NEC America, a network communications company offering hardware, software, services and solutions, is a billion-dollar company operating in the United States, Canada and South America. Faced with a growing platform of employees and partners to train, in 2000 NEC implemented the Pathlore Learning Management System in order to track and manage training for around 3,000 learners. Previously, the company found it difficult to manage training, and the cost of training was steadily increasing as employees attended external classes on an as-needed basis.
Prior to implementing the Pathlore LMS, NEC managed its training through what Robert Kimbrell, vice president and general manager of human resources and administration for NEC, called a “home-grown tracking system.”
“It was really nothing more than a database for inventory of limited sets of information,” said Kimbrell. “It was not in its truest sense a learning management system—an administrative management system that had all of the functionality and features that we needed to be successful.”
Employees were attending external training on an as-needed basis, and NEC found itself paying premium rates without negotiating for lower prices for this training. In addition, there was little focus on the training gaps that needed to be filled to increase the productivity of the workforce. In 2000, NEC decided to refocus on reducing the costs of training and education while increasing its value.
“We want to have the talent to meet the business organization’s needs both today and in the future,” said Kimbrell. “We want to have a very competent workforce—not only skilled, but a well-educated, well-informed workforce. And when you’re in the type of business we’re in—offering solutions—that is a strategic goal of ours, one that meets the business needs and the needs of our customers.”
“We recognize that the only way to get all these employees trained properly is to provide them with multiple solutions or multiple venues for training in a blended format,” said Wim Wetzel, manager of training and education for NEC America. “We recognize that we have employees who don’t feel comfortable learning on computers who would rather have an instructor in front of them. We have people who can’t afford to buy computers so we provide them for them at work. We try to deliver their learning opportunities in every possible venue.”
In order to get training out at a reduced cost and to keep better track of that training, NEC selected the Pathlore LMS. Wetzel had previous experience with the LMS and had used it in four different companies. But bringing it to NEC America, he said, was based on the system’s proven results. “I was able to show how we had saved a tremendous amount of money and training dollars using Pathlore’s system,” said Wetzel.
According to Wetzel, the biggest differences between the Pathlore LMS and the systems of the other vendors he had looked at for his previous company were in its ease-of-use, reporting capabilities and cost.
“The ultimate deciding factors were reporting and cost,” said Wetzel. “…With the Pathlore system, you could create any report on any issue at any time, on the fly. …For Pathlore, which was called Registrar at that time, the cost was approximately $125,000—that’s in 1997-98 dollars. The competing company’s out-of-the-box cost for the same product that was not as easy to use was $4.6 million. With our discount of 40 percent, it came down to about $2.1 million. …So it really was an economic decision as well as an ease-of-use decision as well as being able to do the reports on returns on investment or processes, how people were doing and any kind of data that was in the system.”
Once the LMS was implemented, it started delivering returns almost immediately. According to Brendan Herron, vice president of strategic development for Pathlore, one of the first returns realized by companies implementing an LMS is that they are able to manage training more closely. “It allows them to figure out how much they’re spending on training and how much they’re spending with third-party companies on training and whether people are actually taking the training,” he said.
According to Wetzel, no data had been collected before implementing the Pathlore system in October 2000, but once they went live, they were able to go back through paper documents and uncover the history of training initiatives starting from a year or two before the implementation. “From the time we went live to the 10th of this month (Sept. 10, 2002), our cost savings using the Pathlore tracking system is 67.9 percent. We’ve trained 1,430 people, and the exact number of seats is 9,571 seats filled by those 1,430 people. And we’re averaging about $39 per seat per person.”
Wetzel also stated that through the Pathlore LMS, in conjunction with SkillSoft, NEC has been able to deliver training to previously underserved employee populations, such as engineers. These engineers are now reporting that they are able to apply what they have learned immediately to their jobs.
“In the past four and a half months, 173 engineers have completed 2,469 learning objects through the Pathlore and SkillSoft system,” said Wetzel. “That has been a significant impact because until about a year ago, engineers were the least-served for training and education because engineering training is so expensive. Now we’re able to deliver that training at a significantly reduced cost, which further increases not only our Pathlore ROI, but also the SmartForce/SkillSoft ROI.
Through the LMS, NEC has been able to improve its training management to the degree that it can now receive training at a negotiated reduced price by using the system to help it implement a preferred vendor program. NEC uses the LMS to make projections of the number of people who will need to take a class within a year and calculate the number of seats per class, then takes that number to the vendor and uses it to negotiate a reduced price by using the vendor for all of the necessary training in a given subject.
“Through our preferred training provider program, we’re averaging about a 42 percent reduction off the top of what the vendor charges any other company, and that’s a significant factor here,” said Wetzel. “I just received a proposal for security training for 1,200 employees in our enterprise that would have cost this company about $60,000, and I just received it for $22,000. This is a result of some heavy negotiations with the vendor, with the commitment on NEC’s part that if we do future business on the security side, that we would use them as the vendor of choice.”
To become a preferred vendor for NEC, companies must meet a list of requirements that includes such things as guarantees of quality and timely delivery. The vendor must guarantee that the quality of the training will not be degraded in any way, despite the fact that it also must be offered at a discount. If employees or their managers are not satisfied with the training, the vendor must retrain the employee or train another employee at no cost. The vendors are not allowed to bill NEC for travel and expense costs through secondary invoices—all costs must be declared up front. And the vendors are required to quote both their regular rates as well as a discounted rate for NEC.
“We require two pieces of information: what the public price is and what NEC’s discounted price is, so we can compare those,” said Wetzel. “Both of those data, by the way, are captured in the Pathlore system, and this is another thing that made the Pathlore system so acceptable to us. We can add fields and modify a field to meet any of our business goals or needs. So we were able to add these two fields: prenegotiated cost and actual seat cost. We take those two values at the end of class, and we do a calculation as to what the actual savings for the class was. …So they’re real hard-dollar calculations. They’re not pie-in-the-sky numbers. In fact, over almost a 24-month period, our prenegotiated cost is in excess of $1.2 million. Our actual cost to provide that training to our employees was almost $375,000.”
Vendors that want to become preferred training providers must accept NEC’s entire list of requirements, said Wetzel. “There’s no in-between,” he said. “We had two major providers of learning flat-out reject the document and say they would never follow these requirements. As a result, they didn’t do business with us. The companies that did choose to go along with the requirements got a lot of business from us, increased their revenues, and the two companies that initially rejected the requirements clamored to come on board because they saw their business going elsewhere.”
But the benefits of using the LMS extend beyond the financial returns NEC has seen through its preferred vendors. According to Wetzel, the LMS has helped him reach his goal of delivering training to all NEC employees. Before Wetzel joined the company, NEC was selective about which employees received training. “I changed that philosophy here by making that training available to everyone in some format, whether it be instructor-led, CBT, online, distance learning—it really didn’t matter, we were going to get training out to everybody,” said Wetzel. “Now people know that if they have a training need and they can justify it, we will get it for them—and we will get it to them at a significant discount.”
Herron claims that one of the major benefits of using an LMS is that it allows the enterprise to align its workforce with the corporate goals. “If you take what makes a company go,” he said, “it’s people knowing how to do their jobs and perform at a superior level. And one of the things an LMS can do through what’s called skills management is help companies find what skills are needed for a job and then measure the employees against those skills and have a career path or training path…to help bring that employee up to that level of skill. And in doing that, the employee not only sees himself having a higher level of job performance and job satisfaction, the organization now knows who has what skills and can use those skills for special projects, for strategic planning purposes and so on and so forth.”
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