The New York Times has run a series of stories written by a guy who runs a woodworking company in the Philadelphia area in which the author/ business owner shares his insights and lessons learned. The latest post is here, in which we learn about the high cost of training. Go ahead and click on a the links to some of his other pieces and get a feel for this guy's business. I actually read this piece a few days ago and have been stymied. This guy's thinking provides so many lessons in how not to do things it is hard to know where to start.
First, perhaps, is to wonder why the New York Times picked Paul Downs Cabinetmakers as the paragon from which their readers should learn. It is funny how some industry segments embrace lean at a different pace than others, but the woodworking and cabinetmaking folks have been early and eager embracers of lean. There are hundreds of cabinetmakers who realize that, in light of the fact that if GE can build you a locomotive in about four weeks, taking ten weeks to get a dining room table built is a bit extreme. Imagine the exposure had the NYT chosen to cover a lean journey, rather than this exercise in long outdated thinking.
I could highlight the abysmal accounting, some of it from simply getting the math wrong. He writes:
"I pay Bill [the guy being trained] $24 an hour (like Bill himself, this is a made up number but a good approximation of the wages I pay experienced bench hands). With taxes and benefits, he costs me $30 an hour. When he’s working at the bench, I can sell his labor for $80 an hour. If I move him into the office, no product will be built. So that costs me $80 an hour in lost production, but I’m still paying him his wages. That means the cost of his training is already $110 an hour.
Of course, someone has to train Bill. That would be my engineer. Guys like him cost about $48 an hour, including taxes and benefits. We bill him out at $90 an hour. If the engineer stops doing productive work and starts training Bill, I forgo both his production and the revenue we charge for it — but I still have to pay him for his services. That’s another $138 an hour. So the initial cost of
training Bill is $248 an hour."
Of course, even this math assumes the engineer and the trainee won't be working on real jobs during the training, otherwise the engineer will still be generating revenue.
And it assumes that no one will be hired to replace the cabinetmaker when he goes off to become an engineer – a curious assumption if cabinetmakers can bring in a net contribution of $50 an hour ($80 revenue – $30 cost). One would think you would want to bring in Bill's replacement before he starts training to be an engineer.
If you factor in that the engineer still does billable work – training Bill on real live projects – and Bill can be replaced with someone who can send $50 to the bottom line, the training becomes a lot less costly. In fact, keep thinking about the subject and it doesn't take much creativity to realize that training Bill – and everyone else – is a real good investment.
One lesson is that there are lots of ways to look at the cost of training. He seems to have gone out of his way to build a case for not doing it … just as easy to make a case for doing more of it. How often do we see that? Deciding the outcome in advance, then gathering the numbers to support that preconceived outcome.
Another lesson is in the time it takes to do all of this training. It is hardly unique to this company – seems to be a common failing at lots of companies – especially small ones – but standard work is obviously lacking. The real value of standard work is not for existing employees in existing processes. Yeah, there are benefits to be had, but for the most part, they already know the process. The real benefit is when someone new has to learn the job, whether that is a new employee or someone being cross trained. When standard work and job instructions are done right, training is easy; when it is not it takes forever with big productivity losses along the way, as the cabinetmaker describes. TWI is not just historical trivia – it is the difference between quickly and effectively training people and this guy's sad story. With TWI women made the huge leap from housewife to aviation mechanic in weeks, while Paul Downs takes three months for people to make the relatively small step from cabinetmaker to cabinet designer.
But the real problem at Paul Downs Cabinetmakers is embodied in the last paragraph: "additional training has the potential to upset the balance of power between labor and management." The "balance of power"? Are you kidding me?
He sees the fact that his niche CAD software means training his people will not translate into marketable skills at other companies as a good thing. He doesn't have to pay them as much. Now there''s an inspirational leader – one who figures out to make sure that not only he, but no one else will pay his employees much. If you click back through his history you will see that, when the economy dropped his immediate reaction was to fire 13 of his 23 people. When he and his partner got the cash flow all screwed up he hit his employees with a 15% pay cut. With that mentality it should be no surprise that he could only see the numbers that made investing in his people a losing proposition.
Obviously the tables Paul Downs makes are very good, otherwise this whole approach to people and management would have put him out of business long ago. That is not an unusual story … companies that take three steps forward via a great product and two steps backwards via lousy management, netting the one step gain. The sad part is that they think that is what running the business is all about – fighting a battle over the balance of power and bulling through absurd lead times, and then calling the one step forward a success. In fact, none of that is necessary.
Too bad the NYT chose this company rather than any one of the outstanding lean companies that could explain that engaging, training and looking for ways to enrich employees works so much better than racking your brains to come up with strategies to minimize their earnings and beat them in a power struggle. That would have made for a small business blog worth reading.