Outsourcing Training and Development: Factors for Success

Overview

Praise for Outsourcing Training & Development

Based on the real-world experience of human resource vice presidents and consultants from a variety of organizations, Outsourcing Training and Development is your one-stop guide to implementing a successful outsourced training program.

"This book brims with practical guidance, wise counsel, rich examples and, best of all, helpful tools. It's a must for HRD or training managers and all other key ...

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Overview

Praise for Outsourcing Training & Development

Based on the real-world experience of human resource vice presidents and consultants from a variety of organizations, Outsourcing Training and Development is your one-stop guide to implementing a successful outsourced training program.

"This book brims with practical guidance, wise counsel, rich examples and, best of all, helpful tools. It's a must for HRD or training managers and all other key stakeholders involved in outsourcing any part of training."
—Harold D. Stolovitch, emeritus professor, Universite de Montreal, principal, HAS Learning and Performance Solutions and author, Telling Ain't Training and Training Ain't Performance

"In step-by-step details, Judith Hale outlines how to make the right decisions about outsourcing securing the proper agreements and keeping the process on track. In an easy-to-read format with figures and charts, this is an indispensable tool for those involved in outsourcing."
—Jack Phillips, chairman, ROI Institute, Inc.

"The charts, tables, and guidelines are superb resources for both sides of the relationship, and Hale's many examples let us learn from others who have traveled this potentially treacherous path before. Outsourcing Training and Development is the perfect map!"
—James J. Hill, Jr., CEO, Proofpoint Systems Inc.

"Buy this book and use it. What I like most about the book is that it does not paint outsourcing as the panacea that some might think that it is. Like anything else, outsourcing requires hard thinking, planning and managing. Judy Hale gives you that and much more."
—William J. Rothwell, Professor-in-Charge, Workforce Education and Development, The Pennsylvania State University

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Product Details

  • ISBN-13: 9780787978976
  • Publisher: Wiley
  • Publication date: 12/2/2005
  • Series: Pfeiffer Essential Resources for Trainin
  • Edition description: Includes CD-ROM
  • Edition number: 1
  • Pages: 192
  • Product dimensions: 8.10 (w) x 9.30 (h) x 0.80 (d)

Meet the Author

Judith Hale, Ph.D., is president of the consulting firm, Hale Associates. Their services include consultation on alignment, assessment, certification, evaluation, and integration of performance improvement systems, performance management and strategic planning. She is also the author of The Performance Consultant's Fieldbook, Performance-Based Certification, Performance-Based Management, and Performance-Based Evaluation all from Pfeiffer.

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Read an Excerpt

Outsourcing Training and Development (with CD-ROM)


By Judith Hale

John Wiley & Sons

ISBN: 0-7879-7897-3


Chapter One

Outsourcing

A Business and Economic Model

This chapter is about what is driving the increased interest in outsourcing training. There are three major drivers-economic, technology, and training's past performance. The economic drivers are the number of potential buyers and providers of training goods and services, the number of dollars spent on training, and the amount of venture capital available to new consulting firms. According to the Bureau of Labor Statistics (BLS), there are more than 200,000 people employed in training and development and there are approximately 3,800 independent training consultants. According to the U.S. Census Bureau, there are almost eighteen million sole proprietors and approximately two million partnerships and five million corporations in the United States. Of those enterprises, more than a million have five hundred or more employees, and almost 600,000 have more than 10,000.

It is difficult to accurately establish the amount of money organizations spend on training, as the number differs depending on the source. What is known is that larger organizations spend more money on employee training and they develop and market training to their customers. According to Business Week, industry is spending approximately $63 billion annually on training and an increasing proportion is being outsourced. According to the Exceleration Group, expenditures or the market size for training and development services in North America will exceed $120 billion in 2004. This includes an estimated $53 billion targeted for employee training expenditures (Training, October 2003) and approximately $65B for customer training. This investment in training in turn is attracting private investors who are underwriting both new and established training firms.

The increased use of the intranet and the emergence of technology-based training is another factor driving outsourcing of training. Technology and web-based training have created a need for instructional designers and training managers who understand both technology and learning, a combination not traditionally found in the training function. Today, the team involved in the creation, delivery, and maintenance of training consists of highly skilled programmers, graphic artists, and instructional designers experienced with multimedia suite development tools and web-based technologies. Outsourcing firms are able to hire or subcontract with the full array of specialists required to produce technical training programs capable of being deployed by way of an intranet to workers dispersed all over the world.

