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Companies Simulate to Stimulate Learning

Samsung is among a widening circle of organizations using business simulation technologies to help managers meet the challenges that lie ahead.

March 25, 2008
Related Topics: Training Technology, Career Development, Employee Career Development, Workforce Planning
Providing training to managers isn’t necessarily the same thing as teaching them to run a business. Given the dizzying pace of modern business, companies like Samsung Electronics North America realize the enormous risk of promoting the wrong people—or more precisely, promoting them before they are ready to assume leadership roles.

    Samsung is among a widening circle of organizations using business simulation technologies to help managers meet the challenges that lie ahead. The virtual tools thrust key contributors into the hot seat, forcing them to think creatively, collaborate to solve problems and deepen their awareness of critical business drivers.

    Aiding them in the discovery is a facilitator provided by Capsim Management Simulations Inc., a Northfield, Illinois, consulting company that Samsung hired to develop and implement game-based learning.

    Samsung plans to target about 60 to 70 high-potential managers each year to participate in the simulation exercises, first launched in 2007 as part of the company’s annual leadership training. The interactive exercises thrust managers into "What if?" situations designed to mirror scenarios they could encounter on the job.

    During the inaugural round of business games, Samsung managers engaged in active learning across different functional areas, breaking down silos of knowledge and fostering collaboration, says Randy Mase, director of training and development for New York-based Samsung Electronics North America.

    Here’s how Samsung’s simulation technique works: Teams of high-potential managers compete against one another to run fictional companies, and then measure their success over a five-year period. During the five-year period—each "year" is completed in about 2½ hours, with the class extending for about two days—the five teams are charged with making critical decisions that affect other aspects of their fictional companies.

    Each team is composed of six or seven Samsung managers who must pool their intellectual resources to plan annual budgets, forecast sales growth, hire and fire employees, invest in research and development and calculate the economic risk of expanding or closing plants.

    The simulation packs a lot of learning into a compressed time frame.

    Between each session, class members discuss the results of each preceding year and provide feedback, which makes them both learners and teachers, Mase says.

    "What we are trying to do is grow these high potentials [to be] bigger contributors in the future. We want them to have the ability to interact with people in other functional areas" within Samsung, Mase says.

    Twice each year, Samsung plans to target promising managers who it believes could benefit from the simulation training. Each session will target 30 to 35 managers.

    Having well-trained managers is the cornerstone to Samsung’s strategy to boost sales and expand into new markets. The company employs about 600 middle management professionals but is feeling the pressure to identify top performers who appear ready to move up the ranks.

    Samsung posted revenue of $3 billion in 2007, a one-year growth rate of roughly 16 percent, and wants to swell sales another 15 percent to 20 percent in 2008.

    "In order to support that growth, we need not only good products and sales efforts, but also excellent leadership," Mase says.

    Samsung uses an assessment tool that measures the effectiveness of learning on two levels. First, participants are surveyed for their reactions immediately following the conclusion of the course.

    The second and perhaps more meaningful assessment comes three months later. Classroom participants, along with their managers, are asked to respond to a series of questions designed to reveal how frequently people apply their newfound knowledge.

    Since participants are deemed to have high potential, it’s possible they already possess some of the competencies before they begin. Even so, internal surveys with participants and their managers indicate that managers welcome the opportunity to further their skills.

    "What we’re finding after the training is a 30 to 35 percent jump in how often people use these skills," Mase says.

    Simulated training is effective because it enables people to learn the nuances of leadership in a controlled setting, while at the same time challenging them to think more broadly, says Craig Watters, the president of Capsim, who facilitated Samsung’s simulation events.

    "The most important lessons [are centered] on strategy and deployment—learning how the decisions one makes in one’s job or department ripple [through] other business units in the organization," Watters says.

    Although game-based learning tools have been used in the education arena for years, commercial organizations have been slow to adopt them. Samsung is in the minority.

    But that may be changing. About one in four U.S. companies will adopt business games in 2008 as part of their employee training efforts, according to a report by IDC, a market research company based in Framingham, Massachusetts.

    The surge in popularity of virtual learning tools likely is tied to corporate angst about what employees do—and don’t—know. In fact, a dearth of business acumen among managers threatens to cripple an organization’s effectiveness, according to a recent survey by the Institute for Corporate Productivity in Seattle.

    "Many organizations are running flatter, with people working across functional lines. What they’re finding is that it’s better to give people lower in the organization more decision-making power, rather than waiting for things to move up the chain of command," says Mark Vickers, the institute’s vice president of research.

    That certainly is true of most health care organizations. Regence Group, a Portland, Oregon-based health insurer, is using games to make a serious point to its workforce: The U.S. health care system is in crisis and needs a major overall. Like most health care organizations, Regence faces mounting pressure from HMOs, lawmakers, consumer rights groups and others to rein in the runaway costs of delivering health services.

    Four years ago, executives at Regence Group burdened employees with a seemingly impossible task: spearhead a transformation of the fractured U.S. health care system. The initial goal was to educate employees, especially those in customer-facing jobs, about how their attitudes and behaviors affected customers.

    Using simulation tools provided by Paradigm Learning, a training vendor in Tampa, Florida, Regence began the pursuit in earnest four year ago. It started by raising the bar for its 3,000 frontline customer reps, who handle claims and other membership concerns.

    "We want to reduce the tyranny of HMOs and eliminate waste, confusion and cost for our customers," says Jan John, the director of organizational development for Regence, which provides health coverage to about 3 million people in Idaho, Oregon, Utah and parts of Washington state.

    Paradigm customized its patented Discovery Maps program, a multi-sensory learning tool that helps people understand how their individual jobs support Regence’s larger corporate objectives.

    Rather than merely processing insurance claims accurately and on time, these employees are learning to serve as "patient advocates," capable of tracking down answers to complex health-related questions.

    Character traits such as empathy and compassion are highly valued, even more so than familiarity with the reams of paperwork associated with the job.

    Employees are sometimes asked to go the extra mile by finding insurance coverage for a person’s exceptional medical condition—in some cases, even referring Regence policyholders to a competitor willing to take on the special risk.

    John cites the example of a 33-year-old woman who called Regence’s customer service department in tears, angry to learn that the company did not pay for in-vitro fertilization procedures. The woman, who had recently been diagnosed with breast cancer, was determined to fight to have a healthy, normal life, including motherhood. But she was equally worried that chemotherapy treatments would ruin her chances.

    "What she wanted was to have some of her embryos frozen to be used later on," John says.

    Although Regence could not cover the procedure, the customer service team researched it and put the woman in contact with a handful of carriers that might be willing to assume the risk. That prompted the woman to burst into tears again—this time, however, with gratitude.

    Such success stories underscore the power of simulation training, John says. So strong is the company’s belief that it uses the customized Discovery Map tool as part of its onboarding process for new employees. New hires are exposed to Regence’s customized Discovery Map as early as their second day on the job.

    Additionally, the Discovery Map program is engendering increased engagement and employee satisfaction, according to John. Before implementing the discovery-learning tool in 2004, only 37 percent of Regence’s employees reported having discussions with their managers about corporate strategies. A year following the training, nearly 70 percent of employees said so, and the number is rising.

    "It goes to one of the huge drivers of engagement: People are connected and understand what their jobs are and how they make a difference to our organization," John says.

    Still, companies should move thoughtfully when considering simulation vendors, says Watters of Capsim. Although some tools teach industry-specific knowledge, Watters says most companies likely will want to use more generic offerings that provide users with baseline knowledge of financial and other business issues.

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