Training and Human Resources Development in Networked Organisations

The Changing Environment of Companies
Training Suppliers and Middlemen
Training Your Suppliers
Training Your Middlemen
Training and HRD Changes in Companies
Training Your Customers


The way how many companies operate today is in rapid changes; many new developments such as "virtual company", "modular company", "co-makership" and "networking" are having a crucial impact to every field of life in the companies. It is widely recognized that organizations are moving away from centrally coordinated, multi-level hierarchies and toward a variety of more flexible structures - like the networked mode to work (see e.g. Miles and Snow 1992).

These altering operative modes will have in the near future also an important effect to training and human resources development. Not only do the new operational modes change the conventional functions and operations of the training and HRD departments - in addition the role of training and HRD in companies widens from internal function for training and developing also in much a wider extent also the suppliers, middlemen and customers of the company.

The Changing Environment of Companies

The quickly changing operating environment of the companies is in the following described only few developments which are revolutionizing our understanding of the function of training and human resources development.

The mode of the "virtual corporation" quotes to a situation in which the basic business entity is not anymore a single company but rather a temporary network of independent companies - suppliers, customers, even rivals - linked by information technology to share skills, costs and access to one another´s markets (see e.g. Business Week, February 8, 1993, pp. 36 - 40). Davidow and Malone (1992) stress that the virtual corporation will appear edgeless, with permable and continuously changing interfaces between company, supplier, and customers.

The other important aspect has been addressed with the term "modular corporation". In brief, the idea of a modular corporation is to nurture a few core activities and let outside specialists make the parts, handle deliverers, or do the accounting (see e.g. FORTUNE, February 8, 1993, pp. 52 - 56, see also Peters 1992). This development in the companies dictates that many operations are subcontracted and the company itself focuses strongly on the "core competences" to build its competitive advantage.

The destiny of the company is not only decisive anymore by and large of its own operations, but it shares its destiny with a number of actors. The relationships between the company (and its different entities), its suppliers and its middlemen and especially its customers change. Many writers, for instance Davidow and Uttal, argue that growing interdependence with suppliers urges also that companies realize their duties towards their suppliers. Davidow and Uttal (1989) call this interdependence sharing the same co-destiny. The role of the middlemen is changing as well - the middlemen can be independent service producers and the same company might have different middlemen competing with its products and services on the same market. It is obvious that the trust of the middlemen must be high and the relationships between the company and the middlemen/distributors long-lasting (see e.g. Peters 1988; Davidow and Malone 1992). The customers of the company are taking more responsibility (and should be more prepared to do so) of different activities, such as product and system design, which previously have been belonging to the domain of the company itself.

In all these developments lead to the conclusion that the clear distinctions between firms and markets, between the company and its external environment have disappeared (see e.g. Webster 1992). In my understanding the new organizational modes lead to three major changes in the area of training and human resources development. These developments can be described as follows:
1. training and HRD responsibility is widening to suppliers and middlemen
2. training and HRD must focus more on joint values and processes as well as on core competences
3. training and HRD must take responsibility also of the training and development of the customers.

Training Suppliers and Middlemen

The training responsibility of the companies is changing with the quick change of the business environment (see Figure 1 - in the visualization of Figure 1 basic sources have been Kotler 1988 and Miles and Snow 1992). Many companies recognize that for the smooth running of their activities, the training of their suppliers and middlemen is urged.

Figure 1 Training responsibility in conventional business

Figure 2 New "networked" organisation and altering training responsibility

Training Your Suppliers

Some advanced companies have recognized that the entire production chain of the company must be trained according to company standards and company practices. Such new practices as ISO 9000 quality system, statistical process control (SPC), just-in-time (JIT) manufacturing require that the suppliers, the producers and the middlemen are all sharing the same way of thinking and share equally the same dedication to quality. Many companies - like Xerox Corp., Motorola Inc., Ford Motor Co. - have realized that suppliers are a crucial part of the quality improvement and that the quality of suppliers can be assured by providing access to their own training and HRD programmes, consultancy help and training (see e.g. U.S. Congress, OTA 1990; Geber 1989). However, as yet the majority of companies do not pay much attention to the training level of their suppliers, and the smaller suppliers in particular are facing trouble in meeting the different new requirements.

It should be recognized that there are also remarkable threats is linking the suppliers too closely to all the practices and requirements of the companies. Miles and Snow stress that continued, step-by-step customization of a supplier´s processes can ultimately result in the inability of the supplier to compete in other markets and an obligation on the part of the company to use all of the supplier´s output.

The case of the use of interactive video in the training of SPC by the Ford Motor Company illustrates how a major manufacturer is contributing to the training of its suppliers by offering a critical resource.

Ford Motor Company developed together with Futuremedia in the United Kingdom an interactive video package of about SPC. The training package consisted of five video disks devoted to quality questions, including themes like an introduction to SPC, SPC in production, SPC in service etc. The interactive video disks contain also additional information which can be accessed by the students, summaries of the content of each module, and questions for students.

