This paper is the result of a joint partnership between the Social Protection Unit of the World Bank and the Korean Ministry of Labor on Skills Development. This partnership was aimed at better understanding the Korean skills development strategy and drawing lessons and best practices for developing countries. This paper is about the evolution of an innovative in-service training program and its effects in Korea. In many developing countries, small- and medium- scale enterprises (SMEs) play important roles in outputs, exports, and employment. Therefore, governments have used various policy instruments to promote productivity of SMEs through in-service training of their workers. However, those policy tools have not been effective to date. An exception to this general trend was found in Korea. The Government of Korea tested a pilot in-service training project and achieved significant results. The government encouraged SMEs to organize themselves into training consortiums (TCs) and provided them with institutional and technical assistance by financing employment of training specialists who manages human resources development of TC-member SMEs. Since mainstreaming, nevertheless, the progress of the TC program has been less than magnificent. Some factors responsible for the lukewarm achievements are analyzed and policy measures for reinvigorating the program have been suggested, together with some lessons learned.