Costing the effectiveness of training: case study 2 improving Parcelforce productivity

This study is dealing with a more global approach to productivity and the parameters of the study are less easy to isolate than they were in the driver study.

The general manager of the office in question had expressed some concern about the low British Standard Institute (BSI) productivity ratings being achieved by his office in .comparison with other Parcelforce offices

Since it was proposed to direct additional parcels traffic to this office as part of a rationalization training input designed to increase this programme, he had requested a ratings.

BSI ratings are set for every major industry and are a measure of the relative productivity of different companies or of different regions within a large national or multinational organization.

In the case of Parcelforce the BSI figure in question relates to the number of parcels being processed through a parcel handling office in a unit time.

This figure is influenced by the level of business in the area which will be lower in times of recession and higher in times of rapid economic growth) and most importantly, by the way in which the parcel handling staff and the overall operation is managed and by the number of man-hours expended in handling a given number of parcels.

As in all industries of this type, the company has limited control over the volume of business on a day-to-day basis and the timing of demand. This means that the actual parcelhandling operation needs to be carefully and flexibly managed if it is to remain productive.

What follows is an analysis of the effectiveness of a training programme designed to increase the BSI rating of the office in question which would represent a direct measure of productivity improvement. Cascio[2] indicates that with the current levels of expenditure on company training and the inevitable pressures for cost control, the operations manager is likely to ask what are we getting for all this money and time? Phillips[3] suggests that management commitment to training will increase when training programmes obtain measurable results that they understand.

Case study on improving parcel handling Productivity The training course was targeted at the 16 managers who were responsible for running the parcel office. Consultant trainers were given a detailed brief which included the following statement: To increase overall productivity by ten (10) BSI points[and]to ensure that local managers are capable of maintaining a long term improvement in productivity.

The integrated training programme, which was provided over a period of 14 weeks, consisted of two major components: productivity training and coaching; and flexible learning management programme, the costs of which are shown in Table I.

The managers were enrolled on a flexible learning management programme to run in parallel with the specific productivity training. This was seen as an opportunity to reinforce the specific training and coaching they would receive in productivity issues and to place it in a broader managerial context and culture.

The productivity training exercise consisted of a seven-week period in which productivity in the office was measured by the training consultants, followed by a period of training for the 16 managers during which they were encouraged to focus on the use of profit based incentive schemes (PBIS) as an alternative to straightforward overtime payments to workers.

the use of profit based incentive schemes has sometimes been described as operating a win-win situation in terms of personnel management, where schemes are operated which benefit both the company and the employees

. In this case the aim of the PBIS would be to have more effective and efficient parcel handling during normal shifts (with a bonus paid related to volume handled), rather than to pay for extra handling hours in more traditional (but expensive) overtime payments.

BSI calculations and results BSI figures are calculated as the number of parcels handled per hour over a recording period such as a working month. The raw data then has a weighting factor applied to it to obtain a comparative BSI rate. In the case of parcel handling in Parcelforce the weighting factor is 0.621. The following illustrative examples indicate how BSI is calculated. If an office handled 300,000 parcels over a standard period using 2,500 hours of labour then the BSI rating would be as follows: (300,000/2500) 0.621 = 120 0.621 = 74.5 BSI rating.

If during a period of recession in the marketplace the volume of parcels fell to 250,000, then by still using 2,500 hours of labour the BSI rating would be reduced as follows: (250,000/2500) 0.621 = 100 0.621 = 62.1 BSI rating. If however the 250,000 parcels could be handled by just 2,000 hours of labour using PBIS then the BSI rating would be enhanced as follows: (250,000/2000) 0.621 = 125 0.621 = 77.6 BSI rating.

The target given to the consultant trainers was to improve the BSI rating from a low of 65 by a clear 10 points. The figures both before training (1989/90) and after training (1991/93) for the Parcelforce office in question are given in Table II. It appeared that the trainers had achieved both of the stated aims of improving BSI by 10 points and by sustaining the improvement.

In Table II we show the BSI monthly rates for four selected months together with the annual mean figure for the target. What is immediately apparent is that the training was effective in raising the annual BSI rating from 65 to 75 and subsequently to 80. In addition, the improvement was sustained to the end of 1993 when this particular study was terminated.

 This

improvement was confirmed by the operations manager of the office who reported that, in his opinion, the training had had a direct cost benefit by reducing the handling costs of the average parcel through his office from 18p to 12p per parcel.

