15 660 Strategic Human Resource Management MIT Sloan School of Management ServiceMaster Industries How have ServiceMaster s values and goals contributed to their success Why haven t other firms successfully copied this approach How important is training and development in the ServiceMaster system How does training and development affect their continued growth Why has ServiceMaster been willing to spend the resources it has on training and development for a set of low skilled high turnover positions ServiceMaster Industries Serve over 10 million customers in 41 countries with revenues of 6 4 billion 50 000 employees who manage a workforce of over 240 000 contract employees Named most admired outsourcing company in America by Fortune in 1999 and 2000 Over 50 of employees are women and minorities 29th consecutive year of growth in revenues and profit with a compounded growth rate of over 24 over the last 20 years From 1987 1998 average of 68 5 return on shareholders equity ServiceMaster Industries 1 800 WE SERVE Residential and Commercial Cleaning Services Terminix Pest control 1986 Merry Maids Residential maid service 1988 American Home Shield Home warranty service 1989 TruGreen Lawn and tree service 1990 Since 1991 ChemLawn Rescue Rooter Furniture Medic Diversified Health Services AmeriSpec American Residential Services ServiceMaster Revenues M 6000 5000 4000 3000 2000 1000 0 1979 1983 1986 1988 1990 Note excludes income from franchisees and international partners 1992 1994 1996 1998 ServiceMaster Industries Peter Drucker addressing ServiceMaster s Board of Directors about their strategic intent Gentlemen Gentlemen you you do do not not underunderstand stand your your business business Your Your business business isis to to train train the the least least skilled skilled people people and and make make them them functional functional ServiceMaster Industries When people come in for an interview and see quotations from the Bible and our objectives on the wall and when they talk to us and see how we try to implement our corporate objectives in a day to day manner they either warm up to the way we do things or they are immediately turned off Lifetime Employee What What do do you you think think of of this this approach approach ServiceMaster Industries Basic Goals 1 To honor God in all we do 2 To help people develop 3 To pursue excellence 4 To grow profitably ServiceMaster Values and Creed Providing opportunity for people to become all they were created to be ServiceMaster Annual Report We want to help people be something before we ask them to do something We don t fire people for lack of skill We fire people for attitude problems Kenneth Wessner Former Chairman ServiceMaster Industries Frankly when you view the person as only a production unit or something than can be defined solely in economic terms motivational or even incentive schemes have a tendency to be mechanistic and manipulative In so doing there is a drive to define a system that will idiot proof the process and one can in turn make people feel like idiots C William Pollard Chairman ServiceMaster ServiceMaster Industries Frankly when you view the person as only a production unit or something that can be defined solely in economic terms motivational or even incentive schemes have a tendency to be mechanistic and manipulative In so doing there is a drive to define a system that will idiot proof the process and one can in turn make people feel like idiots C William Pollard Chairman ServiceMaster What What isis your your reaction reaction to to this this ServiceMaster Industries Survey of Employees 1990 Since ServiceMaster has taken over this facility how would you compare the following Satisfaction Training Cleanliness Higher 52 59 48 No Change 33 41 33 Lower 15 0 19 ServiceMaster Industries The Wall Washing System Device Example Benefits Results Training Wall Washing Wand Why Patients respond faster in clean room Reduce time required Allows washing from erect position Worker understands why the wall needs to be clean and cares about the result Improved efficiency Less strain leads to higher satisfaction and lower turnover Quality improves Worker is involved in big picture and is more committed ServiceMaster HR Practices Can this approach work elsewhere Other countries What types Other industries What characteristics Why Would a Firm Pay to Train Because its managers are stupid According to neoclassical economics the worker must pay for general on the job either literally or through foregone earnings Firm and employees must split the costs and benefits of firm specific human capital in order to continue their mutually beneficial relationship and prevent hold up problems Are there other reasons to pay for training No choice labor scarcity or deficient educational system Specific human capital presumes general skills To give itself an incentive to use workers productively and efficiently Gift exchange and symbolism Employees reciprocate gift with loyalty and effort Focuses employee attention on strategic and developmental objectives Training presupposes Caring Why Pay to Train Optimal investment in training can be a competitive game If your competitors are underinvesting in general training you will be more reluctant to provide extensive training for fear of their cream skimming your workforce unless you can otherwise bind the employees to the organization Preserving Training Investments Bonding Training institutes Other HR practices Screening based on trainability and stability Career pathing Broad job design empowerment Pay for knowledge and or seniority Benefits To safeguard investment e g health care To promote loyalty e g dependent care Dress it up as gift Train people in groups Jobs are Increasing in their Complexity How would you characterize the change in skill requirements in your establishment NO CHANGE LESS COMPLEX MORE COMPLEX SAME DIFFERENT SKILL 38 3 40 18 source Osterman 1992 CHARACTERISTICS OF NATIONAL TRAINING SYSTEMS Amount of Training Opportunity for Mind Changing Mobility Level in the Labor Market Equality With Respect to Sex Race Immigrant Status Location of Training School or Firm CHARACTERISTICS OF U S SYSTEM ENTRY DIVERSE AND DIFFUSE NUMEROUS PATHS WEAK HIGH SCHOOL TRAINING COMMUNITIY COLLEGES STRONG FURTHER FIRM BASED PRIVATE TRAINING INFRASTRUCTURE STATE PROGRAMS WORK WITH FIRMS REMEDIAL SMALL AND INCOME STRATIFIED U S TRAINING PATTERNS 1995 AVERAGE HOURS OF TRAINING PER EMPLOYEE IN SIX MONTH PERIOD