The Business Enterprise Trust

MOTOROLA (B)
This case was researched by Stephanie Weiss and written by Matt Kelemen, under the supervision of Kathleen A.
Meyer, executive director of The Business Enterprise Trust.

In 1979, electronics powerhouse Motorola faced growing competition in its industry.

CEO Robert Galvin was convinced that an expanded commitment to training was
essential to his company’s competitiveness, but past efforts to renew the workforce had
been ineffective. Despite Motorola Directors’ objections to a greater investment in
training, Galvin decided to create the Motorola Training and Education Center. Galvin
remembered:

“Once in a while, the boss has to make the decision and I called
it. Everybody said fine, that’s it. They got behind it and we
made it work.”

Motorola Training and Education Center

The Motorola Training and Education Center (MTEC) was charged with instilling
Motorola’s vision of near-perfect quality throughout the organization. Motorola called it
“Six Sigma” quality, a statistical term signifying performance that is six standard
deviations from average. In symbolic terms, Six Sigma represented the company’s
devotion to continuous improvement. In literal terms, it translated into 99.99966 percent
defect-free production, or fewer than three defects per million parts produced by
Motorola.

Through extensive process mapping, MTEC identified weaknesses in the

company’s operations and offered courses to improve performance. MTEC educated
employees about Six Sigma and then taught basic algebra to help track error rates on
the shop floor. Other subjects included team building, problem solving, reading
comprehension and statistical process control.

The Six Sigma goal that MTEC fostered instilled a culture of quality among all
employees. As Motorolans encountered problems, they were expected to take the
initiative to solve them. Six Sigma training provided employees with the tools to
significantly and continuously reduce manufacturing errors.

The initial investment quickly benefited the company. Three separate

independent studies commissioned by Motorola in the mid-1980s all reached the same
striking conclusion: when skills were taught, reinforced and measured in terms of later
job performance, Motorola reaped a $30 - $33 return on every one dollar invested.

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Secure in this knowledge, Galvin encouraged MTEC to expand its course

offerings to meet the business needs of the company’s disparate divisions. However,
as it expanded its reach, MTEC made disturbing discoveries about the basic
competencies of Motorola’s workforce. In 1984, Motorola advertised internally to fill 50
vacancies in a new cellular phone factory. Of 480 applicants, only 49 passed a simple
six-problem math skills test.

The 40-hour Minimum

Findings such as this prompted the company to vastly expand its learning
opportunities – and requirements. In 1987, Motorola established a policy requiring every
employee to engage in a minimum of five days, or forty hours, of job-related education
and training per year. The forty hour policy served both as a mandate and an
entitlement, and it applied to everyone in the organization.

As course offerings expanded, most Motorola employees trained much more

than forty hours annually. Some employees in the technologically intensive divisions,
such as software development, had more than 100 hours of training annually.

Motorola University

By 1989, the demand for training had grown so significantly at Motorola that
Galvin and the other Directors expanded MTEC into a corporate industrial university
based on the grounds of Motorola’s Schaumburg, Illinois headquarters.

Under the leadership of Motorola University President Bill Wiggenhorn, who led
the training effort at Motorola since 1981, the University quickly moved beyond the walls
of the Schaumburg facility. By 1996, the University operated in 13 sites around the
world. With a full time professional staff of over 400 people and a part-time teaching
staff of 605, it offered upwards of 900 courses in 24 different languages.

About 30 percent of the University’s courses were crated to meet the company’s
broad goals. These courses introduced employees to Motorola culture and the
SixSigma quality initiative, as well as ethical practices and other issues. The remaining
70 percent of courses were shaped by the specific business needs of Motorola’s various
divisions. Managers were intimately involved in crafting courses to solve immediate and
long-range business problems. Motorola University took advantage of new learning
technologies such as the world wide web, distance learning, and instructional CD-roms
to strengthen its offerings.

In the early 1990s, Motorola’s training budget experienced double digit growth,
before slowing down to an annual increase of about four percent by the middle of the
decade. Funding for the University originally came from a general corporate fund, but
Motorola eventually required its business divisions to cover the cost of educating
workers. By 1996, Motorola was spending $200 million per year teaching 142,000
employees around the world skills ranging from foreign languages and computer
programming to marketing strategies and statistical tools (Exhibit 1: Motorola University

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course list excerpt). Wiggenhorn suggested that the actual investment was double the
stated figure, since employees still received salary and benefits during training.

Motorola University also established a series of four training programs for its
prospective and existing suppliers. Based on the notion that Motorola could only attain
Six Sigma product quality if it had some control over the quality if it had some control
over the quality of product inputs, the company required suppliers to participate in these
training programs as a prerequisite to any business contract.

