One of the most critical long-term drivers of a nation’s economic success is the skills possessed by its workforce. Thus, the challenge of building the right skills has always been one of the top strategic priorities for governments everywhere. Shouldn’t it therefore also be a top priority for businesses?
A skilled population is not only good for society but also excellent for the economy. By extension, for business, the development of the wider skills of our workforces is just as critical as the subsequent challenge of attracting (and then retaining) them to your company.
Furthermore, the value of engaging in the skills agenda, aside from building the talent pool, or even social responsibility, also focuses the business on the internal talent agenda. When the external and internal agendas are properly aligned, this drives obvious strategic value to the organisation.
Charlie Mayfield, Chairman of John Lewis Partnership and Chairman of the UK Commission Employment and Skills says, “We need to be making the business case for skills. It is not a nice-to-do activity. You need to look at the costs and the opportunities, and invest for the future. I genuinely believe that the UK is a sleeping giant in respect of its skills and employment policies. There is so much potential to improve our skills, our productivity and our economy to create a fairer society.”
However, for many economies, expertise is waning. With that in mind, what part can companies play to ensure that the skills needed are present and available in the population?
Considerations for Companies Engaging with the Skills Agenda
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First, understand what skills are required from the population for a growing economy – then produce an inventory of such skills and capabilities and compare them to your organisation’s own skills base
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However, avoid being too inward looking, both at a company and country level. Benchmark across companies, industries and countries
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Identify the gap between the desired level of competencies and the perceived level of these competencies the population is believed to have
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Forge closer relationships with education authorities to assist in communicating the message to central government regarding the skills requirements of business
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Work directly with local educational establishments (schools and universities) to encourage the type of learning needed to develop the careers of the next generation of employees
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Encourage the development of clearer partnerships and collaboration across the trinity of government, academia and business in the support of a stronger skills base
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Be more diverse in your own recruitment policies. For example, consider recruiting from more disadvantaged groups such as the low skilled, NEETs (not in employment, education or training) or those with criminal backgrounds
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Don’t ease off in troubled times. For example, corporate and public spending in management development goes down in a crisis/in a downturn, potentially leaving an entire generation of managers underdeveloped
A knowledge economy: The good, the bad and the unskilled
For many Western countries, a combination of technology, automation and globalisation are changing the nature of economies, leading to a decline in low skilled jobs. The UK is one economy that is clearly seeing this shift, as it continues to generate more knowledge based jobs and jobs in the service sector than those that are manual in nature. By 2020, it is expected that manufacturing will account for just 1 in 12 jobs (versus 1 in 5 in 1987).
The UK has continued to leverage itself as a knowledge economy and, although this creates opportunity, it presents a challenge of having the right skills to ensure growth. According to the UN, OECD, US Census Board and others, companies and countries will need 4 billion people by 2020 to fill knowledge worker positions. Some projections indicate that there could be a shortfall of 32 to 39 million people to fill positions.
Increased competition from lower cost talent pools is putting pressure on the UK workforce and the skills they possess. "The answer to the question of whether I think that we are producing the skills needed for the UK economy is, sadly, that I don’t. I believe there is a threat from overseas students as they are eager for work. The threat is coming from Eastern European and Asian markets where the students have a much greater work ethic and apply themselves in subjects which have a low take up in this country,” says Lord Stafford, Founder of the Lord Stafford Awards and Chairman of the Countryside Foundation for Education.
Although more young people in the UK are going to university, surveys carried out by the CBI show that key employability skills – communication, teamwork and analytical skills – seem to be declining.
Lord Stafford continues: “There are too many students leaving university lacking the skills needed in the workplace - in fact there are too many students who should never be at university in the first place. Eight out of 10 businesses say that young people graduating today are without the basic ‘soft skills’ demanded by company bosses. There is a recent report prepared by a technology firm called ESR, which shows that 78 per cent of employers think that graduates lack critical thinking skills, more than 70 per cent said they were unable to interpret complex data and 57 per cent said that they had poor advanced technology skills.”
David Turner, CEO of HEROtsc, says, “As a business leader, I want bright young people who have been taught how to think, innovate, question and have discipline to come to work and challenge the environment we are in. Clearly, there will be specialist industries for which we need to continue to develop a specific type of talent through educational learning, but I would be happy to see people willing and ready to commit to work where we can train and develop their skills and give them greater careers in the future.”
