The Role of Human Capital Investment in Sustainable Economic Development

1
The Role of Human Capital Investment in
Sustainable Economic Development

• Patrick Sherry, Ph.D.
• Director, National Center for Intermodal
  Transportation
• University of Denver

2
Overview

• Effects of Human Capital Investment
• Anticipated Economic Activity
• Identification of Needed Areas for Human Capital
  Development
• Leadership
• Workforce
• Practical Considerations for Implementation

3
I ITS Experts Group

• Four Pillars of Activities
• Technology (Including ITS and Global Navigation
  Satellite Systems)
• The development and implementation of selected
  integrated technologies is important to the
  successful management and operation of intermodal
  transportation.
• Supply Chain Management (Focused on
  Transportation)
• Seamless interconnectivity of different modes of
  transportation. Efficient management of the
  supply chain involved in regional freight and
  shipping movement is critical to seamless
  interconnectivity.
•  Sustainability (Including Energy and the
  Environment)
• The identification of opportunities for the
  development and promotion of fuel efficient
  transport policies and practices is particularly
  important in the APEC region.
• Human Capacity Development
• Human capacity skills are important to the
  effective movement of intermodal
  transportation. The ability of the work force to
  develop, manage, and safely implement existing
  and emerging technologies is essential to the
  ongoing facilitation of trade in the APEC
  region.

4
Asian Economic Downturn
5
US International Container Traffic
Source RITA
6
What Are US Railroads Doing to Increase
Productivity Profit?

• Circa 2008-2009
• Developing cooperative alliances
• Working with customers
• Investing in Technology
• Investing in equipment and infrastructure
• Investing in employees
• Hiring additional employees

7
Railroad PerformanceClass I Railroads
Index 1981 100
Productivity
Volume
Revenue
Price
Source Railroad Facts, AAR (Based on a
design by R. Gallamore)
8
Railroad Capital ExpendituresClass I Railroads
and so far 2008 looks to be a paradigm shift!
Billions
Source Railroad Facts, AAR
9
U.S. Railroad Intermodal Traffic(millions)
Source Association of American Railroads
Weekly Railroad Traffic
10
U.S. Railroad Intermodal TrafficTrailers vs.
Containers (millions)
Source Association of American Railroads
Railroad Facts
11
Future Demand for Freight Transportation Will
Continue to Grow
Billions of Tons of Freight Transported in the
U.S.
p U.S. DOT projection
12
Projected Growth in Trains Per Day From 2005
to 2035 by Primary Rail Corridor
13
Class I Railroad Capital Spending vs. Net Income
(Current Dollars)
Capital Spending
Net Income
Source Association of American Railroads
14
Tax Incentives to Leverage Capacity Expansion

• 25 tax credit for projects that expand rail
  capacity
• Expense other infrastructure capital expenditures
• Leverage private investment
• Need tax CREDITS for HUMAN CAPITAL INVESTMENT

15
US Rail Employment is Up for the First Time in
Decades
Total Class I Employment Jan. 2001-Nov. 2008
Source Surface Transportation Board
16
Railroad Employee ProductivityClass I Railroads,
Ton-Miles Per Freight Service Employee
Millions
Source Railroad Facts, AAR
17
(No Transcript)
18
The Role of Training
19
Investment in Human Capital Related to Increased
Productivity
Increased Percent Time in Training
20
Source Kim Bloom (2003)
21

• The mean proportion of workers being trained in
  an industry is about 10.
• If industry managed to increase the proportion
  of workers from the mean to 15 this would be
  associated with a 4 increase in productivity
  and a 1.5 increase in wages.
• Note that it took the UK economy 13 years to
  generate an increase in the proportion workers
  trained on this scale (from 9 in 1984 to 14 in
  1996).

22
Effects of Education on Productivity

• Becker 1964, Mincer 1974 looked at the impact of
  education on earnings or estimated private rate
  of returns ().
• A survey of growth accounting studies covering 29
  developing countries found estimates of
  educations contribution to economic growth
  ranging from less than 1 percent in Mexico to as
  high as 23 percent in Ghana (Psacharopoulos,
  1984).

23

• Education is also an important contributor to
  technological capability and technical change in
  industry. Statistical analysis of the clothing
  and engineering industries showed that the skill
  and education levels of workers and entrepreneurs
  were positively related to the rate of technical
  change of the firm (Deraniyagala, 1995).

http//www.geocities.com/ceteris_paribus_tr2/i_ozt
urk.htm
24

• Lucas (1998), found that the higher the level of
  education of the work force the higher the
  overall productivity of capital because the more
  educated are more likely to innovate, and thus
  affect everyones productivity.
• Increased education of individuals raises not
  only their own productivity but also that of
  others with whom they interact, so that total
  productivity increases as the average level of
  education rises (Perotti, 1993).
• The impact of education on the nature and growth
  of exports, which, in turn, affect the aggregate
  growth rate, is another way in which human
  development influences macro performance.