How Motorola Compared to its Peers

Training was a booming, yet uncertain, industry in the 1980s and 1990s. By
1995, U.S. organizations were spending more than fifty billion dollars on training.
Training costs continued to rise annually because companies, particularly manufacturing
firms, had trouble finding qualified employees.

Employee ranking and classification generally determined the amount of training

individuals received. Administrative employees generally fared the worst, averaging just
21 hours of training per year. Companies were most generous to salespeople, providing
an average of 37 hours per year. Regardless of corporate rank, Motorola retained its
minimum of 40 hours of education for all employees.

On average, American companies devoted 1 percent of their payroll costs to

training. Motorola, by contrast, spent 3 percent of its payroll on education.

Perhaps most extraordinary was how Motorola linked employee education to

specific business targets. Labor economist Anthony Carnevale explained in U.S. News
& World Report in May, 1995:

“Motorola’s whole system is driven from

the shop floor. The company trains to solve
performance problems. It doesn’t just put a
little red schoolhouse in the workplace.”

The Payoff to Motorola

Robert Galvin’s decision to vastly increase training opportunities at Motorola paid

off, reiterating the findings of the earlier studies. Training helped the firm become the
first U.S. electronics company to outperform its Japanese competitors and, in 1988, the
first large corporation to win the Malcolm Baldrige National Quality Award. In 1990, a
year after MTEC evolved into Motorola University, Galvin stepped down as Motorola’s
CEO. However, in the years following, the company reaped many benefits from his
training efforts and focus.

In the first half of the 1990s, Motorola sales increased at an annual rate of 24
percent, reaching a total of $27 billion by 1995 (Exhibit 2: 1995 Earnings Statement).

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Profits between 1992 and 1995 nearly quadrupled, reaching $1.78 billion by 1995.
Motorola became the world leader in the wireless market, which offered vast worldwide
potential as less developed countries create telecommunications systems. The wireless
business – cellular phones, paging and two-way radios – comprised the heart of
Motorola’s operations, accounting for 60 percent of its sales. Motorola also was the
largest U.S. based supplier of semiconductors and one of the five largest in the world.
Semiconductors accounted for 29 percent of Motorola’s sales.

The contribution of training to this meteoric rise related primarily to “cycle time,”
the amount of time it took Motorola to launch a product in a new market or to get a new
product up and running. Training brought a consistency to Motorola’s operations that
diminished cycle time dramatically. From 1990 to 1995, productivity at Motorola, as
measured by sales per employee, jumped 139 percent. Janeice Webb, Vice President
and General Manager of the International Networks Division, commented:

“We measure everything at Motorola in cycle time. If people

are properly trained, they’re effective quicker.”

Motorola was also able to estimate the revenue it would lose if it failed to train its
employees adequately. Said Bill Wiggenhorn:

“Everytime one of our manufacturing lines shuts down because

we don’t know how to do preventative maintenance or
we don’t know how to do the proper trouble shooting,
it costs us $20,000 per minute, per line.”

Galvin predicted correctly that the ability to change and absorb new information
would provide a competitive edge in the electronics industry. Beyond boosting
productivity, a thinking, learning workforce translated into more patents for inventions
garnered by Motorola.

Employee Loyalty and Quality

Training also built a strong sense of loyalty among employees. In the decade
after Motorola initiated its mandatory forty hours of training voluntary turnover decreased
from 10 percent to 5 percent. Galvin explained the improvement:

“There’s great appeal for people to stay on a top notch

team. We gain much greater loyalty as a function
of the fact that we are all preparing ourselves for
tomorrow’s potential.”

Judy Schwartz, Market Development Manager of the Motorola Cellular Infrastructure

Group, concurred :

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“If your career path is to move into management or to

another area, the training is available for you to do that
and I think that increases loyalty tremendously.”

Motorola University also gave the company a competitive advantage in recruiting

qualified applicants. In particular, mid-level employees favored Motorola because the
company offered them a chance to renew their skills.

Motorola considered a high quality workforce essential to its ongoing success.

Explained Director of Education Ed Bales:

“Unless we invest in the future workforce, we will be out

of business because we won’t have any workforce. We
will not have the talent – the leadership talent, the technical
talent, the people talent.”

Training in Hard Times

In the Summer of 1996, Motorola’s explosive growth ground to a halt. A sluggish

semiconductor market, a complex cellular phone market and a weak start with several
new products all contributed to a stock tumble. Third quarter revenue dropped 58
percent and the fourth quarter looked bleak as well.

