AT&T's $1 billion gambit: Retraining nearly half its workforce for jobs of the future

Susan Bick joined AT&T 20 years ago and has spent much of her career in various roles within IT. She's been a production support person, a coder and a project manager, to name just a few.

But the IT world she entered when she started at the telecom giant in the late 1990s bears little resemblance to the company she works for today. Over the last decade, AT&T's business has been changing at warp speed, moving from a voice network to a data network, from hardware to the cloud and from a landline business to a mobile-first enterprise.

The transformation has provided the 133-year-old Dallas-based phone company with myriad ways to stay competitive in a brutal industry. But beginning in 2008, when executives started examining the kind of workforce skills AT&T would need to thrive in this new mobile- and software-centric world, they faced a stark reality: The company just didn't have enough of the talent it needed.

With one of the largest workforces in the world, its research showed that only about half of AT&T's 250,000 employees had the necessary science, technology, engineering and math skills the company required. What's more, 100,000 workers were in jobs having to do with hardware functions that probably wouldn't exist in the next decade.

The discovery presented AT&T with two daunting options, explains Bill Blase, senior executive vice president of human resources. "We could go out and try to hire all these software and engineering people and probably pay through the nose to get them, but even that wouldn't have been adequate," he explains. "Or we could try to reskill our existing workforce so they could be competent in the technology and the skills required to run the business going forward."

In a world where technology advances are measured in months, not years, companies selling everything from computers and cellphones to cereal and sneakers are trying desperately to adapt. A recent research report by the Society for Human Resource Management states that nearly 40 percent of hiring managers cite lack of technical skills among the reasons why they can't fill job openings.

And the message isn't lost on workers, either. A 2016 Pew Research Center survey shows that more than half of the adults in the workforce today realize that it will be essential for them to get training and develop new skills throughout their career in order to keep up with changes in the workplace.

In fact, according to Willis Towers Watson, 90 percent of maturing companies expect digital disruption, but only 44 percent are adequately preparing for it — and getting the right people to get the work done remains a challenge for most.

One reason companies such as AT&T have opted to retrain is the high cost of turnover. The median cost of replacing a worker is 21 percent of an employee's salary. The percentage rises as the base salary increases. Retraining workers for new, or more highly skilled, jobs also allows a company to keep valuable institutional knowledge in-place.

"When you have workers that already possess much of what you need, it makes a lot more sense to retrain them than to go out and hire new workers—who may be more educated—and then wait a year or more for them to get up to speed with how the company operates," explains Anthony Carnevale, director and research professor of Georgetown University's Center on Education and the Workforce.

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He says long-time employees at well-established companies like AT&T "already have two to three tiers of skills because they've learned the structure and culture of the institution." They're not only part of the company, he says, but they're members of the community where that company does business. And when the pace of technological change is outrunning the skills of workers, companies don't have time to continually swap out their labor force for new, skilled workers.

AT&T's massive global retraining program — the company prefers to call it "reskilling" — is perhaps corporate America's boldest response to this war for talent. Known inside the company as Future Ready, the initiative is a $1 billion web-based, multiyear effort that includes online courses; collaborations with Coursera, Udacity and leading universities; and a career center that allows employees to identify and train for the kinds of jobs the company needs today and down the road. An online portal called Career Intelligence lets workers see what jobs are available, the skills required for each, the potential salary range and whether that particular area is projected to grow or shrink in the years ahead. In short, it gives them a roadmap to get from where they are today to where the company needs them to be in the future.

If it succeeds, by 2020 AT&T will have reeducated 100,000 employees for new jobs with cutting-edge skills and, in the process, created the kind of nimble workforce it needs to compete in the 21^st century.

It will also have succeeded at something that the United States, as a nation, has never been good at: job training. Now the Trump administration wants to do something about that. In June, Labor Secretary Alexander Acosta announced new executive actions aimed at expanding training opportunities, primarily through apprenticeships. Despite the fanfare surrounding the program, the fact remains that the government continues to cut money for federal job retraining efforts. And what money it does invest is not producing a stellar return.

A report released by the Labor Department in 2016, called the "Workforce Investment Act Gold Standard Evaluation," concluded that the federal government's primary job-training programs don't really work. Among the findings: The programs were not that good at helping raise the wages of the participants receiving the training, and most of those offered job training felt it was unrelated to finding employment.

