South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

4.11 Leadership and Management

Leadership and management skills play a significant role in influencing business performance and enhancing UK competitiveness. Evidence(50) shows that investment in leadership and management and improvements in management structures, resource planning and staff training and development can have a positive impact on ‘bottom line’ business performance. Effective leadership and management are also essential to stimulate innovation.

The demand for management skills, both within the managerial occupational group and beyond, has increased significantly in recent years. The nature of management skills required is also changing, with the management skill set becoming increasingly broad and demanding. A significant proportion of employers have identified management skills as among the most important in terms of future skills needs. Management skills play a significant role in influencing business performance and, subsequently, enhancing UK competitiveness.

The Leitch Interim Report highlights that more productive firms use better management practices. Evidence suggests that management practices such as objective-setting, performance tests, regular appraisals, engagement of non-managerial employees in problem-solving and family friendly schemes have been found to be associated with better organisational performance. Evidence also shows that effective human capital management practices, such as internal labour markets and the flexibility for individuals to ‘grow’ their own jobs, are critical to organisational success.

Research in the manufacturing sector has revealed that business performance is strongly linked to the quality of management techniques and that there is a correlation between management practice and:

• Total factor productivity;
• Sales per employee;
• Sales growth;
• Growth in market share;
• Stock market valuations.

4.11.1 Investment in leadership and management skills

In terms of overall leadership and management skills and capacity, the UK performs poorly against its international competitors. Too often the training of managers has been seen as a cost rather than an investment and is either neglected or an early casualty of cost-cutting. Organisations in the UK are less likely to integrate HR management into their overall business strategy. They are also less likely to have a progressive ethos for development of managers, to place an emphasis on vocational qualifications or to evaluate the impact of management development activity.

UK organisations tend to have weaker career structures for managers and are less effective than their European counterparts in fostering their internal labour markets through promotion and retention. This can lead to the under-utilisation of skills at junior management levels and the emergence of skill gaps and shortages at higher levels of management.

The research also reveals that the critical factor underpinning better management performance among international competitors is investment in management skills. Well managed companies are more likely to invest in management development and the acquisition of appropriate qualifications(51).

4.11.2 Demand for leadership and management skills

The NESS 2005 survey identified that a lack of management skills amongst applicants was a factor in 53% of SSVs for managers and 25% of SSVs for administrative staff (with lower proportionate effects in other occupational recruitment).

In terms of skill gaps, the survey suggests that around 10,500 managers in the South West have an identified skill gap with inadequate management skills being a factor in 62% of these cases. This suggests that at least six and a half thousand managers in the South West would benefit from management training. That figure is probably a significant underestimate.

In terms of training, managers were the group most likely to receive training. 57% of establishments which trained any staff off-the-job (in the 12 months prior to survey) had trained one or more managers, over twice the proportion of the next most frequently trained group (administrative and clerical staff). However, this statistic refers to training of managers in any skill or subject area, not necessarily to training of managers in managerial skills.

Given the scale of skill gaps noted above it seems likely that a significant latent market exists for higher volumes of management training. Encouragingly, however, given the quite high propensity of establishments to offer training to managers, it may be that there is less resistance to converting this latent demand for training into actual training than is the case for other types of training and other occupational groups.

4.11.3 Future needs

Working Futures indicates that there will be a significant growth in demand for corporate managers (+50,000 jobs). Two-thirds of the gains in this group are to be accounted for by females.

4.11.4 Sector requirements

The Sector Analysis (see Section 4.6) conducted as part of this analysis has identified that leadership and management is a key priority across a wide range of sectors. It is therefore an important cross-cutting theme for the region. What is clear from this review is that the nature of the leadership and management requirements vary significantly depending on the sector. The SLIM Working Paper on Leadership and Management provides further details of these requirements and should form an essential part of any leadership and management activities supported in the region.

Improving the quality of Leadership and Management skills was the single clearest priority to emerge in this analysis of SSC skills needs. However, it is also clear that managers in different sectors have very different skills and face very different issues. Indeed, most individual sectors identify a wide variety of leadership and management requirements. These are listed below in Table 10.

Table 10: Management & Leadership priorities by sector

The need to develop Supervisory Management Skills, eg among technicians taking on first time management roles or in the retail or automotive sectors which are trying to reduce high turnover rates, is a clear and common need. The range of circumstances in which these skills are required is highlighted by LANTRA, which points to the need in their sector to supervise and mentor apprentices, migrant, casual and temporary workers and volunteers. In the Skillsmart sector, larger employers with multiple outlets face a particular challenge in developing management competencies in staff.

What is clear from this analysis is that whilst Leadership and Management is a priority for all sectors, there is no 'one size fits all' approach.

Conclusion

The NESS analysis shows a significant need for leadership and management skills in the region, as reported by employers.

Leadership and management emerges as a clear cross-sectoral priority from the sector analysis. As the analysis indicates, the issues are very sectorally focused and any concerted effort to improve leadership and management skills in the region need to take this into account. This argues for a strong sectoral focus to the region’s leadership and management strategy, with differentiated provision based squarely on sector needs.

There is a strong basis for improved agency co-ordination to make best use of the limited public sector funding deployed to this end. This is best done by the RSP. It should also be possible to explore the potential for resource pooling on this issue.

(50) West Midlands Regional Skills Partnership Cross Cutting Issues 2006: Leadership and Management, West Midlands Observatory, 2006.
(51) ibid