The actual volume of parcels handled by the office is held from this paper for reasons of commercial confidentiality but if we assume a realistic ballpark figure of 250,000 parcels per week, then such a reduction of costs would generate savings of (250,000 0.06) or 15,000 per week. This would translate to annual savings of 780,000 for the office set against the overall training costs of 81,000.

The cost of training would be recovered in a matter of weeks. We had not set out to measure the costs per parcel in this way since the BSI rating was the figure employed to make standardized comparisons between offices within Parcelforce. We therefore welcome the indications of cost savings outlined above but cannot be completely confident that all costs have been considered.

However, the operations manager also reported on several other benefits of the training programme which were more subjective in nature but which seemed to reinforce the use of training programmes in productivity management:

 Industrial relations within the office had improved considerably with the introduction of PBIS. The volume of parcels coming to the office had increased as a result of closure of other regional offices, but this increased volume was being handled within the existing facilities.

 Managers in the office were now more able to identify potential improvements in productivity. They had gained new skills in being able to monitor and analyze operations. They had gained increased understanding of PBIS and were able to use such a scheme effectively rather than direct overtime.

 They demonstrated greater thought on issues of staffing and overtime schedules. They now made additional requests for the delegation of working hours and incentive allocations. They demonstrated increased confidence and morale.

 The managers and staff were now operating as productivity teams which displayed greater confidence and morale and placed them in a better position to address and solve handling problems. There was a much greater awareness of operational costs and the relative costs of overtime versus PBIS.

Despite the excellent nature of this analysis, the study was still anxious to assess as accurately as possible the impact of the training on costs. For this reason, the BSI performances of four other regional parcel handling offices were compared with those of the office in question and the findings are . reported in Table III

The results show that over the study period there had been measurable improvements in other offices where PBIS had been introduced without the intensive training provided in the study office. However while the average gain for Parcelforce as a whole was 11 BSI points over this period, the gain in the experimental office had been 15 BSI points.

Using salary figures at the time it was estimated that an improvement of one BSI point would produce a saving of 163 per week. Using this figure as a basis for further analysis we were able to calculate the cost savings reported in Table IV.

These figures suggest that the cost saving produced by such a gain in a single office the first year of operation and subsequently several times over. What is also worth emphasizing is that the original BSI improvement of 10 points (from 65 to 75) was almost immediate and reflected the impact which the training programme seemed to have, bringing dramatic savings very quickly.

The training programme was still producing additional savings (over and above those made by other offices) of almost 34,000 per annum in 1993 when compared to the baseline costs. Thus even taking the most conservative interpretation of costing.

Discussion: The findings presented here suggest that productivity training will readily produce significant savings in operational costs but it must be emphasized that several issues were considered in this case before attempting to implement such a training programme. the training programme can be shown to generate worthwhile gains over an extended period

First, the senior management must be aware of what is being proposed and be in a position to support the training initiative. In this case the situation was first identified as a possible site for specific training input by the senior management concerned and so it was possible to assume co-operation. Second, an initial examination of the performance of the office should suggest the possibility of obtaining a return on the training investment. In this case the office was performing below par in terms of Parcelforce national BSI ratings. In addition, the direction of additional parcels traffic from other offices in the region offered the prospect of addressing the BSI rating in favorable circumstances.

Third, the performance criteria (in this case BSI ratings) must be clearly understood at the outset. Finally, there should be no local factors such as local union agreements, unrealistic duty schedules, unhelpful local custom and practice arrangements etc. which preclude the effective introduction of new productivity methods.

In summary, the training programme was targeted at a specific group of managers who were likely to have a direct impact on productivity and thus on BSI ratings.

References:

1. Hedges, P. and Moss, G.D., Costing the effectiveness of company training: case study 1 improving driver performance in Parcelforce, Industrial and Commercial Training, Vol. 28 No. 3, 1996. 2. Cascio, W.F., Using utility analysis to assess training outcomes, in Goldstein, I.L. and associates, Training and Development in Organizations, Jossey-Bass, Oxford, 1989. 3. Phillips, J.J., Training Evaluation and Measurement, Kogan Page, London, 1991. 4. Deal, T.E. and Kennedy, A.A., Corporate culture, in Schein, E.H. (Ed.), Organizational Culture and Leadership, Jossey-Bass, Oxford, 1985.

Further reading: Hedges, P., An evaluation of management training policies and effectiveness: the Parcelforce experience, unpublished PhD dissertation, University of Wales, Cardiff, 1993.