So far, AT&T's results look a bit more promising. According to the company, more than half of its employees have completed 2.7 million online courses in areas such as data science, cybersecurity, Agile project management and computer science. The company has awarded 177,000 virtual "badges" to about 57,000 employees on their internal career profile pages, indicating they've completed the coursework. Further, about 475 AT&T employees have enrolled in Georgia Tech's online master of science in computer science program, and nearly 80 have graduated. The jobs of the future most in demand at AT&T: data scientist, computer analytics, app developers and anything to do with cloud computing.

What all this means in practical terms: According to the company, employees that are currently retraining are two times more likely to be hired into one of these newer, mission-critical jobs and four times more likely to make a career advancement. John Donovan, CEO of AT&T Communications, which is responsible for the bulk of the company's global telecommunications and video services businesses, said the organization is also using far fewer outside contractors when it needs deeper technical skills. "We're shifting to employees, because we're starting to see the talent inside," he said.

That was certainly the hope of AT&T employee Bick when she started retraining. In 2014 the project manager saw that friends working at other companies were using the Agile project management tool. AT&T offered some training in Agile, but Bick and her group were still using an older, more traditional method, called Waterfall.

"I really wanted to get into the Agile realm, so I started taking the courses they had," she said from AT&T's offices in St. Louis. After more than 100 hours of online course work, done at night and on weekends over about 18 months, Bick was placed into a new job as a senior scrum master. The position combines her project management background with more of the technical skills she earned with her coursework. And what about her colleagues that didn't keep up with their training? "Well, some of those folks are no longer with the company," Bick said.

One of the keys to AT&T's retraining success so far can be traced right to its chairman and CEO, Randall Stephenson. When the decision was made to begin the massive retraining program, HR boss Blase and his team spoke with some outside consultants to see if they could help with the process. The price tag was north of $100 million.

"We said, 'No way, we have to build this internally,'" Blase recalled. He spoke with Stephenson and said the company could handle the challenge, but it needed buy-in from the top. "I prayed every day that leadership would make this important, and they did," he said. "Randall and [John] Donovan adopted it as one of their key principals at all their town hall meetings, and the thing just took off. This [retraining] would have been nothing more than an HR exercise that sat on a shelf if our leadership didn't become its biggest advocates."

Other companies are starting to take notice. Blase said AT&T's salespeople are increasingly being asked by customers (most of whom are Fortune 1000 companies) to explain the retraining and if their companies can tap into the program. In fact, John Palmer, AT&T's chief learning office, spends a good deal of his time on the road, talking about how the company is handling the retraining, why it made the programs web- and mobile-based, and how it's helping employees get through the process.

"John's not getting into minute detail about the positions we're filling, but he is talking about why it's important for companies, at the senior level, to engage and retrain workers rather than constantly going to the street to hire," Blase said.

And when it comes to education, the company is putting its money where its mouth is. In early 2013, Zvi Galil, dean of the college of computing at Georgia Tech, met with Stephenson to talk about launching an online master's degree at the college. Within two days the CEO gave Georgia Tech $2 million to get it off the ground and a year later another $2 million. The company is also collaborating with the University of Notre Dame on an online master of science degree, with a specialization in data science, and with the University of Oklahoma on an online MS degree that focuses on data analytics.

"We knew the vision of Randall Stephenson when it came to retraining and that he gave huge weight to education," said Galil. "He enabled us to get up to speed very fast." Today more than 6,300 students are enrolled at Georgia Tech to earn an online masters of science in computer science degree, with nearly 500 of them from AT&T. The degree is identical in every way to one earned on-campus except for this: It costs less than $7,000, compared with around $42,000 when a student attends in person.

Nathaniel Meyer appreciates that feature. In December 2015 the married father of two young boys earned his online master's in computer science at Georgia Tech, with the degree paid for by AT&T. He used his newfound training to move from a rapidly fading job in network operations in Charlotte, North Carolina, to a position as a data scientist in the company's Plano, Texas, offices. Getting all the coursework and projects done on his own time, in addition to holding down his day job, was "difficult and challenging but in the end very rewarding," Meyer said. "I've got everything that I want in a job now. I love my work, and it's a really good fit for me."

Blase said satisfied employees like Meyer and Bick aren't just good PR. They give the company a real and substantial competitive edge. "If you're a kid graduating with a master's from Cal Tech and you see that AT&T is being recognized regularly for its commitment to employee development, that's going to mean something," he said.

"And when you have engaged employees, that leads to satisfied customers and increased profits for the company. Having a mantra of continuous learning is all part of that equation."

— By Susan Caminiti, special to CNBC.com