Ford has been devoting much effort to quality and especially to the quality improvement of its suppliers. Today Ford Motor Company strongly recommends that all its suppliers use this training tool as a part of their employee training (see e.g. Rushby 1988).

Training Your Middlemen

If the role of suppliers is a critical one to the company, so is the role of the middlemen as well. The marketing middlemen are in many industries forming an important interface to the customers. The middleman should be a part of the same value and quality system as the company itself.

The training of marketing middlemen is often the key to success in many sectors of industrial marketing. Some companies operate a strict policy of never introducing a new product to the market until the sales literature has been printed and every distributor has been properly trained (Nickolaus 1990). However, the different opportunities offered by TBT have not been widely utilized in the training of marketing middlemen.

The case of Massachusetts Mutual Life Insurance Company illustrates that TBT can be a valuable addition to the support services which a company offers for its middlemen.
Massachusetts Mutual Life Insurance Company has over 4600 agents housed in 100 agencies and approximately 200 district offices in the United States. The company has been supporting its agents in various ways. It recognized, however, that although the conventional support services and the different financial incentives were still important, the support services offered had to be developed in various new ways.

The company produced an interactive video (IV) training program called Mass Mutual Selling Skills to be used by its agents. This program allows the agents to respond to various sales situations and learn the essentials in the selling of insurances. The agents have also been asked to participate in the cost of the courseware development.

The company has listed the greatest benefits as the potential for agents to learn at their own pace and the drastically reduced (30%) training time with increased quality compared with old training systems (Curtis 1991; Razza 1988).

Training and HRD Changes in Companies

The location of the companies and their operations have been in quick changes as well. The concept of value chain (developed by Michael E. Porter, see figure 3) is helping to define how a company can spread its activities. Porter suggests that the company must examine each activity in the value chain to see if there is a competitive advantage to concentrating and/or coordinating the activity globally in various ways (Porter 1986). Although this is usually understood to be most effective in upstream value activities, it is obvious that there is great potential also in downstream value activities. Takeuchi and Porter have already discussed thoroughly the possibilities of international marketing in global strategy (Takeuchi and Porter 1986). However, the recent developments in computers and electronic networks open new options for the operations of the companies. Porter distinguishes the downstream and upstream activities in value chain. He argues that by and large the downstream activities are more related to the customer and thus they are more usually tied to where the buyer is located.

Figure 3 The Value Chain (Porter)

Porter goes on to argue that the downstream activities which create competitive advantage are largely country specific and that in those activities it is likely that the multidomestic pattern of international competition is more dominant than the global pattern However, many recent developments especially in telecommunications and information technology have decreased the importance of performing at a given location. For instance reliable and fast transport systems offer as well new options for the companies to maintain good customer service despite the location of the customer service expertise.

The operations of the companies will be more geographically dispersed in the future, but so will also be the case in many industries concerning suppliers, subcontractors, middlemen and especially customers. To enable effective running of the companies, the companies must not only deliver their usual training more widely, but also take a new approach the training and human resources development. The three new main denominators are sharing through the networks, promoting throughout the networked organization also joint values and processes, and gaining commitment. The task of training and human resources development is to promote new themes such as joint values and procedures throughout the company´s environment - as discussed earlier also including suppliers, middlemen and customers. The goal of training and human resources development is not only to sharpen the core competences of the work force but also to build new types of commitments between the company and its suppliers, middlemen and customers.

Porter has described the forces driving companies to high coordination of activities and to a geographically dispersed configuration of activities. As Lei and Scolum stress in many global undertakings done by the Japanese and Korean companies and networks the single most important task facing human resources development is the constant training, development, and socialization of manager´s in organization´s values, mission, and philosophies.

As the Figures 3 and 4 show, the companies need not only coordination as such, but also joint values, joint procedures and joint processes throughout their operations. It should be stressed that these joint values and procedures are even more needed with suppliers and middlemen than ever before.

Figure 4 Coordination and configuration according to Porter

Figure 5 Requirements for highly coordinated and geographically dispersed activities

It seems to be important that in the new organizational modes the companies stress also "core competences" - in other words such competences of the companies which are unique and crucial for their success. However, it is likely that in the companies there are needed joint values, processes and procedures as a basis for these core competences (see Figure 6).

Figure 6

Although all the major companies declare that people are their most important asset, the differences in training and human resources development are great on a practical level. The strategic emphasis on training differs greatly in different companies. Carnevale, Gainer, and Villet discuss the strategic importance of training for the company. The role of the trainers is too often outside the strategic core of the company. They argue as well that the trainers do not often think strategically and have by and large the role of fire-fighters (see Carnevale 1990). However, like many other writers they also stress that training can have an important strategic role for the company when the competition is moving more clearly into new areas and when the decisive factor in competition is to a wide extent the competence of the workforce (see e.g. U.S. Congress, OTA 1990; IRDAC 1990).

