How can we truly value the results of our investment in continuous training for our employees? Is not the full assessment of a company’s worth based at least in part upon the value of that employee-training investment? Consequently, have we not arrived at a new “covenant” between employers and employees: one which stresses providing career education that results in employability over guaranteed employment? John Haggerty’s illuminating article addresses these questions. Of course, Fairchild Semiconductor is a big firm, so one might dismiss much of his fervor as the province of the large corporation. To do so, however, would miss the point. Large or small, the issue for you and your company remains the same: how to best invest in, and in return, receive the full value of each of your employees — whether they number one or one thousand. — Michael Donahue, Business Editor
Is Fairchild’s Focus on Employee Recruitment and Development a Humbug?
by John Haggerty, Manager of Fairchild Learning Center, Fairchild Semiconductor
Consider the following statements:
Most of us in business have heard something like this before. Many of us have mouthed these or similar words. I wonder how many of us really believe what we are saying. Despite having been associated with employee learning in one role or another for more than a decade, I often have found myself pondering the link between employee development and improved business performance. Is there really something tangible here, or am I focused on something simply because the dominant discourse of our culture points us in that direction?
Since I tend to subscribe to the notion that whatever the mind seizes and dwells upon with particular satisfaction is to be held in suspicion, I have continued to attempt some means of measurement to reassure myself that Fairchild’s notable employee development efforts have been fruitful. I have attempted to apply Donald Kirkpatrick’s utilitarian four-level model for evaluation training programs, with which most trainers are familiar. I have even gone so far as to apply a technique called “utility analysis” (advanced by Michael Burke at Tulane) which performs a fairly rigorous before-and-after statistical analysis. The former made us feel good and little else, and the latter was arcane to the point of being useless for any general administration. I have had related conversations with human-resources associates in our employment group. I asked our employment manager how we determined whether the increased performance expected from spending the extra time and money necessary to hire the very best was returned. She, too, was confident that the value was there but was likewise unable to put a hard number to it. The specter of a humbug loomed — that is, until I was involved with some of the legal and administrative components of making Fairchild an independent company.
Some people associated with the transaction asked a very reasonable question. “You are assigning the new Fairchild enterprise a certain value (hundreds of millions of dollars). When we evaluate the bricks and mortar and equipment, we find its worth to equal roughly half of the assigned value. The remaining asset is the workforce. How is it that they are worth the remainder?” (Please allow me the literary license to ignore the value of existing business relationships when considering this equation. I was not asked to do so at the time and, given the scale of things, my unfolding contention is not compromised by so doing.)
My approach to addressing this query was simple. If we did not have any workforce in place, how much would it cost to hire and develop an entire employee base able to perform to the business standards required? I investigated the question, dug up some historical data, and presented it. I was only halfway through my presentation to the auditing party when they were satisfied and went on to investigate other matters. I have to admit that it was edifying to do the math. Our investments in people had paid off in a very tangible way and had caused me to consider the entire “return on investment for employee development” issue in a new light. I shall explain.
For the sake of this discussion, let us use $200 million as the difference between the value of the bricks and mortar and the assigned value of the company. At the time in question, the headcount at just our South Portland site was around 1,150 with 750 additional employees at other U.S. sites. This total was divided among operators, technologists, business specialists, and managers. My task was to show that it would take more than $200 million to duplicate Fairchild’s entire domestic workforce. I chose to do it using South Portland staff as representative, and I extrapolated from that.
To people unfamiliar with the process, hiring may seem a relatively straightforward process. You have a job opening, you put an advertisement in the paper, and you then easily choose the best candidate from amongst the multitudes of local folks that apply. Given certain job openings and economic times, this can be the way it goes, although this is much more the exception than the rule. If we were recruiting a seasoned technologist, it is much more likely that the advertising would take place in a number of large markets and that search firms would be retained. It is also likely that qualified candidates would come from all over the country, requiring that we fly finalist candidates and their spouses to Portland for an extended interview and familiarization session. For some candidates, this can occur more than once during the selection process. Once an offer is made and accepted, we pay the search firm’s fee, and also pay to relocate the new employee and his or her family. And all of this is before the new employee starts to work. To find what it would take to hire our existing workforce, our employment group calculated the average cost per hire for each job type and did the math. The result was a significant figure representing what it would cost simply to get us all through the door. I considered this as cost one of two. Now, how much do we need to invest to get all these new people up to speed to do their jobs? I needed to calculate cost two.
