Before we get into some of the details about why companies train and some of the cost they incur in doing so. It's useful to make a distinction about the kinds of skills that companies are trying to develop. A classic distinction that we lean on a lot in this field is a difference between firm-specific skills and general skills. What are firm specific skills, firm-specific skills are skills that are only useful in a single organization, kind of what it says on the tin. If you think about, for example, somebody working in a store, for them, it's going to be pretty important to understand the store layout. Where different products are both so they can restock their products and also so they can direct customers around, maybe useful for them to know. Probably very important to know something about all of the products as well. That's knowledge, hugely important in that store but if they moved to a different company, they're not going to need it. If we're working in a warehouse again, understanding the layout of the warehouse, understanding the details of the different processes that I'm supposed to follow, that's very important but likely to be very different somewhere else. If I'm a customer service representative in a call center, what do I need to know? I may have script, but still some understanding of the products, some understanding of the challenges that different customers have, I need to have that, again, going to be different elsewhere. There are a lot of skills that we need on our job that are hugely important the particular company where we're working, but as soon as we change companies, we'll use different skills. We call these firm-specific skills. What then are general skills? General skills are everything else. The very big basic, the bizarrely named reading, writing, arithmetic, the kind of basic skills that we have, those are general skills. They're going to be useful whatever organization we work in, and some more advanced skills. There are going to be, for example, some technologies that are used throughout the industry and so as I go from company to company, understanding that technology and those processes is valuable. There are some basic customer relations skills that we can imagine, again, are useful in different places. For example, how to deal with an upset customer, how to reduce conflict, that's going to be valuable and some of the details of stock handling, presumably. If you're in a clothing store, how to fold and display merchandise well, that may translate across companies as well. Some of the skills that I need are only valuable in the company where I'm working. Other skills that I need potentially valuable in many different companies. Why make this distinction? Because it has important implications for when we need to train and what some of the costs of doing so might be. That's what I want to go into next. Let's talk about firm-specific skills. Obviously, one thing that's different between general skills and firm-specific skills is people are not going to come into your company with firm-specific skills. We can potentially hire people who have a high degree of general skills, who have all the basic competencies we need, who know the general technologies we're using and all of those things, because firm-specific skills are only used in our company, we're not going to be able to hire people by and large who already know our store, its layout, and so on. Firm-specific skills we're going to need to do training if we want people to have them. On the other hand, that training is costly. If we think about some of those costs, the biggest one is the employee time in training. Every hour that I'm training somebody helping them to understand my culture, my process and so on is now where I'm paying them, but they aren't delivering value to me and so that's expensive, and you see a lot of companies, maybe it takes four weeks, six weeks of training before somebody is ready to start, that's very expensive. On top of that, we have to develop training materials which they can use, we have to pay for the time of the trainer. Certainly, when we invest in firm-specific skills, it's expensive and a lot of people are nervous about doing so. The common refrain is, what if I spend all that money training people and then they leave? The response to that tends to be, what if you don't train these people and then they stay? Ultimately, if we want our people to perform their jobs properly, particularly where those jobs require some knowledge that's specific to the organization, then we need to give them this training. They need to understand our core process and technology. If we want to be productive in our warehouse, for example, we need people who really know what they're supposed to be doing and how to use the technology. If we want people to be good salespeople, they need to know our products, really understand them and be able to explain and sell them to our customers. Clearly the extent of training we're going to give them, this is going to vary depending on our product complexity. For an example of the importance of this, take the Cheesecake Factory. Probably not many of you have been to Cheesecake Factory, it's a restaurant in the US, you tend to see them particularly in malls. What the Cheesecake Factory is particularly known for, is having a gigantic selection of meals. I think they have over 200 dishes, and actually very difficult when you're sitting there trying to figure out what it is that you want to eat. There's pages and pages and pages and pages of is it ever going to end? Here's another page of the menu. Lots of things that you can choose turns out to be quite good actually if you're at the mall with your family, because if nobody can agree on what kind of food they want to eat, well, it's all there at the Cheesecake Factory. That's good, but think about being a server at the Cheesecake Factory. What does this mean? It means that people can ask you questions about what's on any of those endless pages in the menu about any of those products, and if you're going to offer good service, you need to be able to answer each and every one of those questions. That means that Cheesecake Factory, when they hire new servers, they have two weeks of training just on understanding the menu and understanding the products at the end of which they'll actually give people a test which they have to pass. If you've got a complex product selection, you actually have to invest quite a lot in having people understand those products if they're going to sell them effectively. Another piece of this is exposure to organizational culture. We'll talk a little bit about culture in the next module when we're thinking about motivation and so on. But it's an important part of providing consistent experience for customers. It's an important part of what helps people know what they're supposed to do within organizations, but they need to know the culture, particularly new people. Another thing we try and do often with training, it's just help people understand the culture. If you take my favorite example, Trader Joe's, how do they get outstanding customer service? One thing they do is they spend 10 days with new hires training them. Much of that training is not actually about specific products, about specific processes, it is about understanding the culture by understanding what it means to work at Trader Joe's and what is expected of them. If we want to have a strong strategy, if we want to deliver high productivity, good value to customers, all of those things I've talked about, we need the organizational capacity, the ability of our people to do many things. Strong training is going to be part of developing in them the firm-specific skills that they need to do that. That's firm-specific training. How much you want to do it is going to depend in part on how unique your products and your processes and culture are and how much you want to really train people in them.