Another driver is the failure of training departments to demonstrate value. Training functions struggle with knowing how to show that their programs contribute to their organization's goals, and the fact that they are considered fixed costs makes them vulnerable to cost-cutting measures. Some drivers are shown in Figure 1.1.

The investment in training is expected to increase because, according to the Bureau of Labor Statistics, organizations believe training develops skills, enhances productivity and quality of work, improves morale, and builds worker loyalty. According to the ASTD 2004 State of the Industry Report, only 8 percent of their 213 benchmarked organizations do Level 4 evaluation (demonstrate the value gained from the investment in training); therefore, very few training departments can demonstrate that they add value to the organization. Yet, businesses believe there is a direct correlation between the levels of investment in training and a firm's performance in the marketplace. Other factors that are driving the need for training are new products, technology advancements, and increasing regulation. The work environment is more complex, the workforce more dispersed, and there is a growing number of jobs in fields that are generating new knowledge.

At the same time the investment in training is growing, business and industry are being pressured to cut costs, reduce headcount, and avoid long-term liabilities like pension plans. As a result, organizations are looking for ways to meet the demand for training without hiring training specialists or investing in the development of their training function. A solution is to outsource.

A LITTLE HISTORY

Given that outsourcing is leveraging the capability and capacity of external resources long term, outsourcing today does not differ significantly from the large training contracts of the past. Major industries, particularly telecommunications, computing, automotive, and the military, have outsourced training services for years. The contracts were for millions of dollars and ran for a number of years, and contracting helped the organizations avoid hiring additional personnel. Similarly, sole proprietors and small and medium-size businesses have always outsourced their formal training and still do. Small and medium-size firms outsource through the local Better Business Bureaus, professional and trade associations, and community colleges. Large firms hire the expertise of consultants and training firms. Smaller firms tend to do basic skills training, and larger firms tend to do job skill training. So the attributes of leveraging external resources long term is not new.

Outsourcing Versus Contracting

The question becomes one of when is a relationship one of contracting versus outsourcing. Contracting, as a business model, is to use vendors to do special projects that are one-time events or supplement internal staff on specific assignments. Contractors are hired to augment training staff. Outsourcing, as a business model, is to substitute external resources for current employees. The goal is to either reduce the number of full-time employees (FTEs), avoid hiring more people, or replace current staff with outsourced personnel so they can be redeployed to other needed tasks that are perhaps less easily outsourced. The result is that the organization can either reduce or avoid increasing fixed costs. Here are some examples. Outsourcing is the acquisition of external resources to perform current tasks or new ones so as to:

Reduce headcount;

Avoid the need to increase headcount; or

Keep headcount the same but reassign them to tasks less easily outsourced.

Contracting is the acquisition of external resources to:

Increase capability short-term or Augment staff's capability short term.

RESEARCH FIRM

Background: The firm has 8,000 employees and 2,000 contractors on site. The Training Department has thirty full-time employees. Last year the department delivered 116,00 training hours.

Contracting: If there were a project requiring someone with skills in developing a website or creating animated graphics for one or two programs, the department might contract with an individual or firm to do the work.

Outsourcing: If, however, the department wanted to deliver more training by way of websites or wanted the ability of add animated graphics to all future programs, it could either hire another employee (add an FTE), train one of its thirty trainers (redeploy the FTE), or outsource (not affect the FTE, yet expand capability).

THE SAME RESEARCH FIRM

Background: The firm spends about $1.5 million a year on tuition reimbursement. Currently one of the Training Department's thirty employees is assigned full-time to manage the tuition reimbursement program.

Outsource: The training manager wants to outsource tuition reimbursement because this would allow her to:

Replace the person responsible for tuition reimbursement with someone with the skills that would be of greater value or

Reassign the person responsible for tuition reimbursement to tasks he or she is already capable of doing but does not have the time to do.

Outsourcing lets the training manager still provide a service clients value, yet expand her department's capability by reassigning a resource to tasks of greater need.

Contracting: If the training manager only wanted to redeploy the person in charge of tuition reimbursement for a short time, perhaps six to nine months, at the end of which time the person would return to the old assignment, the training manager could just contract with someone.

