Purpose: The purpose of this paper is to increase understanding of the relationships among the workplace as a learning environment, strategies for competence development used by SMEs and learning outcomes. Specifically, there is a focus on a distinction between formal and integrated strategies for competence development, the conditions under which these strategies are likely to be used, and their effects in terms of individual learning outcomes. Design/methodology/approach: The study was based mainly on questionnaire data collected through a survey of 14 SMEs that had received support from the European Social Fund's Objective 3 programme. In addition, data collected through interviews and analyses of documents were used. Findings: The results indicate interactions between the strategy of competence development used by the firms (formal vs integrated) and the type of learning environment in the workplace (constraining vs enabling). The use of an integrated strategy in an enabling learning environment was the most successful combination in terms of learning outcomes, while the use of an integrated strategy in a constraining learning environment was the least successful combination. Research limitations/implications: There is a need to elaborate the theoretical and empirical basis of the distinction between formal and integrated strategies for competence development, and to study the effects of the two types of strategy, not only for individual learning outcomes, but also for effects at an organisational level. Practical implications: HRD practitioners need to question a traditional reliance on formal training, as the presented results indicate the importance of using competence development strategies that are based on an integration of formal and informal learning. Originality/value: The study indicates that the effects of competence development efforts are likely to be a function not only, nor primarily, of the training methods and strategies that are used, but also of the characteristics of the learning environment of the workplace. (Contains 1 figure and 5 tables.)