25

• One of the emerging requirements for a successful
  economic development program is a workforce
  delivery system that works for local, emerging,
  and new businesses in the community.
• Survey after survey notes businesses need a
  skilled workforce to be competitive.
  Traditionally economic developers have not had to
  deal with the workforce delivery system and that
  system tends to be complicated by regulations,
  vendor influence, and perceptions that it only
  deals with those least capable of holding a job.
• International Economic Development Council

http//www.iedconline.org/?pTraining_Workforceag
enda
26
World Bank Knowledge Economy Index
27
Bloom et al 2006
28

• In a study of more than 3,100 U.S. workplaces,
  the National Center on the Educational Quality of
  the Workforce (EQW) found that on average, a 10
  percent increase in workforce education level led
  to an 8.6 percent gain in total productivity. But
  a 10 percent increase in the value of equipment
  increased productivity just 3.4 percent.Another
  study by ASTD showed that leading-edge
  companies trained 86 percent of employees while
  average companies trained only 74 percent.
  Leading edge companies also spent twice as much
  per employee. Companies that invest the most in
  workplace learning, the study showed, yielded
  higher net sales per employee, higher gross
  profits per employee, and a higher ratio in
  market-to-book values.

29
Difficulty in finding workers with key skills
30
An Expanded Role for APEC

• To increase and sustain economic development
  there needs to be continued investment in
  education and training of workforce
• APEC can take the lead by providing training and
  development actiiities for key leaders throughout
  the region
• In addition to providing skills training APEC
  should seek to enhance the leadership and
  developmental sklls of key industry
  represntaitinves
• Focus should be aon giding and shaping the values
  and praoctices fo businesses from the top as well
  as supporting skills development at all levels

31
Business Weeks 50 Most Innovative Companies

• 1 1 APPLE  2 2 GOOGLE  3 3 TOYOTA MOTOR  4 5
  MICROSOFT  5 7 NINTENDO  6 12 IBM  7 15
  HEWLETT-PACKARD  8 13 RESEARCH IN MOTION  9 10
  NOKIA  10 23 WAL-MART STORES  11 11 AMAZON.COM 
  12 8 PROCTER GAMBLE  13 6 TATA GROUP  14 9
  SONY  15 19 RELIANCE INDUSTRIES  16 26 SAMSUNG
  ELECTRONICS  17 4 GENERAL ELECTRIC  18 NR
  VOLKSWAGEN  19 30 MCDONALDS  20 14 BMW  21 17
  WALT DISNEY  22 16 HONDA MOTOR  23 27 ATT  24 NR
  COCA-COLA  25 47 VODAFONE  26 NR INFOSYS  27 NR
  LG ELECTRONICS  28 NR TELEFÓNICA  29 31 DAIMLER 
  30 34 VERIZON COMMUNICATIONS  31 NR FORD MOTOR 
  32 35 CISCO SYSTEMS  33 48 INTEL  34 28 VIRGIN
  GROUP  35 NR ARCELORMITTAL  36 40 HSBC HOLDINGS 
  37 42 EXXONMOBIL  38 NR NESTLÉ  39 NR IBERDROLA 
  40 25 FACEBOOK  41 22 3M  42 NR BANCO SANTANDER 
  43 45 NIKE  44 NR JOHNSON JOHNSON  45 49
  SOUTHWEST AIRLINES  46 NR LENOVO  47 NR JPMORGAN
  CHASE  48 NR FIAT  49 24 TARGET  50 NR ROYAL
  DUTCH SHELL 

32
Innovative Transportation Companies
http//images.businessweek.com/ss/09/04/0409_most_
innovative_cos/index.htm
33
Procter Gamble

• Gets 400,000 applications for entry-level
  management positions each year.
• It will hire less than one half of 1 of them,
• "We actually recruit for values," says Chief
  Operating Officer Robert McDonald.
• "If you are not inspired to improve lives, this
  isn't the company you want to work for."
• The careful vetting, training, and career
  development pay off. PG boasts 23 brands with at
  least 1 billion in annual sales and is the
  market leader in everything from detergent to
  diapers to razors.
• bringing in and promoting creative thinkers.
• Interviewers look for what they call a
  candidate's "power," including leadership ability
  and empathy.
• Innovation skills and values are measured in an
  online assessment. "Our managers are skilled at
  probing for the right fit," says William Reina,
  director for global talent. "The people they
  identify score well on the assessment."
• every department has its own "university." The
  general manager's college, holds a week-long
  school term once a year when there are a handful
  of newly promoted managers
• There are nearly 50 courseshelps managers with
  technical writing or financial analysis.

34
Development of Human Capital

• Begins with the leadership
• Having a vision
• Recognizing that technology levels the playing
  fields
• Recognize that new technology will take time to
  develop
• Recognize that we need to improve our ability to
  identify new techs
• Recognize that we need to implement new techology

35
Leadership Competencies
Vision
Values
Problem Solving
Execution
Communication Skills
36
How do you develop Innovative and Productive
Leadership?

