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YOUR RESPONSIBILITY FOR EDUCATION

So far in this chapter, we have discussed your responsibility for training - providing your employees with the skills they require to meet the needs of your customers. We close this chapter with reference to your other responsibility - the education of your work force and potential work force.

Training your work force and educating your work force are equally vital but significantly different undertakings. Training provides specific skills required for performance on the job. Education provides basic skills and enhances the person's capability. Fredrick Harmon and Garry Jacobs, in The Vital Differences, express the difference between training and education this way:

Whatever a person's inherent capacities, training improves the level of skills available for expressing those capacities; but education increases the level of capacity itself. Training refines the tools of expression; education improves the person.

Education trains the mind to consider many possibilities, to see things from a new and wider perspective, to question and challenge the status quo, to think and imagine, to innovate and invent, to make decisions for oneself, and to act on one's initiative.

Not only the training but also the education of your work force is vital to the success of your business. Without an educated population to draw from, you will not be able to hire the quality work force you must have for your business to survive.  And today in the United States, that educated population is not being provided.  You undoubtedly discovered this as you attempted to hire people to fill your vacancies. You likely found some of the following:

• Applicants who could barely read or write
• Applicants who could not write a simple letter or fill out an application form
• Applicants whose math skills, and perhaps verbal skills, were barely minimum

You are not alone. Here are some shocking statistics cited by Jack Grayson, the founder of the American Productivity & Quality Center, and Carla O'Dell in their book, American Business:  A Two Minute Warning:

• Ninety percent of Japanese youth finish high school as against about 75 percent in the United States.
• Today, 27 million Americans, or more, are functionally illiterate, more than the entire population of Canada; 15 million of the functionally illiterate are at work.
• A bank in the Midwest found that half of the high school graduates it hired could not pass a simple math test.
• At GM, about 15 percent of hourly employees are functionally illiterate.

There are many complex reasons why American educational institutions are failing to provide a knowledgeable work force. Yet there is very little disagreement that American schools are failing in their primary task - to produce literate, disciplined, and competent workers.

So what is your role - your responsibility - in responding to this failure of American education? Regardless of your political persuasion, it is vitally important that you get involved with other federal, state, and local government, education, and business leaders to find an answer. Take an active interest in promoting the quality of your state and local educational institutions. You will be glad you did. These institutions have a major role in providing your work force with the basic skills they will need to help you keep your business strong.

Traditionally in this country, we have paid most employees a straight hourly wage or an annual salary. Employees got paid the same amount whether or not the company was profitable. More important, they got paid the same, or nearly the same, regardless of how hard they worked. Additionally, employees came to expect annual increases in their base pay either as a cost of living increase and/or as an increase based upon their time with the company.  We might vary the increase a small amount based upon performance so that the high performers got slightly more, but everyone got approximately the same percentage increase with just a few percentage points separating the high and low performers. Some of us had a bonus system for providing an additional reward to our high performers. But the bonuses we paid rarely amounted to very much as a percentage of total compensation. In effect, most employees in the same job get paid pretty much the same and receive approximately the same increase each year. What's wrong with that? Plenty.

The major disadvantage of our traditional compensation practices is that, for most employees, base pay has lost any relationship to performance. Our employees have learned that they will make the same whether they work hard or take it easy.  Consequently, most people don't work as hard as they could. In fact, in a variety of surveys conducted throughout the 1970s and 1980s, American workers were asked whether they worked as hard as they could.  In practically every survey, workers said they didn't. When asked why, they replied, "Because all the benefits of their hard work went to managers and owners, not to employees." In short, American workers don't believe it "pays" to work harder.

A second problem with our traditional approach to compensation is that our employees now expect regular annual increases in their base pay. Additionally, they expect these increases to average 5 percent or better. At a minimum, they expect equal or slightly better than the "expected percentage increase in wages" they read about in the local newspaper. As long as the business climate was such that you could pass along these increases to your customers in the form of price increases, you could afford to grant employees the extra pay. But if your company is like most today, not only can you not increase your prices, you are looking for ways to cut costs and/or prices. If you grant wage increases without offsetting increases in productivity, quality improvement, etc., and you can't pass along these increased costs, you have a significant problem.  As little as a 5 percent annual increase would increase your direct labor cost by over 60 percent in just ten years and more that double it within fifteen years. And that doesn't include the impact such increases would have on benefits you may be paying that are tied to base wages. These would go up also. It is not hard to see how your labor costs could skyrocket in just a few years.

How then do you get out of this dilemma? Is it possible for you to offer your employees the potential for high total earnings while still holding down your operating cost? Yes, it is. But you have to go beyond base wages to create a total compensation system. Today, most authorities think such a system should consist of som or all of the following:

1.  Base wages
2. "Lump sum payments"  instead  of  annual  percentage increases
3.  Group incentive bonuses
4. Profit-sharing
5.  Pay-for-knowledge
6. Employee stock ownership

We will examine each of these and how they might fit into your total compensation strategy.

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