As the United States transforms into a more dynamic and expansive economy, it is facing a growing shortage of skilled workers, especially as the retirement of the baby-boom generation nears.
According to a 2003 study by the National Association of Manufacturers (NAM), "The Skills Gap: Manufacturers Confront Persistent Skills Shortages in an Uncertain Economy," more than 80% of manufacturers reported a "moderate to serious" shortage of qualified applicants; even though more than two million manufacturing layoffs occurred during the recent recession.
And it's just going to get worse. The study also reports that by the year 2020, the deficit of skilled workers in the United States will reach 10 million. Companies need to recruit and train new workers now, so they can become technically proficient and gain some of the older, more experienced workers' knowledge before the baby boomers' mass exodus from the workforce begins.
One manufacturing company that is doing its part to avoid a skills shortage is Alltech, a non-pharmaceutical biotechnology manufacturer of animal feed. The company, with headquarters in Lexington, KY, believes in investing heavily in training and education programs for its workers. "Alltech has always emphasized that its people need to be educated, re-educated and then educated again," said Dr. Pearse Lyons, founder and CEO of Alltech, in a statement. "We are working in a dynamic industry ... [and] searching to put out a clear message. The only way to do this is to understand strengths and build on strengths and the only way to do that is to continually educate yourself."
This principle has led Alltech to invest in e-learning and also create its own MBA program with the Smurfit Graduate School of Business in Dublin, Ireland. In recognition of Alltech's commitment to education, it is receiving Managing Automation's 2004 Progressive Manufacturing Award in the Training and Education category.
At Alltech, employees can take advantage of training programs that help them learn to use numerous software applications such as Microsoft Corp.'s (Redmond, WA) Excel and PowerPoint and SalesLogix's (Scottsdale, AZ) CRM package. Training is also available in sales and marketing, intranet and IT concepts.
Alltech chose ReCor (Evanston, IL), a Web-based training products company, as its main e-learning software provider because of ReCor's support of IBM Corp.'s (Armonk, NY) Lotus Notes platform. "We are a Lotus Notes shop and our entire intranet is Lotus Notes. We wanted something that we could integrate into our environment," says Tim Arthur, global director MIS, Alltech.
LearningDocs, ReCor's IBM Domino-based learning tool, allows Alltech's employees to access training courses through a Lotus Notes client or Web browser using the company's existing infrastructure. LearningDocs "provides interactive e-learning, just-in-time training, reference cards and help support," which includes "frequently asked questions and a discussion forum between people using the program," says Richard Moy, executive vice president, ReCor.
All Alltech employees are required to take the e-learning courses and pass with a score of at least 70%. So far, about 1,200 of its 1,500 employees have completed the program. "We've seen that it helps people and we want to build heavily on it in the future," says Arthur.
And, since its employees are spread out around the globe in 76 countries, Alltech also uses IBM Lotus Sametime, an instant messaging application, for real-time group or one-on-one training and collaboration. It saves both time and money since "higher-end executives can be involved in sales training without committing a lot of time" traveling to different locations, says Elizabeth Bagby, North America marketing manager, Alltech.
Keeping It in House
But, as Alltech officials are well aware, the skills shortage isn't limited to technology jobs. Many companies are finding there's an accute shortage of management skills which can impair planned executive succession. For instance, human resource company Development Dimension International (DDI, Bridgeville, PA) reports that the executive failure rate is as high as 50%. "That figure, in combination with baby boomer retirements, is sufficient to establish a case for an impending leadership crisis," DDI stated in a white paper. Also, 75% of companies are not confident that they will be able to fill these leadership positions.
Alltech has bucked the trend of hiring from outside the company to fill management positions. "The culture of the company has been to grow organically, and we've seen growth rates of 20 to 22% over a 25 year period," says Aidan Connolly, vice president for sales in Europe, Alltech. "It's difficult to introduce outside people. They don't understand the company culture."
The focus on company culture, often dismissed at many other companies, should carry more weight in a corporation's strategy, argues Boris Groysberg, assistant professor in the organizational behavior unit at Harvard Business School. "The specific training and relationships that people develop at work are useless at other places." Even if you're able to to poach a star employee from another company, it's unlikely they'll shine. According to a study Groysberg co-authored, "The Risky Business of Hiring Stars," the recruits "quickly faded out when they left one company for another," and most left the new company within three years. "For a company to sustain a comparative advantage, it must mentor its own workers," he said.
Executives at Alltech realized that some of their managers lacked managerial skills. "Most people were hired because of agricultural or veterinary degrees ... they acquired sales and marketing skills along the way," said Connolly. The company looked into enrolling its managers into various MBA programs, but it found most to be too expensive and time consuming, and the curriculum was not relevant to the agribusiness industry. "Alltech realized it needed to customize something that was shorter and more specific to the company's needs," he said.
Smurfit Business School, where Connolly received his MBA, has run business planning and strategy programs with other companies and offered to customize a MBA program for Alltech.
By writing case studies of Alltech's and its competitors' worldwide success stories, "we came up with the overall strategic Alltech global plan, which is the focus of the first two weeks of the program," which Alltech launched in June 2000, said Connolly. There is a total of seven weeks of training in nine different modules, which encompass strategic marketing, communications, management, negotiation, sales management, finance and leadership. Employees travel to the school in Dublin for half of the modules, and the other half are conducted in the United States.
Alltech's board of directors only offers the MBA program to managers in regions it deems strategic, therefore, limiting enrollment to a few spaces each year. So far, 59 people have completed the program, with another 20 scheduled to start in 2005, says Connolly.
Though the program has only been running for a short time, the results already support its continuation. "If [Alltech] were to spend $100,000 for each person to attend a MBA program at other schools, it would have cost $5.9 million so far, and then $7.9 million when you count the 20 people ... this year," said Connolly. Tuition and program expenses at Smurfit cost Alltech only approximately $11,000 per person.
But cost benefits are not the only positive results of the program. "Loyalty is a big factor. Highly ambitious people who succeed in the company financially but are looking for growth -- we don't see them leaving the company once they are in the program," says Connolly. Once again, this is a preemptive move by Alltech to stop the bleeding before it starts. For instance, a poll of 202 IT executives in 2003 by Teradata Corp., a division of NCR (Dayton, OH), shows that the average employee tenure is now at an all-time low of 3.6 years.
Love the One You're With
"For someone who has been with the company for 5-10 years, a conservative estimate of the cost to replace them is in excess of $100,000," Connolly says. Through this program, employees "gain a greater buy-in to the strategy and vision of Alltech," he adds, and this is critical because "uniformity of vision makes us a much stronger company."
Alltech stands out among its peers because it has actually been able to measure its return on investment for its training programs. For instance, Alltech's employee tenure is significantly higher than the industry average, reports Arthur. "Firms have never had good information of whether additional training investments will improve their profitability," states a study from the American Society for Training and Development (ASTD, Alexandria, VA). One key finding: When the 2,500 firms studied were ranked according to how much they spent on training, the companies "in the top half had a total shareholder return that was 86% higher than firms in the bottom half, and 45% higher than the market average." The study also states that, when ranked according to average per-employee training expenditures, the firms in the top quarter had 24% higher profit margins and 218% higher income per employee than firms in the bottom quarter.
Bolstered by this information, Alltech is continuing to expand and enhance its training and education programs by utilizing virtual learning environments. "Education is all about the journey, not the destination," said Dr. Lyons, in a statement. "Alltech is not just a supporter of education, Alltech is education."