A declining proportion of young people are taking STEM-subjects (science, technology, engineering and mathematics). The number is declining throughout the Western economies - there are triple the number of graduate engineers in China than in the United States and almost 60 per cent of Chinese graduates have degrees in science or engineering.
The consequences of a lack of skills
Finding the right skills to fill vacancies is becoming more difficult - in the UK, for example, the most difficult vacancies to fill are in engineering (21 per cent), IT (18 per cent) and accounts/finance professionals (18 per cent). Owing to this lack of available skills, CEOs are now looking to change their strategy in managing talent and to increase their investment in the area.
Although employment was down during the recession, the race for the best talent never stopped. “It is now very clear again those companies that have the right talent strategies and who invest in their workforce will be the longer term winners,” says Peter.
However, these strategies need to recognise the wider context in which business are operating - the economic, social and environmental challenges. Businesses now need to engage with the skills agenda as much as government and education.
The skills agenda and CSR
Many organisations now recognise that one of the biggest social impacts they can have is in helping people build their skills, gain employment and contribute to society.
Paul Walsh, CEO of Diageo says, “The skills agenda is of critical importance in the development of a strong and sustainable UK economy. Business certainly has a key role to play. For companies like Diageo the contribution is two-fold. First, to provide extensive opportunities to develop skills within our business. This includes ongoing professional development in disciplines such as finance and marketing, as well as training in vocational trades such as supporting apprenticeships for coopers and coppersmiths. The second is that in running a successful export led manufacturing business we create an ongoing demand for skilled workers, offering employment opportunities, and thereby incentivising the workforce to continue their professional development to meet our skills needs.”
A recent report by the UN and Accenture found that 83 per cent of the 750 CEOs surveyed believe that the economic crisis has raised awareness of the role of sustainability and ethics in building business and raised its importance as a leadership issue (with 80 per cent agreeing on the last point).
“Universities need to realise that they have the business leaders of tomorrow going through their hands today and there is an urgent need to engage with them to make them fit for purpose," says Lord Stafford.
The idea that the only purpose of business is to make profits is out of date and has seemingly been replaced by a key business philosophy of ‘doing good’. This idea has become so ingrained that recent Harvard MBA graduates have taken the equivalent of the Hippocratic Oath, actually swearing to be open, honest and ethical as business managers and leaders.
“Private education (or public education for that matter) does not create ethical people - people are ethical by choice, assuming a sound knowledge of an ethical decision making framework is had. This is where education has a role: to expose people (students, participants, faculty, etc) to a solid ethical decision making framework and making them realise that their choices make a difference. The choice of applying the framework and making better decisions from an ethical point of view, however, remains with the individual,” says
Eric Weber, Associate Dean of IESE Business School.
Peter Lorange, Chairman, President & CEO, Lorange Institute of Business Zurich believes that business schools need to change in order to keep up with the changing economy. He says, “There have been several changes in the environmental context for business schools. We might conclude from this that a new relationship based/ network based strategy might be more appropriate for business schools. We call this construct the ‘business school of the future’. This implies that, above all, schools must be able to develop leaders for the network economy, ie, more listening, more ‘we’ rather than ‘me’, more learning as we go, more trust.”
Recruiting from more disadvantaged groups such as low skilled or NEETs provides access to talent pools that would otherwise have been ignored.
There are increasing numbers of companies that work alongside educational institutions to help build employability skills, work experience and other schemes that pass on important skills to the next generations.
“There has to be a strong focus on education as the platform for all skills development - and into the future. Given the speed and pace of change, we need our young people to be well educated and capable of adapting to changes in the skills needs for the economy. There must be greater partnership and collaboration across government, education, academia and business to support a strong skills base in the UK,” says
Gary Kildare, Vice President, Human Resources, Americas, Europe, Asia Pacific at IBM.
This is not just philanthropy. Employers providing good work experience gain a pool of motivated and semi-skilled people. The public sector and local government must also play a part in furthering skills.
David concludes that “It is important that business leaders forge much closer relationships with education authorities from a centralised point of view and through local communities. We cannot expect teachers and lecturers in education to assume that they are developing our future resource without giving them insight into the way our businesses are having to develop and change to compete in the global market.”
Please get in touch if you have any comments about the issues raised here.
I hope to see you soon,
Matthew
