining expend iture

Manufacturers supp lied figures for total training expenditur e in various fsup ervisory/ technician and op erative; management and other; and total

share between managem ent and non-management. From these figures tr

as per capita, and per capita non-man agement for each enterprise. Again

wh at man ufacturers believed their costs to have been, based on their r eco

them established that each considered th at all major costs had been captu


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0

10

20

30

40

50

60

70

0 200 400 600 800 1000 1

Annual training expenditure per capita non-management

D

ollarvalueaddedperhouroflabour

dou bled. The app roach assum es that labour prod uctivity has been the sa

in the previous July to December.

Productivity results

Ma in quantita tive da ta

Table A9 (see app end ix A) provides th e collective results for the various m

footwear, it w as decided to use the p er capita non-management figures. I

footwear m anufacturing, expenditure on manager training app ears to ha

exceeded that on tr aining of other person nel. For Brilliant and Dazzle the

are significantly higher than the respective figures that exclude managem

with footwear, training expend iture per manager p osition was not estima

differences in estimating it was considered to introduce too many inaccur

assumptions.

Figure 6 shows p rodu ctivity levels as value ad ded per h our of labour aga

expend iture p er capita non-m anagem ent for that financial year. A correla

0.156 was obtained .

Figure 6: Labour productivity in value terms against yearly training enon-manager by the wire products manufacturers


44/128

Figure 8 shows m ean nu mber of kilograms of w ire processed p er hour of

annu al training expend iture non-managemen t. Again the scatter suggest

very d ifferent to th e other four.

When p ercentage waste is plotted against mean ann ual training expend it

man agemen t, a rather d ifferent p ictur e emerges (figure 9). One partial exhigh labou r pr odu ctivity is that it is achieved by incurring a relatively hig

Incidentally, and consistent w ith the p attern for training investment and

the highest training investment (about $1,500 per an num per capita non-m

lowest w astage (about 0.25%). As explained above, because of the predom

forms of prod uction, includ ing Flawless wou ld be of questionable validit

not been plotted.

Given the par ticularly small num ber of case stud ies, and the somew hat in

of Adept, it is only possible to speculate about a relationship between traand produ ctivity. There is less sup por t for reverse causality than for d ire

correlation coefficients between annu al training expenditure per capita n

value ad ded curren t year 0.516 and p revious year 0.412; and between cur

following year 0.589 (Adep t exclud ed). (Correlation coefficients for cur re

because they result from som ewh at different sets as a consequence of the

0

10

20

30

40

50

60

70

0 100 200 300 400 500 600


Mean$valueaddedp

erhouroflabour

Adept

Dazzle

Elan

Brilliant

Crackajack

Figure 7: Average labour productivity in value terms against average

expenditure per non-manager by each wire products manu


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0

2

4

6

8

10

12

14

16

18

20

0 100 200 300 400 500 600


Meannum

berofkilogramsofsteelprocesssedperhouroflabour

Adept

Dazzle

Elan

Brilliant

Crackajack

0

1

2

3

4

5

6

0 100 200 300 400 500 600

Percentag

ewaste Adept

Elan

Brillian

Crackajack

Figure 8: Labour productivity in simple numerical output terms agai

expenditure per non-manager by each wire products manu

Figure 9: Wastage level of each wire products manufacturer againtraining expenditure per non-manager

Brilliant


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48/128


49/128

wastage and reduced labour . So, given the jobbing

productivity and training

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