Motorola had learned from previous experiences that being ready for change was
as important in lean years as when profits were soaring. In 1985, a difficult fiscal year
for the company, Galvin and Wiggenhorn feared that training budgets would be cut
throughout the organization. To their surprise, investments in training rose several
million dollars, with increases in all sectors. There now seemed to be widespread belief
that training helped employees adjust to change, which was critical to weathering difficult
times. Explained Janeice Webb:

“I never cut back training in a down year, because you’re really

trying to get that asset, human beings, prepared for the up-surge.”

Motorola’s 1996 slump once again encouraged a sharper focus on training as

Motorola University worked closely with senior management to address the most critical
issues at hand and disseminate ideas and solutions to the company’s global workforce.
That year, the average Motorola employee received 56-58 hours of training, and over
the five years that followed. Motorola expected workers to receive eighty to one hundred
hours of education each year.

By early 1997, analysts were predicting renewed success for Motorola. Cellular
phone sales had increased 17 percent in the last quarter of 1996 and the company had
found an international market niche with its newest product, the miniature StarTac
phone.
 Motorola University Course List Excerpt Exhibit 1
SCC95, Executive 5-Ups Seminar ……………………………………………. 60
ENG927, Fast Cycle Project Management ……………………………………. 60 New!
SLS281, Focused Account Planning ………………………………………….. 61 New!
MGT335, Ford 8D Team-Oriented Problem Solving ………………………… 61
SPC394, Fractional Factorial Experiments………………………………….. 62
SPC392, Full Factorial Experiments…………………………………………… 62
SCC220, Gathering Requirements……………………………………………… 63
SPT772, Government Compliance for Personnel………………………………. 63
FED101, Gratuities, Bribes, and Kickbacks…………………………………… 64
MFG345, Group Technology/Material Flow………………………………….. 64
NET190, Hands-on Internet and World Wide Web Navigation:
Macintosh Version………………………………………………………… 65 New!
NET191, Hands-on Internet and World Wide Web Navigation:
PC Version……………………………………………………………….. 66 New!
NET635, Hands-on Macintosh Configuration and Troubleshooting…………. 67
NET264, Hands-on NetWare 4.x Administration…………………………….. 67
NET645, Hands-on PC Configuration and Troubleshooting…………………. 68
NET367, Hands-on TCP/IP Internetworking………………………………….. 68
NET331, Hands-on X Window System Programming………………………… 69
CLT323, Hispanic Patterns of Communication……………………………….. 69 New!
IDE100, IDE Dialogue Workshop for Managers…………………………….. 70
SCC021, Implementing Continuous Improvement……………………………. 70
SCC521, Implementing Software Continuous Improvement…………………. 71
MGT242, Improve Team Performance through Listening and Feedback………. 71
MFG341, Improve the Production System……………………………………… 72
MGT202, Improving Team Performance through Effective Meetings…………. 72
MGT111, Influence…………………………………………………………….. 73
MGT112, Influence Reinforcement…………………………………………….. 73
NET210, Information Security for Managers…………………………………….74
ENG222, Innovation in Product Development 75 New!
MFG331, Integrated Factory on a Tabletop………………………………………75
MFG885, Intelledex Vision Programming………………………………………..76
NET369, Introduction to Client/Server Computing…………………………… 76
NET350, Introduction to Datacomm and Networks…………………………….. 77
QUA389, Introduction to Design of Experiments……………………………….. 77 New!
MFG460, Introduction to Interfacing with Robots……………………………… 78
MFG465, Introduction to Machine Vision……………………………………… 78
SPC373, Introduction to Phased Techniques for Quality Improvement………… 79
MFG464, Introduction to Pneumatics…………………………………………… 79
SCC580, Introduction to the SEI CMM………………………………………… 80
SCC581, Introduction to the SEI CMM for Managers………………………… 80
SCC583, Introduction to the SEI CMM for Practitioners………………………. 81 New!
MGT706, Japanese Business Techniques………………………………………. 81
MGT700, Japanese 1……………………………………………………………. 82
MGT701, Japanese II…………………………………………………………… 82
MGT705, Japanese III…………………………………………………………… 83
QUA387, IMP Fundamentals…………………………………………………… .83 New!
MGT800, Korean………………………………………………………………… 84
MFG710, LabVIEW Basics Course……………………………………………… 84
MFG711, LabView Advanced Course…………………………………………… 84
MFG452, Lead Finishing Technology…………………………………………… 85
MFG346, Leveling Production Schedules……………………………………… 86
DIS161, Listening for Results…………………………………………………… 86
PEC200, Low-Energy Design: Fundamentals of Software-Driven Hardware……87 New!
SLS265, Quantifying Solutions…………………………………………………..117
REQ019, Responsive Communication…………………………………………...118
QUA397, Robust Design of Products and Processes…………………………….118
QUA391, Screening Designs of Expriments……………………………………..119
SCC584, SEI CMM Advanced Concepts………………………………………...119
MFG924, Seiko Robot Maintenance……………………………………………..120
MFG923, Seiko Robot Programing………………………………………………120
FED200, Selling Commercial Products…………………………………………..120
DIS160, Selling with Style……………………………………………………….121
MFG238, Short Cycle Manufacturing……………………………………………121
SIM300, Simulation in Manufacturing…………………………………………...122
SIM301, Simulation Using SIMAN………………………………………………122
SIM302, Simulation Using WITNESS…………………………………………....123
ENG290, Six Sigma Design Methodology………………………………………..123
SCC530, Software Metrics for Process Improvement…………………………….124
SCC160, Software Process Framework for Small Projects……………………….124
ENG270, Software Reviews………………………………………………………125
SCC900, Software Reviews for Information Systems…………………………….125
QUA300, Standards Development: Creating and Promoting Motorola Strategies..126
SPC379, Statistical Process Characterization and Control……………………….. 126
SPC360, Statistical Process Control Overview…………………………………….127
SPC388, Statistics II ……………………………………………………………….128
ENG815, Step 1: Software Technology Planning for Practitioners………………..129
MKT405, Strategic Market Planning………………………………………………129
QUA301, Strategic Standards Management………………………………………..130
ENG233, Structured Methods for Database Applications ………………………131
ENG128, Structured Methods Management Overview…………………………….132
ENG125, Structured Methods Part I………………………………………………..132
ENG126, Structured Methods Part II……………………………………………….132
PUR200, Successful Negotiator…………………………………………………….133
QUA392, Systematic Approach to Problem Solving……………………………….133
SCC350, Systems Engineering Process……………………………………………..134
SCC355, Systems Requirements Engineering……………………………………….134
MGT219, Systems Thinking Overview……………………………………………...135
CES103, Team Problem Solving…………………………………………………….136
MFG335, Technology Awareness…………………………………………………...136
SEP550, Total Cycle Time Implementation Workshop……………………………...137
SEP552, Total Cycle Time Management Overview………………………………….137
MFG343, Total Productve Maintenance……………………………………………..138
TDP500, Training Manager Symposium……………………………………………..138
TIT104, Training Techniques for Field Managers……………………………………139
CLT201, Transcultural Competence………………………………………………….140
MGT115, Uncompromising Integrity…………………………………………………140
SLS260, Understanding and Penetrating Customer Organizations……………………141
SCC020, Understanding Continuous Improvement for Managers…………………….141
SCC520, Understanding Software Continuous Improvement for Managers…………..142
SSG102, Utilizing the Six Steps to Six Sigma…………………………………………142
SSG102CD, Utilizing the Six Steps to Six Sigma: CD-ROM…………………………143
TCS411, Voice Mail New Subscriber………………………………………………….143
NET655, Windows NT: A Comprehensive, Hands-on Workshop…………………….144
TCS120, The Winning Connection: Telephone Courtesy Skills………………………144
MFG454, Wire Bond Technology……………………………………………………..145
MFG342, Workplace Organization…………………………………………………….146
 FINANCIAL HIGHLIGHTS
Exhibit 2

