What about general skills training? Well, general skills training is different for two reasons. First off, you have more of a choice. In practice, you can go out and hire people who already have those general skills, you don't have to develop them by training. The other reason that they're different is that actually some of the costs involved in general skills training are different. The things that we've talked about, what makes training expensive, is still there. The time that the employee spends in training, I still have to pay for that, the development of training materials, the trainer time yeah, I still got to pay for that. But there are other costs as well. So to say, what's different about general skills, is they're useful in other places. If I invest a lot in developing my employees, I raise their skills, then they're better at doing things than they were before. Potentially, that means it's going to be easier for them to get a job somewhere else with these new skills than it was when they joined me. Indeed, if I have a reputation for being really good at training people, suddenly I'm a very attractive place for other companies to poach from. So there's this real concern that the more that I train my people in general skills, the more likely people are to leave. How do I overcome this? One way that I can do that is by increasing the amount that I pay them. You're more valuable, we have more outside options now, I'll raise your pay so that you stay. That makes sense. But now when I'm thinking about calling it, how much am I going to train? I'm saying, well, I'm going to pay to train you, and then I'm going to have to pay you more as well. It's almost like I'm paying for this training twice and so in that way, we often think that the cost of organizations pay to train in general skills ultimately are going to be higher. One solution when the economists have suggested is, maybe this means that organizations just shouldn't pay for general skill training. They should only pay to give people firm-specific skills. It makes sense. But if you look out there, it doesn't actually describe what companies do. We do see a lot of companies that invest a lot of money in what is very clearly general skills training. To give some examples, Cheesecake Factory, the store, the restaurant with the enormous number of dishes I was just talking about and obviously [inaudible] cheesecake. They will actually pay to help some of their staff in the kitchen who are immigrants, pay them actually for English as a second language training to improve their language skills. This is going to help them anywhere, it's going to make them easier to work with at Cheesecake Factory, but it also makes him horrible elsewhere, classic general skills. Chipotle, the Mexican quick service restaurant I've talked about in the past and other good employer, they actually helped fund degrees for their employees, so they will help pay for them to go and study and earn a business degree anywhere else and Chipotle will pay for it. Again, this makes it much easier for them to find jobs somewhere else. It's a big investment in general skills. Amazon, amazon.com, enormous Internet retailer, couple of years ago they announced that they were investing $700 million in providing general training, particularly in technology skills for their employees. Even though we say that a lot of companies may not want to invest in general skills because they could just hide to get them, and it's going to be very expensive to provide them, we see that they still do it. Clearly, there is an argument for investing in general skills. What is it? The first is, skills may be general, but they may also be very scarce and so in principle we might say, "Oh, you should be able to go out and hire somebody with those skills." In practice, it may be hard to find. I think this is a particular issue with skills for working with new technologies, so like I mentioned Amazon they were going to invest $700 million in training their people. A lot of that interest was in relatively new fields like machine learning. In principle, they could go out and hire a bunch of people there, but there aren't that many people being trained in it. Amazon is so huge, the demands that they're likely to have in terms of the number of people that they want to hire are so large, it may actually be very hard for them to go out and find enough people to meet their needs. There's a similar story a couple of years ago with AT&T big wireless and cable company in the US saying they were going to spend a billion dollars training their employees in new technologies. You're very big, you have high demand for scarce skills, is just impossible that you're going to be able to find all that skills on the outside market. For those employers, internalizing some of those costs, actually doing the training themselves may make sense. That's one reason. Second reason why you might do this is because you want to create unusual combinations of skills and attributes. Often we're looking for multiple different skills in our people, and we might say, "Yeah, there are plenty of people with this skill, there are plenty of people with that skill; how many people can I find to have both?" Maybe it's easier to hire people with this skill and then train them in that skill. Sounds a bit abstract. Let me give you an example. I talked in the last module about Pret a Manger a British sandwich shop, I expressed my disappointment about their failure to bring the [inaudible] cheddar and pickle sandwich to the UK, I hope you remember it. Anyway, I talked about how for them, when they're hiring, what they're looking for is passion, clear talking, and teamwork. They say, we're going to train people to make sandwiches and coffee because it's a lot easier to train that than it is to train in those basic attributes. Now in principle, they could save themselves in having to train people in making sandwiches and coffee, that's going to cost them money. If they could find people who had passion, clear talking, teamwork, the ability to make sandwiches, the ability to make coffee, getting quite a memory problem for all these. First of all, they'd have to remember those were the five things they were looking for. But more broadly, they wanted to find all of those five together. There are probably far fewer people who have all of these, and so sometimes if you have people who have some of the things you want, maybe a lot easier to train them in the other things you want than try and find people who have the full set. I think a special version of that is with internal promotion. I talked in the last module about the real value often of filling jobs by promoting people rather than hiring them. The people who I promote, they really understand my organization, they've got all this stuff about understanding the products, the technology, the culture, all of those things which I can't bring an outsider who has. But they're also going to need the skills to succeed at the next level. For those people again, maybe it's a lot easier to take the people I already have, provide them with some of the general skills that will help them move up to the next level than would be to bring in somebody who already has those skills, but doesn't know enough about the organization. I think it's probably not a coincidence that some of those organizations that really do invest a lot in general skills development of their employees Chipotle, Cheesecake Factory, some of them Trader Joe's to some of them, all of them really do also place a great emphasis on internal promotion, they tend to go together. Then I think a final reason, and I'll come back to this in the next module, is about building loyalty. We think about it as very economic exchange between employer and employee, they work I give them money, but there's a big psychological component as well. The more that we feel that people are investing in us and helping us out, the more committed we are likely to feel to them. Partly, I think in a very psychological reciprocal way, maybe occasionally in a more calculating way and if I'm doing a five-year degree which is being funded by Chipotle then it's an incentive to stay while that degree is being completeness. It could be another way to really foster attention by providing people with something that they value. Even though we often say general skills training is costly, in practice, there are many reasons why organizations might want to do it and might struggle to really get the human capital they need than not prepared to provide this training at various times. What's the overall takeaway? I mean, as you think about building organizational capacity, training is a big part of it. Understanding what are some of the firm-specific skills that people are going to need, making sure that we have a strategy and a process in place to provide those skills. Understand more generally, with the kind of people who we can get, what are the skills we're going to train for? What are the skills that we're going to hire for? Then think about how this fits with some of the other dimensions I'm going to talk about, particularly about the cost of attrition then down the line once we've invested in these people. I'll talk about some of those things in a few minutes. First though, I want to talk a little bit about how we actually provide that training.