POLE CLIMBING

Background: In the early 1980s the telephone and electric companies had a need to better train people to climb utility poles. All of the phone companies and utility companies got together and adopted a common set of standards for pole climbing.

Contract: The companies contracted with Southern Bell to develop a pole-climbing course they would all agree to use.

Outsource: The group then outsourced the delivery of the pole-climbing course to community colleges, allowing the companies to train about 75,000 people the first year.

Developing the course was a contract because it was a one-time event. All of the companies had the internal capability of developing the course, but wanted to avoid the cost of everyone doing their own program.

Delivery was an example of outsourcing, as the program would be needed annually, and if every company delivered the course they would have to either hire trainers or redeploy their current trainers. Delivery would affect FTEs.

CAR DEALERSHIPS

Background: There are approximately 21,000 independent car dealers and 55,000 independent used car dealers in the United States. A dealership might have a manager, assistant manager, sales manager, service manager, sales personnel, and service technicians. The number of sales personnel is based on the number of new cars delivered monthly. The industry standard is one sales person for every one hundred new cars delivered.

Outsourcing: Owners contract with independent consultants, such as Tony DeSalvo, to train their managers, sales managers, sales force, and service advisors. Tony has had a regular clientele since 1995. His programs include all aspects of the sales and sales management process, including negotiations, presentation, and recommending the right vehicle for the buyer. He also has a program for handling Internet sales. Outsourcing their training allows the dealerships to avoid hiring trainers.

Therefore, a relationship is one of a contract if it is

For a single purpose or for a one-time project

Has no impact on FTEs

To acquire needed talent to bridge a specific gap

It is outsourcing if it affects FTEs and fixed costs by enabling the training function to:

Reduce headcount and the related overhead

Avoid increasing headcount

Redeploy current headcount

Is a long-term solution for increasing the training function's capability and capacity

WHY OUTSOURCE

Organizations choose to outsource their training in deference to building internal capability and capacity based on a combination of business and training reasons, such as:

Focus on core competencies Gain scalability of the workforce to avoid the need to lay people off Avoid long-term liability associated pensions and profit sharing Avoid the cost of building internal competence, especially within the training function Manage training costs Improve the revenue-per-employee ratio Acquire specific talent to support a new strategy or project

Focus on Core Competencies

The focus on core competencies is a newer business model in and of itself. Organizations are encouraged to ask: "What business are we in? What must we do and be better at to stay competitive in the marketplace? What functions are best done by other organizations that have that function as a core competency?" A result of focusing on core competencies is the elimination of those functions not seen as core to the business, including support or staff functions, also known as general and administrative or G&A. Support and staff functions are necessary for running the organization's infrastructure, but of little interest to customers unless they are inefficient and interfere with service delivery. The more common G&A functions being outsourced include:

Accounts payable and receivable Payroll Compensation and benefits Information technology, especially the Human Resource Information Systems (HRIS) Legal services Public relations and communications

Depending on an organization's view of its core competencies, it may outsource its marketing, manufacturing, distribution, customer support, and product installation and repair.

Training is by definition a support function-particularly if it is viewed as a cost center that does not have a recognized value to the organization-and therefore susceptible to being outsourced. Just because training is not perceived as a core competency does not make it unimportant. It means the organization chooses to turn the responsibility over to an external firm that has training as its core competency. It wants a firm whose personnel are fluent in all aspects of training's processes, including design, development, delivery, and administration. The organization also wants an external resource with the latest technology and systems required to efficiently develop and deploy programs to employees wherever they are located.

Gain Scalability

Scalability is the ability to quickly downsize or grow in response to market demands. The telecom and high-technology industries experienced a significant economic downturn between 1999 and 2003. The automotive industry is cyclical. It goes through good times and bad times. Training departments are especially affected during bad times when organizations downsize. Training functions may lose the majority of their personnel, and even whole departments can be eliminated. Organizations are looking for ways to avoid the need to lay off people in the future. One response is the ongoing search of the right size. Another response is converting functions that are fixed costs or G&A to variable costs by contracting and outsourcing services. When a company decides to outsource all or part of a function, it can construct an agreement that can be adjusted annually, even quarterly, based on need. It becomes the outsourcing firm's dilemma as to how to retain and keep qualified personnel billable. The assumption is that outsourcing firms are better able to respond to changing marketplace demands because they have more than one customer and, therefore, have the ability to shift personnel to different customers' projects.

