September, 2006

Research Perspective and Comments & Analysis

No Borders For Training

Ask people in our industry about the impact of globalization, and they’ll likely mention growth in the worldwide supply of products supported by improvements in transportation and technology. We can grow things almost everywhere and move them practically anywhere.

What isn’t immediately obvious to an industry whose currency has traditionally been tangibles rather than intangibles is the globalization of ideas and knowledge. I’ve written before of this flattening phenomenon featured in Thomas Friedman’s brilliant book, The World is Flat. I was reminded of it recently while studying some new PMA initiatives in Mexico, because the end of the value chain in which we are concentrating these initiatives is closest to the consumer, not the producer, as we might initially think.

With a membership ranging from North American growers to overseas retailers, PMA needs to play a critical role in boosting produce services, sales and consumption. One way to achieve this is to provide members worldwide with the industry information and learning opportunities they need. We can only address those needs if we first understand them. This is where research comes into play.

Even though the U.S. produce industry has been linked with Mexico for decades, PMA wanted to better understand the challenges facing retailers and wholesalers there. Our foray into understanding the needs of our produce neighbors began by commissioning industry research in Mexico earlier this year. This will lead to PMA holding a training seminar for retail and wholesale executives in Mexico on Jan. 25-26, 2007, in co-operation with the United States Department of Agriculture (USDA). Titled Training for Greater Yield, the highly interactive seminar will explore the benefits of implementing employee training to improve produce handling and merchandising practices. Group discussions will be designed to identify key business challenges and opportunities within organizations to improve product quality and customer satisfaction.

But I’m getting ahead of myself. Let me step back and explain how we got here.

After completing an analysis of retailers and wholesalers in Mexico, PMA identified a critical need for employee training programs to improve competitive advantage and increase return on investment. The rapidly developing Mexican produce distribution sector recognizes it must acquire better skills through training to evolve in a more efficient manner.

Best practices in produce distribution and retailing are as important to the long-term growth of the economy as is the existing commitment to enhanced agricultural production. Improvements are especially important for suppliers selling produce into the Mexican market, especially high-quality shippers who must rely on every link in the distribution chain to maintain that quality through to the consumer. This is why PMA and USDA are focusing strongly on demonstrating the value of better training for better bottom-line results.

During the six-week research study, nearly all interview respondents, from every level of personnel in the retail and wholesale fields, affirmed their interest in receiving training specifically from PMA. In a flattening world, they want to share in the expertise of their counterparts to build a more efficient, consumer-driven marketplace. They see the global expertise and insight of PMA’s broad membership as the ideal community from which to learn and hone their skills.

National supermarket chains in Mexico saw the greatest value in training services and were most eager to purchase and implement such offerings. Operations employees in supermarkets, distribution centers and wholesalers were found to have the greatest need for training. While these employees are most responsible for ensuring product quality through improved handling practices and merchandising, these areas are precisely where formal training is most lacking.

We are putting particular attention on managing data. As retail chains in Mexico look to improve their quality offering, they realize they need to enhance the use of data on consumer demand, more accurate replenishment and measuring promotional activity. The increasing sophistication of produce category management techniques practiced in North America and Europe can make a major improvement to produce operations in Mexico.

One barrier to sharing produce expertise is the use of industry terminology. Our research indicated many of the English produce industry terms don’t translate easily into Spanish. This is another area where PMA training can help, as we can start to generate a lexicon of acceptable Spanish terms as an integral feature of ongoing training. Naturally, our training has to be conducted in Spanish, and that will be a feature of programs being developed for Mexico as well as for Spanish-speaking audiences here in the United States.

Perhaps the greatest contribution we can hope to make in our flattening world is to instill in produce executives the culture of training as an investment that is integral to their individual performance as well as company profitability. That is not just true in Mexico; it applies equally in the United States and around the globe. The most successful companies in our industry understand it is first and foremost the people — not the products — that make the greatest difference. The finest quality produce is worth little if the skills to handle it aren’t second nature to those charged with getting consumers the freshness they deserve and are willing to pay to receive.