Companies use a wide variety of different training providers and settings in their training and human resources development. These include for instance educational institutions (universities, colleges etc.); training industry; private training consultants; professional, trade, and labour organizations; OEMs; governmental bodies. The importance of these depends on the general training setting of the company.

Increasing demand and the cost pressure have been driving company trainers to seek more cost-effective ways of delivering the training needed. Streamlining of the training and adoption of technology-based training (TBT) methods in training delivery can give good results. Due to the flexibility, and savings in time and money TBT is quickly increasing in major companies. U.S. based large companies like IBM, Ford Motor Company, and Motorola expect that by the late 1990s over half of their company training will be delivered outside the traditional classroom using some form of instructional technology (see U.S. Congress OTA 1990). At IBM, for instance, the development has been very fast. In the early 1980s only about 5 per cent of the company´s training was delivered by technology. In the year 1990 the figure had grown to 30 per cent (Geber 1990). However, while big organizations have been using different training methods, small and medium-sized enterprises (SMEs) have been quite reluctant to invest in training even by new methods.

The case of Abbey National illustrates how a company with widely dispersed activities can effectively use computer-based training (CBT) in its employee development.
Abbey National is a U.K. based building society with 15,000 employees. The company felt that it was difficult to reach all its 680 branch offices effectively for training. Training by conventional means was felt to be insufficient for the quickly altering business environment of banking services. The number of different services provided had been rising fast.

The company chose to deliver one part of its training by CBT. Abbey National designed and provided the programs themselves. Major benefits of the scheme were the potential to deliver “off-the-shelf” routine-like training courses and also to focus, by the extensive use of CBT, the face-to-face tuition better than before in the training activities of the company. (Auvinen 1992).

Training Your Customers

Customers are the basis of success for every company. Thus it has been understood in all major companies that the different ties and interactions with the customers must be increased. Companies serve their customers in the training area by different means. Some use short-term educational conferences in new product education See Bertrand and Stumping 1990). Some companies, like Control Data, let the customers use their training centres and study there together with the company´s own employees (Normann 1991). Digital provides its customers distance learning packages and CBT courses (see Kearsley 1985; Blackburn 1991).

Ulrich stresses that companies should alter their thinking and concentrate on creating customer commitment instead of creating customer satisfaction. He urges that the human resource management (HRM) activities of the company should be directed outside the company instead of only serving the internal company functions. According to him customers could be involved in different training and development activities of the companies, like in designing and structuring the technical and management training and as participants in internal training. These kinds of actions build strategic unity between the company and its customers (Ulrich 1989).

The potential of customer training can be regarded by the concept of the “company´s training interface”. In short, the concept highlights the importance of customer training as a part of the services offered by companies. Customer training can answer the growing training needs of the customers, as discussed below in more detail. For clarification, it is important to stress that customer training, of course, is only one element in the “service-mix” of the company. However, well-designed and well-organized customer training can offer customers both direct benefits (savings in human resource development (HRD) costs, short lead-times in equipment utilization) and potential benefits (access to expertise, networking with other customers). Proper performance in customer training can contribute to both financial incentives (mainly by the willingness of customers to pay premium price) and strategic incentives (increasing customer commitment to the company).

The case of IBM illustrates the effort of a global company to serve its customers in a quickly changing area of technology. Caron from IBM argues that the company feels it must offer the customers the same training as they provide for their employees. This sharing is laying the groundwork for long-term partnerships (Caron 1991).

In 1983 IBM installed a satellite-based training system called ISEN (Interactive Satellite Education Network) in the United States to deliver customer training. By late 1990 it consisted of four studios and 116 remote classrooms in 20 receiving sites all over the U.S. ISEN broadcasts five to six hours daily and is available 245 days per year.

ISEN is based on a one-way digital video system (two images are sent in parallel on a 1.5 Mbits/second band) and two-way audio by terrestrial telephone lines. The interaction between students and teachers is offered via a Student Response Unit (SRU) which consists of a microphone and a numeric pad. With the help of this numeric pad the students can either call the teacher asking for the floor for a question or can comment or answer a multiple choice question presented by the teacher.

Partly as a result of active cooperation with customers, IBM in the United Kingdom found the need for high-quality interactive training programs. Thus a terrestrial distance learning system was implemented in the United Kingdom in 1989. The ETVN (Education TeleVision Network) uses 384 Kbits/second terrestrial lines and offers students the chance to work on a PS/2 workstation. Some customers of IBM have already expressed a wish to install a remote classroom utilizing this educational layout on their own premises (Scott 1990 and Herremans 1990).


The changing operational scene of the companies and their changing environment of business sets new challenges for training and human resources development. My strong understanding is that in many companies the new preconditions of business should favor the use of the methods of distance learning, as distance education will offer radical, new potential to undertake training and human resources development despite constraints of time and space. In many cases programmes delivered by these methods are suiting the new operational environments if the business but are also opening new avenues to build up new types of relationships (by sharing more easily the training and human resources development efforts) with the suppliers, middlemen and customers of the company.


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