Avoid Long-Term Liability

The financial scandals experienced over the last few years resulted in the accounting profession revising its accounting standards. The new standards require firms to be more conservative in their projections as to what their long-term liabilities are related to employees' pension plans. They must more accurately account for costs that are considered overhead or fixed. The organizations must significantly increase their contributions to their retirement plans and must more carefully estimate how many employees will stay until retirement. Outsourcing is a way to avoid this liability.

Avoid Cost of Building Internal Competence

To meet the need for training requires organizations to invest in the training function's skills and technology. Training professionals must be proficient in instructional design, adult learning theory, the use of electronic authoring and delivery systems, and learning management systems (LMS). Organizations may be willing to invest in keeping their line workers current, but not staff. The debate becomes one of if and when to hire, what skill sets to hire, and what to outsource.

The federal government and the military in particular are mandated to use commercial services, instead of hiring personnel. They have developed a set of guidelines to help them weigh the economic and non-economic factors of hiring compared to outsourcing. The argument for hiring requires looking at the job, the expertise required to perform the job, the availability and market value of that expertise, and for how long the expertise will be required. The guidelines suggest weighting the following:

Costs

Employment costs-salaries and benefits. This cost can be significant once training professionals become vested in the organization's pension plan. Currency costs-the cost to keep training professionals current in the subject and the technology. The knowledge base for some jobs is static; but it is ever-changing for training. The cost of staying current can be significant, and this cost exists for vendors as well. (Continues...)



Excerpted from Outsourcing Training and Development (with CD-ROM) by Judith Hale Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

List of Figures.

CD-ROM Contents.

Preface.

Introduction.

Chapter 1: Outsourcing: A Business and Economic Model.

A Little History.

Why Outsource.

What Is Outsourced.

What the Relationship Looks Like.

Implications.

Missteps and Oversights.

Summary.

Where to Learn More.

Notes.

Chapter 2: Identifying the Need.

Determine Clients’ Needs.

Determine Criticality and Priority.

Implications.

Missteps and Oversights.

Summary.

Where to Learn More.

Notes.

Chapter 3: Assessing Capacity and Capability.

Assess Strengths.

Assess Weaknesses.

Conduct Job Task Analysis.

Implications.

Missteps and Oversights.

Summary.

Where to Learn More.

Notes.

Chapter 4 Selecting the Outsourcing Firm.

Set the Baseline.

Define Roles and Responsibilities.

Define the Requirements.

Define the Selection Criteria.

Recruit Potential Outsourcing Firms.

Issue the RFQ.

Issue the RFP.

Convene the Panel and Decide.

Implications.

Missteps and Oversights.

Summary.

Where to Learn More.

Notes.

Chapter 5: Contracting.

Prepare the Contract.

Draft Master Agreement.

Determine Scope of Work.

Draft Addenda.

Agree on Terms and Conditions.

Implications.

Missteps and Oversights.

Summary.

Where to Learn More.

Note.

Chapter 6: Starting Up.

Build Contract Profile.

Set Up Governance Process.

Develop Management Plan and Schedule.

Create Communication Protocols.

Develop Document Standards and Controls.

Agree on Deliverable Standards.

Identify Intellectual Property.

Create Transition Plan.

Create Dispute Resolution Process.

Implications.

Missteps and Oversights.

Summary.

Where to Learn More.

Chapter 7: Managing the Relationship.

Provide Oversight.

Implement the Plan and Protocols.

Share Expectations and Agree on Goals.

Communicate.

Stay Current with Needs.

Measure and Report Results.

Celebrate Success.

Improve Processes.

Implications.

Missteps and Oversights.

Summary.

Where to Learn More.

Chapter 8: Closing Out.

Notify About Termination.

Transfer Intellectual Property.

Return Physical Property.

Reconcile Financial Obligations.

Terminate Clearances, Codes.

Execute Final Performance Review.

Orient the Training Function.

Implications.

Missteps.

Summary.

Where to Learn More.

Notes.

Index.

About the Author.

Pfeiffer Publications Guide.

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