We can replicate great products, but developed minds and dedicated people are true marketplace differentiation in the flattened world of 21st-century produce marketing.

Harder Than It Sounds

Bryan’s piece this month is so filled with hopeful things. How many people win here? Let us count the ways: The Mexican retailers win because they will operate better and sell more if their employees are well trained; the employees win because they will be more valuable to their organizations and in whatever they may do next in their lives; the consumers of Mexico win because they will receive fresher products in better condition, more efficiently distributed. PMA’s grower/ shipper members win because they will have better customers to sell to. And PMA itself wins because by doing so much good, it keeps itself relevant and endears itself to its members.

The good that can come of this is so phenomenal that we best be certain to navigate the craggy shoals between where we presently are and the bucolic sand on which we hope to celebrate.

I find that research in this area is particularly difficult to use as a guide to action, for three basic reasons — plus, I find there is often a big problem even after the project is implemented.

First, the true authority is often not actually surveyed. I have had the opportunity to do more than a few projects for retailers over the years, and there have been various fees involved. The bills were always paid promptly, but rarely with a check from the retailer proper. Instead I got a check from some shipper or wholesaler who wasn’t involved in the project at all.

When I inquired about this, I always heard the same thing: The retailer’s produce director desperately believed in training and wanted to bring in experts to teach, but any time the produce director would put such items in the budget, training would be struck out by people higher up. However, if certain suppliers offered a rebate of X percent of purchases but restricted the use of that money to training and education to enhance the department, the produce directors were permitted to take advantage of those programs.

Of course, although I was involved in a few big programs in which suppliers had formal programs, in many cases it was perfectly obvious that these vendors had the programs as a result of being told by the retailers that they should create them. And, in most cases, the suppliers simply responded on an ad hoc basis to their customer’s request for some help funding certain events.

Second, even when the actual training was fully approved in the budget, the training sometimes didn’t happen or was abbreviated. Why? Buying the training tools — bringing in speakers, buying computer-based training programs or access to online training tools —is, by far, the cheapest cost in training.

The big money is actually spent because you need to overstaff to allow time off for training. Imagine the program elected is going to require two hours a week from an associate. Further imagine that the average associate works 20 hours a week and that you currently get the work done with 100 associates. You now need to add 20 additional associates — assuming they won’t participate in the training — to simply keep your departments staffed as before.

Where will you get them? Who will train them? How quickly can this happen? Can the hours be allocated so that you can live with only this amount of additional labor? It is harder than it sounds — if you only have five associates in a particular store and people insist on 20 hours or they won’t take the job, you now have to start splitting employees between stores.

Then, if all these obstacles can be overcome, who will pay for these added employees? If you don’t add them, what will be your cost in lost sales due to out-of-stocks, unhappy customers, etc.? The cost of training is so great and so hidden out of the training program’s line item that you can easily see why these programs so often don’t happen or are abbreviated.

Third, if the training is good, the employees become more valuable — but not simply to the current employer. They gain a credential and that credential has value in the free market. So, the very first thing you need to do once you invest heavily in employee training is raise the employees’ wages so they won’t quit and go work for a competitor!

And then, if you do store-level training, you still suffer losses because of normal turnover as low-level employees leave for many reasons unrelated to working for competitors. All this makes the return-on-investment quotient on training problematic. If the employees don’t stick around long enough, it is hard to gain a return on that investment. And if those who do stick around get paid a big part of the value added by the training, it is hard to gain a return on the investment.

Finally, there is an overarching pratfall that is rather common. The program begins with great enthusiasm, investment is allocated, staffing is scheduled, the goal of 100 percent training is achieved. A ceremony, a party, a mention in the company newsletter and, then, a horrible thing happens: the company gives another person a job, and he does not have the training because everyone is busy and his training is “postponed.”

Alas, for training to make the contribution it can to the success of an organization, not only must the investment be large but it must also be continuous. Otherwise, the benefits of training dissipate quickly as an organization starts filling up with new people who are unfamiliar with the program.