• Our Team at the
• National Center for Intermodal Transportation has
• Twenty Five years of experience developing
  leaders
• University of Denver Pioneer Leadership Program
• Center for Creative Leadership Consultants
• Academics USC, Harvard, Georgia Tech
• Businesses -
• Trainers

37
1-E-4 Intermodal Training Model
38
Technical Assistance

• Provided by our extensive industry contacts and
  ITI board members

39
Construct a Competency Model
40
The Key Competencies for Success
41

• Identify Gaps in Skill, Knowledge Capacity
• Evaluate BENCH STRENGTH

42
SUMMARY OF RESULTSUsing Competency Model
43
THINKING SKILLS
Critical Thinking Skills
44
BOGOR
45
Working With TOP Leadership Teams

• APEC Leadership SHOULD take the LEAD with
• Both PUBLIC and PRIVATE SECTOR
• Identify key COMPETENCIES needed
• Identify key areas for development
• Create opportunities to discuss and promote
  INNOVATIVE thinking and development
• Ensure that EXECUTIVES are thinking about how to
  develop their workforce
• Encourage incentives to promote HUMAN CAPTIAL
  INVESTMENT
• FACILITATE evaluation and growth of executive
  Capability Bench Strength
• Examine key areas for growth
• Promote the thinking and investment needed to
  advance and develop the workforce
• Work with Teams to create Strategic Vision

46
Workforce Development Activities
Provide COACHING and MENTORING
Identification of Skills Needed
Intermodal Skills
Identification of Gaps
Development of Skills Courses
Needed Intermodal Skills Intermodal
Managers Refrigeration Handlers
Identification of Available Training Programs
Insufficient Training Available
47
Priority Skill Areas

• FOUNDATIONAL KNOWLEDGE
• Government Regulations Policies
• Available Transport Technology
• Global Business Environment
• General Business Environment
• Labor Relations
• Various Transportation Modes
• How Modes Interface
• Understanding of Legal Issues

• INTERPERSONAL SKILLS
• General Managerial Skills
• Customer Service Skills
• Communications Skills
• Listening Skills
• Sales Skills
• Coalition Building Skills
• Teambuilding Skills
• Conflict Management Negotiation
• Leadership Skills

ANALYTICAL SKILLS Environ Impact Analysis
Economic Financial Analysis Policy Analysis
Strategic Planning Forecasting Skills Futures
Analysis Systems Analysis Ethical Analysis

• TECHNICAL SKILLS
• Computer Applications
• Technology Management
• Modeling Skills
• Logistics Supply Chain Processes
• Data Gathering, Analysis Manipulation
• Marketing Skills
• Transportation Experience

48
Success Stories

• Cohort 1999-2000
• José Antonio Pérez Antón was promoted to Chief
  Executive Officer of Grupo ADO.
•  
• Cohort 1
• Shannon Brown, Senior VP and Chief Human
  Resources Officer FedEx.
• Michael Byrne, CEO, Linfox Australia, Pty
  Limited.
• Bruce Denny, Asst VP, Terminal Operations, with
  Pacer Stacktrain.
• Barbara Gilliland, Principal at Parametrix
  Consulting in Denver.
• Adam Rodery, Director, Operational Process
  Improvement with Excel.
• Chris Schuleit ,Vice President of the Enterprise
  Business Development with Hub Group.
•  

49

• Cohort 2
• Michael Brothers, Vice President, Intermodal
  Operations, at JB Hunt Transport Services, Inc.,
• David Leech, Vice President of US Operations,
  Southern Region of FedEx Express.
• Adam J. Lemarr, Manager of Intermodal Hub
  Operations within Norfolk Southern.
• James Price, Vice President Rail Operations,
  Hampton Roads Transit, Norfolk, Virginia.
•  
• Cohort 3
• Grantley Martelly, Regional General Manager, Utah
  Transit Authority.
• Tim E. Naylor, Manager of Service Delivery, Utah
  Transit Authority.
• Than Seeds, Vice President of Operations,
  Americas with APL.
• Ben Sullivan, Country Manager of Linfox, India.

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Challenges

• Economic activity increasing
• Shortage of skills in developing economies
• Intelligent Transportation
• Intermodal Transportation
• Employment outlook good
• Shortages of key talent identified
• Opportunity to shape the future
• Develop self-sustaining training efforts

51
Local Case Study

• Visit to JIT

52
Executive Level Management

• Bob Sleeker
• Exec Vice President of Intermodal Omnitrax
• Experience -- CSX
• Operates Terminals for the Major Class I
  railroads

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2. Executive Management of Intermodal
Transportation Operations

• Module Objectives
• Common organizational structures
• Leadership and motivation concepts
• Best practices in major IM transportation
• Teamwork and productivity theories
• Coaching and development strategies
• Improving collaboration, cooperation, and
  partnership

Developed by Professor Patrick Sherry
University of Denver
54
Proposed Workforce Development Activities
Strategy
External Funding of Training Programs
Scan of Workforce Skills Shortages
Create a Roadmap for Workforce Development
Identification of Skills
Development of Train the Trainer Programs
Identification of Available Training Programs
Development of Supplemental Training Programs
Identification of Gaps Between Skills Needed
Training Programs
Intelligent Transportation Skills Needed?
Transportation Security Skills Needed?