The first step after hiring all new Fairchild employees is a one-, sometimes two-week, orientation. This process is designed to familiarize new employees with the people, culture, benefits, policies, and practices of Fairchild. This was a relatively easy cost to calculate given the known wages and resources involved.
Next, what would it cost to educate this newly oriented group so that they would have the same advantages and experience as currently exists? I broke this investigation into three segments.
Direct job training: We focus on this area to assure that everyone has the skills they need which, when applied directly to our business processes, results in top-quality products and services. While this seems a worthwhile enterprise for many reasons, it is also a requirement that we must satisfy to successfully navigate the many customer and quality-standards audits we undergo. This is a primarily internal process which allowed us to generate a good estimate of total costs.
Professional development: This is the area of employee development open to all our employees. We understand that there is no stasis associated with our high-tech business arena. Businesses like ours are always moving — either forward or behind — and we choose the former as our direction. In order to support this positive momentum, we recognize that all of our employees must prepare today for tomorrow’s challenges. This may involve learning how to change a current job to make it viable for tomorrow’s demands. It may mean understanding our business climate in general and Fairchild’s strategy in particular, when redesigning work environments to support future opportunities. And always, at Fairchild as elsewhere, ambitious employees seek opportunities to learn how to perform better in support of personal advancement. The total costs associated with professional development were a bit more difficult to procure initially because a significant portion of the initiative was done offsite, for example at seminars around the country. Thanks to the computer age and databases, however, we were able to calculate a relatively accurate, easily defendable total for this area as well.
Formal education: This area includes formal courses and degrees our employees take locally through our State University and Technical College Systems as well as through a number of in-place distance learning mechanisms. Fairchild recognizes the value to both the employee and the company when all of us engage in some form of continuous learning. As employees increase their educational credentials, it offers us the opportunity to promote from within, which serves everyone. Our tuition assistance policy, among the most generous in the country, has encouraged over 350 U.S. Fairchild employees to be enrolled in formal higher education during the last two years. The reimbursement for these two years alone was just under $750,000, which becomes a very large number indeed when expanded to reflect the seniority of our workforce.
As I began to present the total costs associated with hiring and developing our existing workforce at that time, it quickly became apparent to the interested parties that they would be hard-pressed to duplicate Fairchild’s people if they had but a mere $200 million to do it.
So, is dedicating appropriate amounts of financial and other resources to hiring and developing a world-class workforce a humbug? A group of New York investment bankers did not think so, and I am now confident that we can utilize a businesslike process to document the value of our human capital to show otherwise.
Humbug? I do not think so.
In conclusion, I should point out another factor that we at Fairchild consider as important as the financial returns we realize, by valuing and investing in our people. We subscribe to the notion that a new covenant exists between businesses and employees. The old covenant implied lifelong employment with a single employer as the way to succeed. Come to work every day for thirty years and you can retire with your gold watch. Whether this was ever really the widespread case in this country is immaterial to this discourse. The fact is that honest and candid businesses, particularly high-tech businesses, realize that such a promise cannot be made in good conscience. Things change too quickly and dramatically for any business, no matter how promising things seem at the moment, to assure such tenure. The new covenant is one by which we can face the future squarely and look it in the eye without flinching. By ascribing to the tenets of this new covenant, we maximize the probability that our business will succeed and at the same time assure employability rather than employment. This is a distinction of considerable difference.
John Haggerty can be reached at 207.541.8901, jhaggert@spf.fairchildsemi.com