(In millions, except as noted) Motorola, Inc. and Consolidated Subsidiaries

Years ended December 31 1995 1994
Net sales $27,037 $22,245
Earnings before income taxes 2,782 2,437
% to sales 10.3% 11.0%
Net earnings 1,781 1,560
% to sales 6.6% 7.0%
Primary net earnings per common and common
equivalent share (in dollars) 2.93 2.66
Fully diluted net earnings per common and common
equivalent share (in dollars) 2.93 2.65
Research and development expenditures 2,197 1,860
Fixed asset expenditures 4,225 3.322
Working Capital 2,717 3,008
Current ratio 1.35 1.51
Return on average invested capital1 14.7% 17.5%
% of net debt to net debt plus equity2 19.8% 12.1%
Book value per common share (in dollars) 18.68 15.47
Year-end employment (in thousands) 142 132

1 Average invested capital is defined as stockholders’ equity plus long and short-term debt less short-term investments
(includes short-term investments categorized as cash equivalents).
2 Includes short-term investments categorized as cash equivalents.

Net Sales Earnings Before Fully Diluted Net Return on Average

(In billions) Income Taxes* Earnings Per Share # Invested Capital ^
(In millions) (In dollars) (In percentage)

*And cumulative effects of # Before cummulative effecti ^ Before cummulative effecti

change in accounting of change in accounting of change in accounting
principle principle
principle